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COMMERCIAL CHRONICLE AND REVIEW.
No DEPRECIATION OF PAPER-QUANTITY NOT INCREASED-GOLD DEMONETIBED-LOST ITS Ct2. BENCY FACULTY-SMALL AMOUNT OF CURRENCY-GOVERNMENT BLOW TO PAY-SPECIE MOVEMENT - INCREASE OF EXPORTS-COMES FROM THE INTERIOR FASTER THAN EXPORTED—PAPER TO INCREASE-SMALL BANK NOTES-PAYMENT OF INTEREST DUE BANKS IN COIN--THE FUTTER DEMAND FOR COIN DEFINED-$80,000,000 PER ANNUM--CONTROL OF SPECIE--HOLDERS OF STOCKS PROFIT BY IT-TAX-PAYERS LOSE-SLOW ISSUES OF GOVERNMENT PAPER-SIX PER CENT. CEETIFICATES--ISSUES OF PAPER--PRICES OF U. 8. SECURITIES--DUTIES RECEIVED--EFFECT OF Tariff-IMPORTS AND EXPORTS-CASH DUTIES--EXCHANGE--DECLINE IN FLOUR--RATES OF ExCHANGE-Rates MONEY-BANK LOANS--DeposiT8--BANKS BORROW MORE THAN TUET LANDPENNBYLVANIA LEGISLATURE--New-YORK CITY STOCKS--NEW-YORK CANALS.
The finances of the government and city have been quiet during the month, and the anticipated depreciation of paper, as compared with gold, has not taken place, mostly for the reason that although the banks nominally suspended, and the government refused to pay its demand potes in specie, according to their face, there has been no increase in the supply of the
paper. The mere fact that persons and corporations are released from the obligation to pay specie for their obligations, does not, of itself, make specie more valuable or paper less valuable. In fact, paper merely assumed the functions of gold in paying debts. It had an additional value conferred upon it, since it is now the medium of settling contracts as well as of circulation. Gold, on the other hand, if it did not lose this faculty, . was dispensed with as a means of payment. Hence it suddenly lost one of its most important attributes, that of being the common object of demand for all who owe debts. Under such a state of affairs, supposing the foreign trade did not exist, there would be no demand for gold at all except to work up in the arts, and that demand would depend upon the general prosperity. Under such circumstances, supposing the quantity of legal tender paper afloat to be no greater than that of gold, there would be rather a depreciation than an appreciation of gold; at any rate, there would be no reason for its commanding a premium. This is exactly what has occurred. The supply of paper is a great deal less than before the suspension; it has, therefore, not depreciated. The government has, indeed, the right to increase the currency, but it has not done it. It owes vast sums of money, and has, apparently, refrained from paying, to prevent that depreciation which must inevitably take place when it uses its power to pay its army and creditors with the authorized paper. There bas been a growing demand for specie for export, but this has not been greatly in excess of what has come in from California. Hence there has been no effective demand for specie, beyond what has been supplied without disturbing the stock on hand. The specie movement, with the price of gold, has been as follows:
Price of gold. 2
@ 4 prem. 4
@ 4% " @ 3% "
SPECIE AND PRICE OF GOLD. 1861,
1862. Received. Exported. Received. Exported. Gold in bank. Jan. 4,...
$ 442,147 $ 28,983,878 11,... $1,445,385
$ 885,923 1,035,025 25,873,070 18,... 1,446,219
547, 703 26,120,859 25,... 1,246,029 $ 22,855 627,767 822,918 26,698,728 Feb. 1,... 1,514,154 289,669
810,484 27,479,533 9... 1,052,318 115,698 854,000 976,285 28,196,666 15,... 1,056,426 117, 101 614,146 1,156,154 28,114,148 22,
187,253 759,247 784,512 28,875,992 March 1,... 855,755 176,161 741,109 510,774 29,826,959 8,...
679,075 585,236 80,436,614
6,088 490,368 779,564 82,841,862 April 5,... 996,445 628,70S 581,292 878,826 83,764,382 12,... 1,110,231 323,906
1,505,728 34,594,668 19,
617,279 693,432 31,671,528 Total,.... $12,232,078 $2,081,917 $7,533,264 $ 11,809,786
@ 1% “
Since the suspension of the banks there has been exported $4,300,000 more than was received from California, and the city banks have gained nearly $11,000,000, because the current sets towards New-York in larger amounts than it goes to Europe. On the outbreak of the war, large sums at the South and West were hoarded, and are known to be held by merchants who, as the armies progress, come forward and pay in gold within a margin. It, so to speak, "banks up" here. It will not be, until the sums in the interior are all paid into New-York, that the supply here will suffer from the continued export. Last year $40,000,000 were imported, but did not much increase the amount in bank; because it passed into the interior. The process is now reversed. It is coming from the interior, to go abroad, and will soon affect the supplies here.
The real rise in gold will take place only when the government paper is paid out to creditors and troops. The money due them will then circulate and improve business, swelling the imports, and giving a new impulse to the export demand for gold. The government paper will become the basis of bank issues of small denomination, and trade generally become active. Then a positive demand for gold for export, in payment of goods, will be felt, and also a demand to pay the interest on the government stocks and States' debts, nearly all of which have determined to pay in specie; which, not being currency, must be bought, and every purchase will enhance the price. The payment of the April interest in coin was notified as follows:
Treasury Department, March 21, 1862. Holders of bonds of the United States, dated Oct. 1, 1861, and
payable three years from date, are hereby notified that provision has been made for the payment, in coin, of the coupons of semi-annual interest, which will become due on the 1st April, proximo, agreeably to their tenor, by the Treasurer of the United States, at Washington; by the Assistant Treasurer, at Boston, New-York and Philadelphia; and by the depositary of the United States at Cincinnati, Ohio.
All such coupons, together with schedules showing the number of
each coupon, and the aggregate sum of each parcel, must be presented for examination and verification at least three full business days before payment.
S. P. Chase, Secretary of the Treasury.
The amount then payable was $1,825,000; and, to complete this, gorernment bought a sum of the banks at 11 premium, which was paid back to the banks, at par, for the interest on the stocks they held. The purchases of coin, for the payment of interest, will hereafter be regular and large, since most of the States that have debts will follow the example of the federal government. The plan is, no doubt, in the highest degree praiseworthy, to keep the specie foundation for obligations; but when all business transactions are put afloat upon paper, the difficulty becomes very great.
When every person has the right to demand specie for what is due him, the metals are mainly circulated; as soon, however, as paper is made the circulation, and specie only a commodity, in demand for a special purpose, it is then only a subject of speculation, and its value is governed by demand and supply. The demand is certain and fixed. Thus the federal and State governments must have, with the present amount of outstanding debts, $60,000,000 specie per annum. In the present condition of the foreign trade the exports will exceed the California supplies by $20,000,000. There is, then, a positive future demand for $80,000,000 of specie—an amount not much less than the existing available stock in the country, in excess of the silver fractions of the dollar. Under the export demand, this amount will gradually waste, and the whole available amount be soon controlled by those who sell to the government at a premium, and again re-collect it when the holders of stocks, having received it at par for interest, re-sell it for a profit. It follows that, as long as this system continues, whatever premium the creditor receives for specie, will swell the rate of interest he enjoys from his money. Thus the holder of the 1.30 Treasury notes, drawing $73 in gold, will receive $1 82 premium at to-day's rates, or nearly 7.4 per cent. interest, and this rate of interest will rise with the advance in gold. The government annuities will thus be exempt from the influences of paper money; because the income they afford will rise exactly in proportion to the prices of commodities, as measured by the paper money afloat. This, however, is to the government a most costly system, and one which would soon exhaust the tax-paying ability of any nation, if it contemplated a long suspension of specie payments.
The amount of the government paper has not increased; because, among other reasons, the demand notes were required to be printed, and were then issued in large denominations of $1,000, to a considerable extent, to contractors, from whose hands they poured into the banks, for deposits and maturing obligations. The demands at bank for discount became smaller with the diminished business, and the strictness with which that business was confined to cash, and the large notes not being useful as currency, were deposited with the government for five per cent. certificates of deposit, payable at ten days' notice. The sum of these deposits has reached $50,000,000, the legal limit. The army is largely in arrears for pay, and cannot get it until the small notes are ready. The department issued the certificates of indebtedness, bearing 6 per cent,
and one year to run, to some extent, and the price fell to 95%, which would give the buyer 104 per cent for his money. The department then issued a notice, explained as follows:
Washington, April 15, 1862. Dear Sirs,— The Secretary of the Treasury has decided to pay twenty per cent. to the original holders of certificates of indebtedness, in the following manner:
If one hundred thousand has been issued to you, he will redeem twenty thousand in toto. It does not require the production of the balance, eighty thousand, issued you. If you have parted with them, it makes no difference. You are entitled to twenty per cent. of the amount of certificates issued in your name. The other four-fifths, in the hands of a third party, cannot, of course, be redeemed until the pleasure of the Secretary.
This decision does not apply to parties who have already received twenty per cent. on checks, or to certificates issued subsequent to 7th inst.
This caused a rally in the price of the certificates to 997, which would give 6
cent. interest to holders. The course of the department seems to be, to withhold payment from creditors as long as possible, and then feed them gradually with different descriptions of paper, alternately, as the market will bear them, holding up as soon as the price droops. Thus, last year, the goods purchased for cash in May were not paid for until November. The army was greatly in arrears, and, when the demand notes were ready, in September, General Scott, in a general order, congratulated the troops on the immense distress that was to be relieved by their issue. In December, the $150,000,000 advanced by the banks being nearly exhausted, the Secretary said he could get along until Janu
He then paid out 7 3-10 Treasury notes to creditors, and the price fell to 96. The 6 per cent stock was then at 90, and this attracted buyers, until the rate rose to 95. The issue was then stopped, and 6 per cent. certificates of indebtedness issued to creditors. These soon fell to 954. This price attracted the public, and investments became large, at 99. The department had got out $80,000,000, and then, to stiffen the price, has paid 20 per cent. of those in first hands. Meantime the demand notes have been printed to the extent of $50,000,000, but a very small amount only was issued. These were of large denominations, and were deposited with the Treasury for 5 per cent. certificates of deposit, which the government has received to the amount of $22,000,000.
The movement may be summed up nearly as follows: 7 3-10 notes issued,....
$ 20,000,000 Certificates of indebtedness, 6 per cent., .
80,000,000 deposit, 5 per cent.,
50,000,000 Demand notes,
$ 175,000,000 The arrears of debt are now about as much more. At the close of April the Secretary gave notice that he would pay 40 per cent. of the debts due prior to February, 30 per cent. of those due in February, and 20 per cent. of those subsequent. The prices are nearly as follows:
The effort of the department was, no doubt, to get the 6's to par; and the payment of 20 per cent. to original holders of the certificates tempted many to hold, thus stiffening the price. Nevertheless, the amount of capital seeking investment is large, and government paper, due within a year, that will
pay 7 per cent to the holder, is a temptation. The revenues of the government have been large under the new tariff. For the total nine months of the fiscal year they were as follows:
RECEIVED FOR DUTIES AT THE PORT OF NEW-YORK.
Total, 9 mos.,. $ 30,076,816 15 .. $ 24,715,667 62 .. $ 22,673,230 26
The duties of this year, for March, are quite large, being nearly two and a quarter millions more than for March last year, when the old tariff ceased to act. The new tariff came into operation April 1st, and was again raised in August, with some additional duties in December. If we take the quantity of duties paid in March, this year and last, the result shows that the average rate of duty then was 194 per cent., and now 34 per cent.-a very heavy tax. The whole amount was, however, paid in Treasury and demand notes, not re-issuable; hence the customs give no resources whatever to the government, until all the notes, amounting to about eighty millions, receivable for dues, shall have been absorbed. The business of the port for three months has been as ollows: IMPORTS, PORT OF NEW-YORK,
Specie. Gooda. Consumption. Warehouse. Total. January,
$ 163,658 $ 2,552,050 $6,763,396 $3,141,725 $ 12,620,829 February,
62,007 3,381,473 7,058,174 3,370,486 13,872,140 March,..
89,327 3,476,004 10,312,689 4,841,846 18,719,866
Total, 3 mos.,.... $314,992 $ 9,409,527 $ 24,134,269 $ 11,354,057 $ 45,212,835
1861, 15,802,702 9,011,925 21,882,297 15,396,545 61,373,469