We cannot tell, in these figures for Louisiana, how many banks are represented, or what the average figures per bank are. For the whole State of Arkansas, however, including five cities of over 10,000, with two over 20,000, and one of 45,000, we can get an average for ninety reporting banks. Even here we do not know where these banks are located within the State; though it is probable that they are in the larger places, and so exceed the average deposits for the banks in the State as a whole, to say nothing of the average for the smaller places. The ninety banks are almost wholly State and national banks.
| Per Cent. | ||
| Arkansas: | ||
| Retail deposits | $ 232,017 | 25+ |
| Wholesale deposits | 231,614 | 25+ |
| "All other" deposits | 456,544 | 49+ |
The average for all deposits, per bank, in Arkansas is $10,224; the average for all the 11,492 banks reporting for the whole country is, approximately, $60,000; the average for the 659 banks reporting from New York State is $502,136; the average for the banks in New York City alone is doubtless much higher, but cannot be stated, as Kinley's figures do not tell how many banks reported by cities.[253]
The "all other deposits" in Arkansas are 27.8% cash, and 72.2% checks; the "all other" deposits in the country as a whole are only 4.1% cash, with 95.9% checks; the "all other deposits" of New York City are only 1% cash, with 98.9% checks.
Several facts are very clear from these comparisons: (1) the proportion of "all other deposits" increases very rapidly as we get closer to the great centres of speculation, and is lowest in rural regions; (2) the great bulk of all the deposits is in the cities. The average for Arkansas banks, for example, is only one-sixth the average of the whole country, and is only one-fiftieth the average for the banks of New York State. It is a much smaller fraction of the average for New York City, but we cannot give an exact figure. The totals reported from the rural regions are trifling, as compared with the totals reported from the big cities. This, as will be made clear in the chapter on "Statistical Demonstrations of the Quantity Theory," is not because the country reports were less complete that the city reports. New York was probably less complete than the country as a whole. It is simply because the activity of country accounts is small, the amount of trading in the country districts small, and (as shown) the average for country banks is small. (3) The character of the "all other" deposits in Arkansas differs substantially from that of the "all other" deposits in New York City, as indicated by the fact that the proportion of cash is high in Arkansas—substantially higher, in fact, for the "all other" deposits in Arkansas than for all deposits, or even for retail deposits, in the country as a whole. The percentage of checks in total retail deposits in the United States, in Kinley's figures, was 73.2; the percentage of checks in the "all other" deposits in Arkansas was 72.2. We may count these Arkansas "all other" deposits as, in considerable degree, deposits made by farmers. What were the "all other deposits" made in New York City?
Dean Kinley's list of the miscellaneous elements that enter into the "all other deposits," given on p. 151, contains only two that might be expected to bulk large in New York without appearing in Arkansas. These are: brokers, and stock and bond financial corporations. Of course, theatres, hotels, publishing houses, railroads, public funds, "those who have no specific business," and rich churches, will all be absolutely much larger in New York City than in Arkansas. But these things may be found in many places, scattered throughout the cities of the country, without making anything like such "all other" deposits as New York shows. It is not New York's foreign commerce that does it, because that is represented in New York's "wholesale deposits," which make up only 14% of New York City's total deposits for the day. It cannot be the supposed "clearing house" function of New York City,[254] whereby banks in different parts of the country pay their balances due one another in New York exchange, because such transactions would appear in New York chiefly in the figures for deposits made by one bank in another, and these figures are excluded from Kinley's totals. It cannot be the deposits of the "idle rich" for current expenses that swell New York's "all other deposits" so greatly—these could not equal the total retail deposits of the city, which are only 3.7% of the total in New York. Moreover, similar deposits are made in many other cities, without, in proportion to population, making any such totals. Figures, moreover, for the aggregate yearly income of the United States, and for the distribution of that income between rich and poor, make it clear that any such items must be bagatelles in comparison with these enormous figures. The only explanation that will really explain is the speculative and investment and financial transactions that centre in New York, and, in less degree, in the other great financial cities of the country.
This is Dean Kinley's opinion. In the "all other" deposits he makes a 50% allowance for speculative transactions. "A large proportion of deposits in this 'all others' class undoubtedly represents speculative transactions, all of which, or practically all of which, are settled with credit paper."[255] It is also the opinion of General Francis A. Walker, expressed concerning similar figures from earlier inquiries.[256]
Various kinds of evidence converge toward this conclusion. Thus, the evidence of clearings, total items presented by banks to the clearing houses of the country. New York clearings are usually nearly twice as great as total clearings for the rest of the country. New York clearings fluctuate in general harmony with transactions on the New York Stock Exchange. This has been commented on many times. The extent to which it holds has recently been carefully measured by Mr. N. J. Silberling, whose results appear in the Annalist for August 14, 1916, under the title, "The Mystery of Clearings." Mr. Silberling applies the "coefficient of correlation" to the problem, getting in one significant figure a measure of the extent to which two variables, as share sales on the New York Stock Exchange and New York clearings, vary together. This coefficient has been used enough by economists not to require detailed explanation here. It is a figure always between +1 and -1. +1 indicates that the two variables in question are perfectly correlated, whereas 0 indicates no correlation whatever. -1 indicates an inverse correlation, such that two variables vary exactly and inversely with reference to one another.[257]
Mr. Silberling's studies show the following correlations: New York share sales (numbers of shares, not values) to New York clearings, using weekly figures, for the years 1909-10, r = .628. This is a high correlation. Limiting the observations to the middle weeks of the month for the same period, he gets r = .731(46). The reason for taking only middle weeks in the month is that thereby the disturbing factor of monthly settlements is avoided. The monthly settlements may be for stock transactions, or may be for other things, but as they are not dependent on the stock transactions of the week in which they occur, their effect is to lessen the evident degree of connection between stock sales and clearings. Thus the middle weeks show a closer correlation between the two variables than do all the weeks taken as they come. If figures for the month were taken, this complication would be smoothed out, and a fairer result might be expected to appear. The middle weeks, eliminating monthly settlements, probably eliminate more other things than they do share sales (which are in large degree paid for in 24 hours[258]), and so exaggerate somewhat the relation between shares and clearings. Monthly figures avoid both complications, though they lose something of the concrete causation. An intermediate figure might be expected for the monthly correlation, and this we find: r = .718(23).