Exchange Relations Between Chicago and New York
[97]... It should always be borne in mind that the fact that New York City is the country's dominating financial market results in making New York funds acceptable everywhere as a means of payment, and in making a ready market for New York exchange throughout the country for a large part of the year.
Throughout January money in Chicago relative to that in New York City is cheap. Exchange rates on New York are high and there is a considerable movement of cash from Chicago to the Eastern States—particularly to New York City....
Just prior to January 1 there is normally a large demand in Chicago for New York exchange with which to meet dividend and interest payments due in New York, and the high rates thus created continue somewhat into the new year. The crop-moving and holiday demand, however, being over, money becomes relatively cheap in Chicago and flows to New York City, where it can at least earn the 2 per cent. paid by banks on bankers' balances, and where it is absorbed somewhat in speculative activity and in the higher security prices, which normally rule the latter part of January and the fore part of February.
From the last of January to the fore part of March the demand for money in Chicago relative to that in New York rapidly rises. Exchange rates on New York fall to a low point, and shipments of cash to the Eastern States are very small....
... There is, however, no evidence of a movement of cash from the East to Chicago in February, although there is something of a westward movement in March.
During this period the relative demand for money in Chicago is increased by the anticipated opening of navigation on the Great Lakes, for the opening of navigation gives rise to a large amount of New York exchange received in payment of grain bills. There is also a demand on the part of western bankers for currency to meet the spring needs of the western farmers. The first of March in many sections of the Middle West is the commonest time for making settlements of interest and principal on farm mortgages. It is also a common date for paying farm rents.
This spring advance in the value of money in Chicago as compared with New York reaches its maximum early in March. The demand then falls off rapidly and with only temporary interruptions (the most noteworthy being about the first of May) until it reaches the low level of the early summer, the latter part of May. It continues at a low level until early in July, when the crop-moving advance begins....
About the first of July the relative demand for money in Chicago and vicinity begins to increase, advancing rapidly, with minor interruptions, until early in September, and then maintaining a high level until the fore part of November. During this period exchange rates rule low and money moves in large quantities from the Eastern States to Chicago....