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Of Credit and Business Conditions

th e


th e

S e c o n d


F e d e r a l


R e se rv e


D is tr ic t

R e se rv e


N ew


New York, December 81st, 1920.

C red it C on d itio n s

I N December the fall in the prices of the great raw
materials which had proceeded so fast in the two pre­
ceding months showed a tendency to slow down. The
index maintained by this bank of the prices of twelve
such basic commodities, namely, cotton, hides, hogs,
rubber, copper, sugar, wheat, corn, iron, lead, petroleum
and lumber, shows the following monthly decreases,
expressed in percentages, since the peak in the middle of
May (after 17th) 1 per cent.
June................. 2
July.................. 3
August............. 4

6 per cent.
October......... *. .. 14
November............. 13
December (to 27th)

The first six commodities above mentioned are now
at or near their pre-war prices. The fall has been so
abrupt that industries which convert these materials into
the kinds of goods consumers buy, have had little op­
portunity for readjustment, and consequently the decline
in retail and even in wholesale prices of manufactured
goods has reflected only in part the decline in raw material
prices. But the 223^ Per cent, reduction in wages which
textile mills in the east have generally inaugurated, and
which is spreading gradually to other industries, is an
indication that we have entered the usual second phase
of post-war readjustment. In this phase, which is slower
than the first, retail prices are gradually lowered by means
of better organization and labor-saving machinery, by
greater productivity of the wage earners and by wage
reductions corresponding roughly, but not always syn­
chronizing, with reductions in actual living costs.
With these decreased commodity values it would be
natural to expect that the volume of credit required to
produce, carry and distribute them would decrease also.
A fall in security values is reflected almost immediately
in the volume of loans on securities. But a fall in com­
modity prices such as we have experienced as a part of
the present world-wide industrial readjustment, is not
so easily or promptly reflected in credit. It is so much
more complex and it involves so many interests and
industries, so much congestion of commodities and shifting
of credit, and so much exercise of human judgment as
to the policies to be pursued, that its reflection in credit,
though eventually the reflection does occur, is neces­
sarily slower.

It is most important in such a period that there should
be sufficient elasticity of credit to enable the various
interests and industries to mature and carry out their
plans without the fear that the necessary credit facilities
may be lacking. Looking back, it appears that during
the early months of falling prices, referred to above, the
volume of credit remained practically stationary, and
that during the later months, when the fall was most
acute, the volume of credit actually increased. Thus,
in a year which, from the point of view of credit, has been
marked by the measurable recovery by the Federal
Reserve Bank of the control of credit through discount
rates which in part had been relinquished to facilitate war
financing, it seems clear that the recovery of credit control
has not been at the expense of credit elasticity. The
higher rates established indicated the desirability that
inflation should proceed no further but they have at no
time prevented the granting, continuing, or even increasing
of credit where conditions justified such action.
F ederal R eserve B a n k E arn in gs

On December 31 this bank pays to the United States
Treasury about $39,000,000, representing its earnings
for the year, after paying operating expenses, dividends
of 6 per cent, to the stockholding banks and making addi­
tions of about $11,000,000 to its surplus as provided by
the Federal Reserve Act.
These earnings are a direct measure of the credit
expansion or inflation which our war financing necessi­
tated. They are also a direct measure of the utility of
the Federal Reserve Bank in providing such credit as
business conditions necessitated. The Federal Reserve
Bank is a semi-public institution organized and operated
not for the purpose of making profits, but to stabilize
credit and keep it elastic, and to issue such circulating
notes as the business of the community requires. Its
surplus earnings, which are derived from the creditmaking and note-issuing power granted to it by the
Government, accordingly revert to the Government.
The reason why the Federal Reserve Bank shows such
large earnings is because the Government does not tax
it, but in lieu of taxes takes the major part of its earnings.
A governmental grant of note issuing power to any
institution or set of institutions, especially when such
notes are of an emergency nature, is quite usually accom­
panied by a heavy tax.



Under the Aldrich-Vreeland Act, which prior to the
Federal Reserve system provided emergency currency,
the Government taxed the banks upon notes issued under
the terms of the act at rates running from 5 per cent,
up to 10 per cent. Under the Federal Reserve Act the
member banks, which borrow from the Federal Reserve
Banks mainly to obtain currency, in effect pay a similar
tax in the shape of the rate of discount charged upon their
borrowings. This rate, or tax, does not go directly to
the Government, but goes to its note issuing agency,
the Federal Reserve Bank, which after paying expenses
and 6 per cent, dividends turns over to the Government
in the shape of surplus earnings the discount it has re­
But if the Government were to adopt the policy of
directly taxing the Federal Reserve Banks upon the
amount of their notes in circulation, less the 40 per cent,
gold cover, and were now to impose such a tax upon the
Federal Reserve Bank of New York at the same rate as
its discount rate, 7 per cent., the tax would amount to
about $36,000,000, or about the amount of its earnings.
In this case the Federal Reserve Bank would show prac­
tically no earnings above its expenses, dividends, and
statutory additions to surplus.
Federal Reserve Bank earnings when transferred to
the Government may be used by it only to place additional
gold behind the greenbacks or to retire Government
bonds. In this way, the earnings go directly toward
correcting the inflation which called the earnings into
existence. Presumably, as inflation subsides, the volume
of Federal Reserve notes required for hand to hand
currency will gradually lessen and both the discounts
and the earnings of Federal Reserve Banks will lessen
M o vem en t o f Funds
The last three months, like the three months im­
mediately preceding, has been a period of heavy move­
ments of funds between New York and other parts of the
country. Owing in part to Government operations, such
as the redemption of certificates of indebtedness and the
collection of taxes, and in part to commercial and agri­
cultural demands upon New York banks, these transfers

have mounted to extraordinary figures. Their movement
from one part of the country to another has been effected
through the machinery of the Federal Reserve system,
which has made it possible to meet special demands
developing in one part of the country from the supplies
built up in other sections, thus maintaining the equilibrium
of the credit structure, and assuring at all times an ade­
quate supply of funds to meet the needs of borrowers at
steady rates.
The following summary of these movements, which
were very similar to the movements culminating with the
September 15 tax payments, is much like the form in
which the latter were described in the September issue
of the R e v i e w , and will enable those who follow the course
of Federal Reserve operations to understand future
developments around tax collection dates.
Deposits of the principal banks in New York City decreased
$470,000,000 from October 14 to December 6, on account of
Government and commercial withdrawals.
These withdrawals caused a steady drain of gold from the
Federal Reserve Bank of New York to other Federal Reserve
Banks. For the three months ended December 17, the loss
of gold aggregated $337,000,000.
This adverse flow of funds w substantially offset by
Government transfers to New York, by the sale of certificates
of indebtedness by New York banks to other Federal Reserve
Banks and by rediscount operations between Federal Reserve
These rediscount operations comprised the following:
On September 29, other Federal Reserve Banks owed the
Federal Reserve Bank of New York $19,000,000. By
October 6 repayment of these loans w completed. On
October 29, the Federal Reserve Bank of New York owed
other Federal Reserve Banks $48,000,000. By December 15
repayment of these loans w completed.
Between December 8 and 15 the deposits of the principal
New York banks rose $407,000,000, in connection with the
following transactions:
Certificates of indebtedness w redeemed and paid in this
district in the amount of $344,000,000, which was $124,000,000
more than the taxes paid.
This excess of redemptions over taxes on December 15
necessitated as usual a loan by this bank to the Government.
The amount, $74,000,000, was gradually repaid and w
extinguished on December 28.
The banks of the district on December 15 increased their
deposits $212,000,000, when they paid for their subscriptions
to the new issues of certificates by crediting that amount on
their books to the account of the Government.

B a n k D e p o sits and L o a n s
(In Millions)
Reporting Banks in New York City*



Dec. 17............................
Dec. 10............................
Dec. 3............................
Nov. 26...........................
Nov. 19...........................
Dec. 19...........................
Oct. 10............................
*Retween December 19,
throughout the country from
^Including rediscounts.


U. S. Securities
Loans Thereon§

Reporting Banks in All Districts*

Total Loans
Investments f




U. S. Securities
Loans Thereon§

Total Loans
Investments 1

6,010 (High)
1919 and December 17, 1920 New York City reporting banks increased from 71 to 72 and reporting banks
796 to 824. fIncluding Government deposits. ^Excluding United States bonds to secure circulation.


Following this large increase in deposits:
The principal banks of New York City reduced their bor­
rowings at the Federal Reserve Bank between December 8
and 16 by $187,000,000.
As tax checks w collected and as the banks sold certifi­
cates of indebtedness to their customers, deposits began to
decline, and in the four days ended December 20, fell off
Simultaneously the banks began to increase their borrow­
ings at the Federal Reserve Bank, and in the four days ended
December 20, such borrowings rose $112,000,000. With the
withdrawal of deposits resulting from the latest sale of certifi­
cates of indebtedness, the banks are likely to seek still further
accommodation at the Federal Reserve Bank.


the lower rate was in prime names not frequent in the
market at this time.
' The attached chart showing the volume of commercial
paper outstanding from July, 1918, continues the chart
printed a month ago. It is based upon the figures of
eleven large distributors of commercial paper who report
month by month to this bank. The decline shown for
October was continued in November in nearly the same

These transfers of funds had a marked effect on the
weekly published reserve percentages of the Federal
Reserve Bank of New York, but if each movement in or
out of this district had not been susceptible of correction
through a movement going in the opposite direction the
fluctuations in this bank’s reserve position would have
been much greater. Had no such counter-movements
been set in motion the lowest reserve percentage of this
bank in the last thirty days would have been 33.4, and the
highest 43.
G o ld M o v e m e n t
Imports of gold from England and exports of gold to
Japan continued in November.
Of the $56,884,000
imported, $16,500,000 was the last of the gold held ear­
marked for the Federal Reserve system by the Bank of
England. Of the rest, a little more than $30,000,000 also
came from England. Slightly more than $3,000,000 came
from France and about the same amount from South
America. Of the $19,870,000 exported, all but about
$1,000,000 went to Japan, which has now ceased im­
porting gold from us.
After deducting from the total
gold imported this year the $111,000,000 of ear­
marked gold, which has been figured for somewhat more
than a year as a part of the country’s gold reserves, the
excess of exports over imports for the current year up to
December 1 amounts to about $44,000,000.
C om m ercia l Paper
The volume of commercial paper outstanding has con­
tinued to diminish somewhat in recent weeks, and dealers
report the market quiet. A decline in activity is normal
for this time of year, but in addition to this factor offerings
of new names are lighter than usual, and seasonal paper in
grain and cotton and a number of other industries is below
Banks this year are more than usually prone to delay
purchases until new business statements are available,
and paper of frequent borrowers has tended to move
slowly. A tendency has developed on the part of certain
buyers of commercial paper to discriminate against the
paper of certain industries as a whole, rather than to judge
it according to the credit standing of the individual bor­
rower. Dealers report, however, that no actual congestion
is occurring. Country banks continue to provide the
principal market, though for a brief period in the latter
part of November a slightly more active demand developed
in New York City and some other large cities. Eight per
cent, continued the prevailing rate, and the tendency to
shade toward 7 % per cent., which was reported a month
ago, has been less apparent. Most of the business done at

T h e B ill M a r k e t
During the past thirty days, there was a somewhat
diminished demand for bills from both New York City
and out-of-town buyers. The out-of-town demand held
up better relatively than did the demand from New York
City and dealers continued to report new customers
among outside buyers. There was a material reduction
in the volume of bills offered to the dealers. Of bills
drawn, cotton, grain, sugar, and tobacco predominated
as underlying commodities. In the latter part of No­
vember, lower money rates for several days caused bills
to move more freely in New York City, and the dealers
reduced their buying and selling rates by H per cent.
The reductions did not increase the offerings of new
bills, and curtailed sales. In consequence of this and of
firmer money conditions at the close of the month, the
dealers, with one exception, returned their rates to the
former level. On this level dealers are buying prime
member bank bills at 6% to 6H per cent, and selling
them at 6 to 6X per cent., according to maturity.
The recurrence of slightly easier money conditions
following December 15 was again accompanied by a
somewhat increased demand for bills. There was no
change in the minimum buying rates of the Federal
Reserve Bank, which continued to rule from 5U to 6 per
cent., according to maturity, for prime endorsed bills.


Stock M a rk e t M o n e y R a tes
During the past thirty days the range of stock market
money rates has been lower than in any previous cor­
responding period this year. The maximum rate for call
loans during the period was 7 per cent. In the last week
of November the renewal rate was 6 per cent., and on one
day the rate on new loans fell to 5 per cent, for the first
time this year. This distinct relaxation largely reflected
a brief interruption of the seasonal movement of funds
from this center to the interior.
In December call rates held at 7 per cent, for both
renewals and new loans until the redemption of certificates
of indebtedness on December 15 put the banks temporarily
in funds pending the handling and clearance of tax checks,
a condition which has become a familiar manifestation at
tax collection dates, and has been described in detail in
previous issues of this R e v i e w . Closing rates at that
time fell to 6 per cent., but subsequently reverted to 7 per
The time money rate from November 20 to December 20
was typically 734 to 7 % per cent., as compared with 7 %
to Sy2 per cent, in the preceding thirty days. In Decem­
ber the supply of time money was somewhat more limited,
but rates were not notably higher. On the whole the
volume of transactions continued small.
G o v e rn m e n t D e b t
The gradual reduction in the public debt of the United
States since August, 1919, when the high point was
reached, is shown in the following table:
(Figures in Millions of Dollars)

August 31, 1919............................
January 1, 1920.............................
June 30..........................................
July 31..........................................
August 31......................................
September 30.................................
October 31.....................................
November 30.................................
December 31*..............................

Total Gross

Floating Debt
Loan and Tax



Figures are given on the basis of the daily statements
of the Treasury Department, with an estimate of the
debt as of the end of the year.
The decline from
maximum to December 31, 1920, was approximately
$2,590,000,000 or 9.7 per cent.
The greater part of the debt reduction has been effected
in the floating debt which is composed of unmatured loan
and tax certificates of indebtedness. The decline in the
outstanding volume of these certificates since August 31,
1919, was $1,621,000,000, a reduction of 41.2 per cent.
During the calendar year 1920 the decline was $945,000,000, a redaction of 28.9 per cent. The fluctuations in the
amount outstanding from month to month are caused by
redemptions and new issues at intervals but the long run
result is a substantial decline. On January 3, 1921,
about $175,000,000 of certificates of indebtedness will
mature, but the Treasury has purchased for retirement

about $20,000,000 prior to maturity, and allowance for
that purchase is made in the estimated figures for
December 31. The remainder, about $155,000,000, will be
paid at maturity, presumably out of the Treasury’s present
balance. This will effect a further reduction in outstand­
ing certificates and a corresponding reduction in the gross
public debt
U n ite d



On December 20 the average of Liberty bond prices
was only slightly lower than on November 20, notwith­
standing a further sharp decline in the general bond list.
The level conformed closely with that of mid-September,
though in the interval Liberty bond prices had undergone
a sharp rise and a corresponding reaction.
In late November, under the stimulus of easier money
rates, there was a temporary rally in Liberty bond prices
of one to two points. This rise was followed by active
selling, which was accelerated in the week prior to the
income tax payment date. The prices of the 4l i per
cent, issues declined one to two points, and the First
33^s declined about three points, bringing that issue
to near the lowest point reached thus far. On the whole
the steadiness of the 434 per cent, issues, despite the
large volume of sales, was noteworthy.
Total sales of Liberty bonds and Victory notes for
November were $202,000,000, approximately the same
as the total for October, but as transactions in other bonds
decreased slightly, there appears a slight relative increase
in Liberty bond trading for that month.
The new issues of certificates of indebtedness at 5 ^
per cent, for six months and 6 per cent, for twelve months,
offered by the Secretary of the Treasury on December
15 in the approximate amount of $500,000,000 for the
entire country, were remarkably successful, particularly
in this district. The allotment made to this district in
the amount of $266,907,000, was much in excess of the
quota, and the total of the allotment for the country
was $589,680,500. These certificates, as in the case of
previous issues, were much in demand by private investors.
All issues are commonly traded in on the New York
market, and the six per cent, issues continue to be sold
at a slight premium, with the 5% s at par or slightly above.
R on d M a r k e t
Further declines in bond prices have reduced most
groups approximately to the levels of last August. The
movement was checked temporarily in the latter part of
November by easier money conditions, but in December
prices fell sharply under liquidation which reflected the
weakness in stocks, and was to some extent due to the need
of funds for tax payments. High grade investment
securities as well as the less seasoned issues showed rela­
tively severe losses. New railway equipment issues held
up better than most other groups, but even these declined
a point or so under their highest prices. Municipal
securities lost about half what they had gained since the
low point in September. Following the tax payment date,
the general”
list recovered somewhat.
\- Foreign! bonds participated in the general decline.
Swiss 8s declined 2 points to 102, and other recent govern­
ment issues are at, or slightly below, the original offering
prices. Foreign municipals reacted also, particularly the


new issues which fell 4 to 5 points. Mexican bonds fell
off sharply and Cuban bonds again touched new lowrlevels.
British issues were steady.
Sales on the Stock Exchange of corporate, state, foreign,
and miscellaneous bonds during November totaled $121,000,000, a slight decrease as compared with October
figures, when trading was the heaviest of any month this
year. During December the volume of trading has again
N e w F inancing
Corporate financing during November amounted to
$177,000,000, thus returning to the comparative quiet­
ness of August and September, which was interrupted
when funds released by the maturing Anglo-French Loan
became available for reinvestment.
While investors
showed a more general disposition to select their purchases
with discriminating care, prime offerings were in demand
and sold quickly. The high income basis upon new
securities in the industrial and public utility groups
was maintained and municipal securities were offered
on a slightly higher basis.
In the first two weeks of December, the market re­
mained comparatively quiet, though one fairly large
one-year note issue of a New York public utility cor­
poration was sold. In the week following December
15, however, corporate securities issued totaled over
Chief among these were $55,000,000
debenture bonds of a large industrial corporation offered
on a 7 per cent, income basis. The majority of offerings
continue to run ten to twenty-five years, and carry pro­
vision for the payment of premiums if redeemed in
advance of maturity.
Between November 20 and December 20 there were
no further offerings here of foreign securities payable in
dollars, but an additional foreign currency bond issue was
announced. It is reported that demand for securities
of the latter character is much less active than it was
earlier in the year.
From January 1 to December 1, corporation issues
have totaled $2,870,000,000, compared with $2,798,000,000 in the same period last year. It is estimated
that about 30 per cent, of these were used to pay off
or refund maturities.
S to ck M a r k e t
Following an irregular recovery from the low levels
reached in the first part of November, the stock market
in December developed further weakness in various
groups which resulted in heavy liquidation shortly before
the middle of the month and again shortly before
the holidays. This weakness of the market was the more
noteworthy in that it occurred when stock market money
rates held consistently at the lowest levels of the year
for a prolonged period.
Industrial averages are now at the lowest level of
the year, down about 44 per cent, from the high point
reached in November, 1919. This decline approaches
the heaviest in the experience of the New York market.
The railroad group has declined about 14 points since
November 1 to nearly the year’s lowest level reached
last February, before the passage of the Transportation

Act. Some of the more speculative railroad issues reached
new low prices for the year.
The volume of trading in November and the first part
of December showed a marked increase over previous
months. November sales were 22,000,000 shares, the
largest since April and an increase of 57 per cent, com­
pared with October. The number of shares sold was,
however, 27 per cent, less than the number sold in
November, 1919, when the long period of rising prices
on the stock market came to an end, and was succeeded
by several days of very active liquidation.
F oreign E xch a n g es
Trading in the European exchanges was unusually dull
during the greater part of the past thirty days, and at
times the market was at a standstill. Rates of both
sterling and francs, while fluctuating irregularly, gave
occasional evidences of strength, to which the develop­
ment of plans for a large foreign trade finance corporation
to operate under the Edge Act contributed. Operating
in the other direction is the fact that some of the European
banks, especially in France, have been calling in credits
advanced to customers for the purchase of foreign goods.
Rates on sterling exchange rose around the middle of
December, the result in part of preparations for year-end
settlements which broadened the demand, and in part to
the suspension of offerings of sterling here for French
account. A part of this advance has since been lost.
Francs had a similar rise but closed the period slightly
below the quotation of November 20, and lire are con­
siderably lower. Marks, after erratic fluctuations, are little
changed from the level of thirty days ago. The high, low,
and closing rates, and the decline from the highest point
reached are shown in the following table.
Foreign Exchange Rates, November 22 to December 24.

China (Hong Kong).............
China (Shanghai).................
Japan (Yokohama)..............
Sweden (Stockholm)............
Bar Silver in New York.......





. 0339

. 3413
. 850

Per cent.
from Par

’ ’ '.7
21 2

*—Silver Exchange Basis.
F oreign T ra d e
Export trade continues to reflect the difficulties incident
to a period of price readjustment. Buyers are reluctant to
undertake new commitments in the fear that prices may
decline further. Commercial relations with Australasia,
the Far East, South Africa and South America have been
particularly affected.



Many foreign importers are seeking to avoid or postpone
the loss involved in carrying through transactions negoti­
ated at more favorable rates of exchange, by canceling
orders or requesting the renewal of drafts drawn upon
them. Banks here, in a number of cases, have been
requested by both foreign and domestic customers to
cancel their irrevocable letters of credit, and in some cases
the banks have even had to defend their refusal against
legal action.
This uncertainty as to collections is causing American
banks to scrutinize more carefully drafts drawn against
export shipments, and the purchase of drafts on some
countries where exchange conditions are particularly un­
settled, such as Australasia and some countries of South
America, has been practically suspended. Insufficiency of
Australian funds in London has caused some banks which
normally negotiate their Australian bills through that
center now to deal directly with Australian concerns with
the understanding that if remittance from Australia is
impossible the exporter will refund the amount of the
draft. Foreign banks doing business with South Africa
which have branches in New York lately have increased
the margin of deposit required against South African bills
from 25 to 50 per cent.
One export firm prominent in the markets just men­
tioned reports that orders now are about 15 to 20 per
cent, of their recent volume. Exporters are advising
their customers abroad to purchase as sparingly as possible
until conditions become more settled, and in some cases
are recalling their foreign representatives.

Export demand for wheat has been keen during the
past four weeks, and shipments continue to exceed those
of last year. November cotton shipments were heavy,
101,309 bales more than during October, but 241,428 bales
below the unusually heavy movement of November last
year. These shipments are attributed largely to deliveries
on old orders. The cotton market in England and France
is reported quiescent, but sales to Germany recently have
increased somewhat. There was also a slightly stronger
demand in Japan. Foreign buying of textiles and general
merchandise is still low.
Export trade in iron and steel is estimated at one-fifth to
one-third of the average of earlier months. German and
Belgian competition is becoming more important. Novem­
ber copper sales abroad were the largest in some months,
with France the principal buyer, but in December demand
again became quiet.
The Department of Commerce foreign trade summary
for November showed export shipments valued at $675,000,000, a decrease of $76,000,000 compared with October.
Imports, valued at $321,000,000, showed a decline of
$13,000,000. Measured by dollar figures, this represents
a falling off of 10 per cent, in exports and 4 per cent, in
imports, but allowing for price changes and seasonal
variation exports have increased about 1 per cent, and
imports 5 per cent, over the October figures.
W o r ld C o m m o d ity Prices
Available reports indicate an exceptional decline in
commodity prices in foreign countries as well as in the
United States during November.
The percentages of
decrease shown by the two British indices are closely
similar to that shown by the Department of Labor index
in this country. The decline in France in November
was even more marked than in England and the United
States, and the index number of wholesale prices in
France shows a percentage decline from maximum of
22 per cent. This figure may be compared with a decline
from maximum of 31 per cent, in Japan, 24 per cent, in
the United States, and about 16 per cent, in England.
The differences and similarities of price movements
in the United States, England, France and Italy are
illustrated in the diagram on this page. The Department
of Labor index numbers are used to represent the course
of prices in this country and the Statist index numbers
for English prices. In all four countries the high point
was reached at approximately the same time, in April or
May of this year. In both France and Italy the decline
was checked for a time and an upward movement oc­
curred. In France the decline has been resumed; no
report for November has yet been received from Italy.
In England and the United States the decline has been
The table at the top of the next page gives the latest
available index numbers of wholesale prices, with com­
D o m e stic Prices

Wholesale Commodity Prices in Four Countries in Percentages of
Average Prices in 1913.

The decline in wholesale prices for November as
registered by four different indices was the sharpest of the
present recession, which has proceeded for about seven
months. The United States Department of Labor index
in November was approximately 24 per cent, below the



In d ices o f W h o le sa le Prices





Per Cent.

Per Cent. Change during


United States:
12 Basic Commoditiesf..........................................
Department of Labor.............................................


(Dec. 24)
(Nov. )
(Dec. 1)
(Dec. 1)







244.9 (Dec. 1)
262.9 (Dec. 1)







460.3 (Nov. )
665.1 (Nov. 1)
+ .7
221.2 (Nov. )
224.5 (Nov. }
331. (Nov. )
- .8
Jan. 1919
215. (Oct. )
194. (Nov. )
- .5
424.1 (Nov. 1)
* All indices have been converted to a 1913 base and are monthly averages unless otherwise stated.
f Computed by this bank on
basis of prices at Armistice.
§ July 1, 1913 to June 30, 1914 = 100.
f July 1914 = 100.
J End of July 1914 = 100.

maximum reached last May, and nearly the same as in
June, 1919. Prices of all groups of commodities included
in it declined, but the greatest decreases were in lumber
and building materials, clothing, and fuel and lighting.
Dun’s index is now at the lowest level since May 1, 1917,
and Bradstreet’s at the lowest since November, 1916.
This bank’s index of 12 basic commodities, which is
computed each week, indicates a much less rapid rate of
decline during the first three weeks of December than
during November.
Readjustments in iron and steel prices have gone for­
ward during the last thirty days, and practically all
materials in these trades have been affected. Pig iron is
now about 27 per cent, below the high point and Pitts­
burgh steel billets 33 per cent, below. The decline in
lead prices since November 20 was 20 per cent. Other
commodities which show declines of ten per cent, or more
in the past thirty days are sugar, live hogs, hides, leather,
coke and rubber. Cattle and hog prices are reported to
be the lowest in four years. Bituminous coal prices con­
tinue downward and some cancellations of export orders
are reported.
Prices Since 1825

At the top of the following page is presented a diagram
showing the average wholesale prices of commodities in
the United States each year from 1825 to 1920 in percent­
ages of the average for the year 1913. A close similarity
exists between the rapid advance in prices during the
Civil War, when the greenbacks were issued, and during
the recent war. Prices during the former period were
greenback prices; gold was at a premium between 18621879, and the standard monetary unit was the paper
dollar. The advance of prices at that time was not so
long continued and not so great as the movement from
1915 to 1920, although in the recent rise the gold basis
has been maintained, a result largely of the concentration
of the gold supply in the Federal Reserve Banks. In
other words, the recent rise in prices represented a de­

preciation of the gold dollar, while the Civil War rise re­
presented a depreciation of the paper dollar. The chart,
which is in yearly averages, shows also the point to which
wholesale prices declined in November, 1920.
The apex of prices in both instances was sharp, and the
decline after the Civil War was much more gradual than
the rise. Though prices dropped 27 per cent, in the first
six months of 1865, they rose again by half that amount in
the second half of the year, and it was not until 1879 that
prices were on approximately the level of 1861.
Aside from the period of greenback prices the general
movement from 1825 to 1896 was slightly downward.
During the general downward movement natural products



Average Wholesale Commodity Prices in the United States each Year from 1825 to 1920 in Percentages of the Figures for 1913
tended to become more expensive and manufactured
products in general less expensive. From 1896 the move­
ment upward was gradual until the outbreak of the World
War brought the rapid advance. Throughout the period
between 1873 and 1914 the indices of English, French and
German prices closely paralleled the index for American
In computing the continuous commodity index two
indices covering different periods were used and both have
been converted to a 1913 base. From 1825 to 1860 the
index used was compiled by Carl H. Juergens. He used 74
commodities, the prices of which were taken from the
report of the Secretary of the Treasury for 1863. From
1860 to 1920 figures were taken from the reports of the
United States Bureau o f Labor statistics.

over the November 1 figures. Rents throughout the coun­
try were then about 60 per cent, above the 1914 level but
the Conference Board’s records show that advances in
New York City were much above the average.

C o s t o f L iv in g
The diagram on this page sets forth the changes in the
cost of living in the United States year by year from 1914
to 1919 and month by month in 1920, as shown by a pre­
liminary index number computed by the National In­
dustrial Conference Board. The figures are in percentages
of the level of prices in July, 1914. On December 1, 1920,
the cost of living had declined 7 per cent, from the high
point reached last July, which cuts down the increase since
1914 by about one-seventh.
The decline during November was 2 per cent.; and the
groups in which reductions took place during that month
were food and clothing. The average cost of clothing on
December 1 was down 29 per cent, from the high point
reached in April and food prices were nearly 12 per cent,
below their July maximum. Rents, fuel and light, and
sundries which had been rising steadily showed no increase

The Cost of Living in the United States in Percentages of the
Cost on July 1, 1914.

R etail T ra d e
The volume of holiday buying appears to have proved
satisfactory to the department stores in this district and
was greater than had been anticipated. Reports received
by this bank just before the close of the Christmas shopping
season indicated that the amount of sales had been about
on a par with that of last year. The size of individual
transactions was smaller this year but there was an in­
crease in the number of transactions. Stores which met
the demand by repricing goods at or near replacement
values had the largest trade.
Customers showed a tendency to select their purchases
with careful attention to value. High priced goods did
not sell as readily as last year and there was a greater
demand for articles of utility. There was relatively
light demand for such articles as pianos and other musical
instruments, jewelry and furniture and rugs. In buying
men’s clothing, customers last year preferred suits re­
tailing at $65; this year, however, suits selling at $45
appeared to be in greatest demand. Similarly, many
purchasers refused to pay $18 for a pair of shoes, and some
stocks bought by merchants to retail at that price have
been reduced to $12. However, cheaper grades of shoes
at $6 and $7 and suits at $28 and $30 were not in great
Reports to this bank for November show that gross
sales of department stores in this Federal Reserve district
averaged 11.6 per cent, more than in the corresponding
month last year. Only two stores out of 14 reporting
showed a decrease. Prices of a number of articles, par­
ticularly textiles, have now declined to a point where the
levels for each month are somewhat lower this year than
for the corresponding month in 1919, and therefore equal
dollar amounts of sales of such articles mean actually
greater quantities of goods sold.
Retail stores maintain their policy of buying only for
immediate needs, and there have been no indications of a
change in this attitude. Reports to this bank, published
in the accompanying table, show a low percentage of
outstanding orders.
Merchants inform us that the
amount of orders outstanding to-day is proportionately
less than at any other time in their memory.
C o tto n and C o tto n G oo d s
Manufacturers and buyers of cotton goods have been
unable to agree upon a new price basis that is mutually
satisfactory, and hence business during December con­


tinued quiet, although sales were slightly larger than for
some time previously. The cotton goods market failed
to reflect the declines in the price of raw cotton and at
times there were rallies.
Mill owners are endeavoring to dispose of stocks on
hand at present prices but are unwilling to accept future
orders at current levels. They hold that present prices
are below the cost of production, even after discounting
declines in the price of raw cotton and a wage reduction
of 22
per cent. It is estimated that mills are running
about 50 per cent, of maximum and the owners say they
will not increase this until a demand is felt.
Data issued by the Census Bureau during the month
showed a cotton crop for the year of nearly 13,000,000
bales, the largest since 1914. Consumption of cotton
in domestic mills has been constantly lessening. In
November consumption was 17 per cent, less than in
October and 32 per cent, less than in November, 1919.
Consumption in November was 332,057 bales; in October
399,837 bales; in November, 1919, 491,250 bales. The
active spindles in November were 2,850,000 less than in
October and it is believed that a similar decrease has
taken place during December.
In foreign countries, especially in Japan and England,
there has been a similar reduction in consumption, and
the export demand for American manufactured cotton
goods continues to be low.
From November 20 to December 20 there was a decline
of 10 per cent, in the price of New York spot cotton;
quotations fell from 17.25 on November 20 to a low of
15.50 reached later in November, and again in the third
week of December. The total decline from the maximum
price of raw cotton reached last July has been 65 per cent.
W ool


W o o le n G ood s

Due to the continued reluctance of garment manu­
facturers and buyers for retail stores to place forward
orders for spring merchandise, there has been a further
decline during December in the demand for woolen and
worsted piece goods, accompanied by another decline in
prices. Consequently the manufacturers have reduced
production still further to about 30 per cent, of maximum.
Nearly half the mills are closed entirely and most of the
others are running on part time.
Both manufacturers of men’s and women’s apparel
apparently have ample stocks of piece goods on hand with
which to start the spring season and are not in the market

B usiness o f D e p a r tm e n t Stores
New York City New York City
and Brooklyn and Brooklyn
Percentage of increase in net sales during November. 1920, over net sales during the same
month last year.............................................................................................................
Percentage of increase in net sales from July 1,1920, to November 30,1920, over net sales
during same period last year.........................................................................................
Percentage of increase of stocks at close of November, 1920, over stocks at close of the
same month last year....................................................................................................
Percentage of decrease of stocks at close of November, 1920, over stocks at close of
October, 1920.................................................................................................................
Percentage of average stocks at close of each month from July 1,1920, to average monthly
net sales during same period..........................................................................................
Percentage of outstanding orders at close of November, 1920, to total purchases during
the calendar year, 1919..................................................................................................






















now. They have shown a disposition to accept the losses
already incurred because of declines in values but hesitate
to make further commitments for fear of another decline.
Nearly all of the woolen manufacturers in New England
and this district have reduced wages 223 ^ per cent., and
union officials have indicated that they will not oppose for
the time being. The largest concern in the woolen in­
dustry, however, has not yet reduced wages.
About the only guide to existing prices of finished goods
was furnished by an auction sale in New York of a large
amount of goods that had been held in stock by the mills.
These goods were sold at 50 to 75 per cent, below the high
prices which ruled a year ago, and somewhat below the
estimated present cost of manufacture even after taking
into consideration the reductions in the price of raw wool
and the decreased wages.
The raw wool market remains unchanged from last
month. Prices are quoted about 50 per cent, below those
of a year ago, but they are nominal, inasmuch as there have
not been sufficient sales on which to base accurate quota­
tions. Stocks of raw wool in the United States are very
large and reports from Australia, England and South
America indicate that stocks in those countries also ex­
ceed the demands. Consumption has decreased rapidly
since the mills reduced operations. W ool growers and
commission houses in this country still hold a large per­
centage of the last domestic clip.

The latest survey of activities in Paterson, New Jersey,
where the majority of the silk mills of this district are
located, shows the looms to be working at about 7 per cent,
of their maximum capacity in terms of loom hours as com­
pared with a reported 9 per cent, last month. Factories
in New Jersey outside of Paterson report operation at
38 per cent, of capacity. On Long Island, in Pennsylvania,
and in New England silk centers conditions are similar to
those in New Jersey outside Paterson. Further reductions
in wages were fairly widespread throughout the industry,
bringing the general level to a point 25 to 35 per cent,
below the maximum reached last year. The standard
week used as a basis for figuring wages was also lengthened
in a number of large plants from 44 to 48 hours.
Retailers have continued to buy sparingly although
further price recessions have been made by jobbers and
manufacturers. Few advance orders for spring goods have
been placed, and nearly all current sales are for immediate
delivery. There was little activity in the raw silk market
during the month and prices are practically unchanged.

Preliminary reports of business failures in the United
States during December indicate an increase over failures
in November and a large increase over those in December,
1919. In the week ended December 2 there were 339
failures; for the week ended December 9, 326 and for the
week ended December 16, 360. It is, however, usual for
failures to increase toward the close of the year.
In November there were 1,050 failures throughout the
country, an increase of 1&7 over October figures. Lia­
bilities of $30,758,000 were $8,000,000 less than in October.

The proportion of failures to firms in business is still
siderably under the normal percentage.
Failures in this Federal Reserve district increased
slightly in November, and the liabilities decreased.
following figures are shown from D un’s reports for

Number of Failures






$ 1,212,644 $ 3,258,200

1st quarter.............



$ 8,488,194 $ 9,977,754




$ 2,865,153 $ 4,365,253

2nd quarter............



$21,496,974 $11,599,741




$11,438,511 $ 1,836,523

3rd quarter............



$40,999,632 $ 5,787,041




$15,462,866 $ 1,650,441

Iron and Steel
Few large orders for iron and steel have been placed
during the month and as a result prices continued to
weaken and production became more irregular. It is
now estimated that the industry as a whole is operating
between 60 and 65 per cent, of its maximum. In the
blast furnaces and finishing departments the decrease
in operations has been greater than in other branches.
The United States Steel Corporation announced its
unfilled tonnage as of November 30 as 9,021,481 tons
compared with 9,836,852 tons on October 31, a decrease
of 8 per cent.
The decrease in unfilled tonnage of
the independent companies combined has probably been
proportionately greater. The figures may be mislead­
ing, however, as some orders which have been canceled
or suspended are carried on the books of all the com­
panies as unfilled orders.
There have been no concerted reductions in hourly
wages in the iron and steel industry during the month,
but the earning power of the workmen has been decreased
in a number of companies through a reduction in the
number of working hours from twelve to eight. This
amounts to a reduction in wages earned of from 27 to
42 per cent., depending upon the length of overtime
formerly permitted. There have been isolated instances
also of actual hourly wage reductions of from 10 to 20
per cent.

B uilding
Preliminary figures indicate that for the eighth con­
secutive month December will show a decline in the
amount of new construction in this Federal Reserve dis­
trict as well as in the country as a whole. Decreased
activity is due in part to the usual seasonal decline and in
part to high prices and wages. Although prices of building


materials showed a drop of 1 2 per cent, during Novem­
ber as compared with a decline of 8 per cent, in the Depart­
ment of Labor’s index number for all commodities, the cost
of building is still twice as high as in 1913. There have
been no important wage recessions.
According to reports compiled by the F. W . Dodge
Company, contracts awarded during November in 25
northeastern States amounted to $130,191,000 compared
with $177,791,000 in October. However, the total value
of contracts awarded in the same States during the first
11 months of the year is 5 per cent, greater than for the
same period in 1919.
In New York State and northern New Jersey building
contracts for November amounted to $29,514,000, a de­
cline of about $20,000,000 from the October figure. The
November figure included $10,568,000, or 36 per cent., for
residential buildings; $6,039,000, or 20 per cent., for in­
dustrial buildings; $4,573,000, or 16 per cent., for public
works and utilities; $3,573,000, or 12 per cent., for busi­
ness buildings, and the remaining 16 per cent, for various
other kinds of work.
For the first 11 months of 1920 contracts awarded in the
same area amounted to $579,000,000, compared with
$496,000,000 for the same period last year, an increase of
16 per cent. In addition, work for which permits have
been secured during this period but no contracts let, is
valued at $325,000,000.
R ailroads and T ran sp ortation

however, is apparently still falling off, although at this
season the manufactures of the New York and New
England industrial centers are ordinarily going forward
in rather heavy volume.
The removal by the Interstate Commerce Commission
of its restrictions against the use of open top cars for
other than coal shipments has permitted the clearing up
of congestion of steel awaiting shipment, particularly in
the Pennsylvania steel districts. One large road enter­
ing New York City has reported to us that an accumu­
lation along its lines at the close of October of nearly
76,000 tons of steel awaiting shipment had been cut
to 30,000 tons by the middle of December. The move­
ment of steel removes the last sign of the congestion
which has existed on the railroads of the country since
last March. Now, for the first time this year, the rail­
roads are reporting an actual car surplus instead of the
heavy shortages which prevailed since early last winter.
E m p lo y m e n t

There was an estimated decrease of 6 per cent, in the
number of persons employed in industrial establishments
in this district between November 20 and December 20.
The number of workers is now about 20 per cent, below
the maximum reached in the spring. The percentages of
decrease each based upon month to month changes have
been as follows:
April May June July

The volume of the country’s railroad traffic continued
to diminish throughout November. In the final week of
that month car loadings were 18 per cent, below those
of the corresponding week in October, although still
approximately 8 per cent, more than in the same week
of 1919 and 1918. For the first week in December,
however, car loadings were 10 per cent, above the previous
week and preliminary reports for the second week in
December from railroads partly in this district indicate
that traffic continues well above that of the last half of
November. Normally December figures show a decline
of about 3 per cent, as compared with November.
Heavy shipments of coal, iron ore and grain from Lake
Erie ports, where the coming of winter is putting an end
to Great Lakes traffic, have been offsetting to a great
extent reduced loadings of miscellaneous freight. Eastbound shipments of grain and ore were much larger than
in corresponding weeks in the past two years. Grain
moving out of Buffalo for export through the port of
New York was in larger volume during the first two weeks
of December than at other times this year.

The roads carrying coal for shipment to the upper lake
ports state that orders for such shipments were apparently
placed later than usual this year. Consequently, this
traffic was particularly heavy during November and up
to the second week in December when winter weather
set in. With mining of both bituminous and anthracite
coal remaining at high weekly levels, the railroads in
general report much heavier coal shipments than at this
time last year, when the effects of the coal strike were still
being felt.
There has also been some increase over October and
November totals in the movement of general merchandise
to the port of New York for export. Westbound traffic,




1y 2%

Sept. Oct.


Nov. Dec.


The principal decline during December occurred in the
metal and kindred industries in New York up-state cities
where many plants have closed down for indefinite periods.
There were also declines in the number of persons employed
in furniture factories at Jamestown and Syracuse.
Some further reductions are reported among the em­
ployees of railroads, steamship lines and trucking com­
panies. Reductions made by railroads in this district,
where most of the men are employed to maintain equip­
ment and operate roads, have not been as large as in
districts where equipment is manufactured.
The textile and clothing trades show no great change
from the last month but continue to be the trades most
adversely affected. It is estimated that only 5,000
workers are employed in the men’s clothing factories in
New York City whereas normally there are 65,000 workers
engaged in this industry. Labor difficulties are partly
responsible for this situation. In contrast, factories
making women’s apparel are now estimated to be em­
ploying 40 per cent, of the 75,000 workers normally
There has been little increase in unemployment in
Paterson, N. J., where only about 10 per cent, of those
usually engaged in silk mills are working to-day. Passaic,
N. J., reports further unemployment in the woolen
Reports from a group of large department stores show
that in preparation for the holiday trade, the sales forces
were increased during December in about the same pro­
portion as in previous years. Employment managers
report an abundance of applicants for positions whereas
last year there was a shortage. Local managers of em­
ployment bureaus, conducted by the State Industrial



Commission, report an increase in the number of appli­
cations and a decrease in the number of positions open
throughout the State and add that workers are now
showing a disposition to accept the less desirable posi­
Inquiries made by this bank from local Chambers of
Commerce, industrial bureaus, employment services
and individual manufacturers in a number of cities in
New York State outside the metropolitan district, pro­
duced estimates of employment among industrial workers
summarized as follows:

Albany. ..

Decrease Percent.
No. Em­ Emplyd. Emplyd.
Nov. 15 Dec. 13 Maximum crease
160,000 120,000 107,000
92,769 75,728 66,500
65.000 52,500 39,175
49,550 33,850 28,450
22.000 19,400
18,000 16,000 15,000



412,619 319,728 264,125 148,494


the first three weeks in December there has been an
unusually large number of arrivals, and although the
figures have not been compiled, it is indicated that
December will show a net gain over any month this year.
The accompanying diagram compares the excess in
the number of alien immigrants entering the port of
New York over those going out, with the average monthly
excess for the period 1910 to 1914. September and
October are the only months this year in which the net
immigration has exceeded the five-year pre-war average.
The November figure, which is partly estimated, falls
below the five-year average, but from present indications
the December figure is likely to exceed it.
Italy is sending more immigrants to the United States
than any other country, and Poland is second. Many of
the immigrants who come here from Poland are in reality
natives of Russia, but as it is impossible for them to
secure passports in Russia they cross the border and
obtain them from American consuls in Poland. A ma­
jority of the aliens arriving at present are relatives of
persons now residing in the United States. Officials
at the immigration station assert that high steamship
rates prevent many more aliens from coming to^this

Those idle in Rochester include 9,200 clothing factory
workers and 5,000 shoe factory workers, and the remainder
is made up from those formerly employed in the build­
ing and metal trades, and miscellaneous factory enter­
prises. In Syracuse 100 factories formerly employing
40,000 persons, have laid off 18,725. Auburn, Fulton,
and Oneida, providing employment for 15,000 in the
early spring, now employ 10,000.
The depression in the knit goods trade has been re­
flected in Utica and Cohoes, where only about 10 per cent,
of the maximum number of such workers are now em­
ployed. In Troy eight of the nine large collar and shirt
factories were closed during December, making idle 10,000
workers, mostly women and girls. In Rome, Ilion,
Little Falls, and Herkimer, where about 23,500 persons
were employed last spring, 8,500 are now idle.
These figures and the more general data for the State
as a whole refer in the main to persons working in indus­
trial establishments who constitute in this State about
one-third of the wage earning population. Other types
of workers have been much less affected by the slackening
in business activity.



A verage 1910 -to 19144ZZZ4

Im m igra tion


There were 61,163 alien immigrants admitted through
the port of New York during the month of November,
a decrease of 13,502 from the October figures. During

L U . ET C.

Net Immigration each Month in 1920 at the Portfof New York.