Exchange Relations Between St. Louis and New York
[99]... General seasonal movements in the relative demand for money in St. Louis (as compared with New York City), ... are fairly regular in their occurrence.
From the beginning of the year until the fore part of May the demand appears to be moderate, exchange rates rule near par, and there is a moderate tendency for cash to move from St. Louis to the Eastern States, with almost no tendency to move in the opposite direction....
The first eighteen weeks of the year, St. Louis bankers say, are a period of comparative inactivity in the local money market. Concerning this period, a prominent St. Louis banker writes: "For the first eighteen weeks in the year... there is comparatively no New York exchange making and also a nominal demand for it, and likewise an easy, quiet money market."...
The second noticeable movement in the St. Louis money market is the sharp decline in the relative demand for money from the fore part of May to about the first of June. Exchange on New York rises rapidly at this time, and May is the month of heaviest shipments of cash to the East....
The high exchange rates in May, and the resulting eastward movement of money, are due largely to the fact that at about this time in St. Louis the bills of boot, shoe, hardware, and dry goods merchants mature, and as their paper is held largely in the East, exchange is required in large amounts. The result is large payments to St. Louis banks, the building up of their reserves, and resulting reduction of their credit balances in New York City.
From the first of June to the first of November the demand for money in St. Louis relative to that in New York City increases rapidly, advancing from the cheapest money in the year (twenty-first week) to the dearest money (forty-fourth week)....
This greatly increasing relative demand for money in St. Louis is, of course, attributable to the crop-moving requirements.... The cashier of a St. Louis bank writes: "New York exchange... always goes to a discount here in the fall of the year, and this is caused by the large cotton drafts drawn in payment of cotton shipped out from the Southwest. The banks down there either send us drafts drawn on New England points or New York, or else they send drafts drawn on the two large cotton buyers here, who, in turn, draw their drafts on Eastern points. The result is a great deal of exchange comes in, for which there is a demand for currency." The resulting low rates of exchange continue as long as the cotton season lasts. During this crop-moving season there are heavy shipments of cash from St. Louis to the Southern States....
After about the first week in November the relative demand for money in St. Louis falls off rapidly until about the first of December, and then fluctuates at a moderate level until the end of the year....
The rise in exchange and easing up of the St. Louis money market in the latter part of November and in December is due to the decline in the crop-moving demand for cash, particularly in the South, and the return movement of cash from that section,... which begins the latter part of November. Southern banks in settling their St. Louis bills first use their eastern exchange and then ship currency. The upward movement of exchange is hastened shortly after the first of November by heavy purchases, for about four weeks, of New York exchange by dry goods, hardware, and boot-and-shoe houses for the purpose of settling their eastern accounts....