Finally, it should be noted that the restriction of cash payments to depositors and the currency premium seem to have increased the demand for New York exchange. Only in that city was it possible to buy any considerable quantity of money. Many banks in various parts of the country purchased gold and currency at a premium in New York and, instead of drawing on their own balances, then entered their home market as purchasers of exchange which was remitted in payment.
In the few instances where exchange was below par the currency premium was a more direct influence; but exchange could not have dropped to the low figures recorded in 1893 in the case of Chicago [$30 discount per $1,000], because the Chicago banks in 1907 did not maintain payments among themselves as they had done on previous occasions. Exchange was at a discount only in those cities where the course of payments was so strongly against New York that practically all the banks found their balances in that city increasing. Chicago might have been expected to belong to this group, but its banks made extensive use of bills derived from grain exports to secure gold which was shipped directly to them. In general, exchange was at a discount, or at par only, in the Southern States, the banks of which, by means of cotton sales, are normally in position to draw money from the northeastern part of the country during the late autumn.
In conclusion, it should perhaps be pointed out that the quoted rates of exchange were often without much significance. The ordinary course of dealings was so completely disorganized in many places that the rates were purely nominal, representing little or no actual transactions.
FOOTNOTES:
[96] Frank A. Vanderlip, Modern Banking, Three Addresses delivered at Chautauqua, New York, August, 1911, pp. 17-29. The National City Bank. New York. 1911 [?].
[97] E. W. Kemmerer, Seasonal Variations in the Relative Demand for Money and Capital in the United States. Publication of the National Monetary Commission, Senate Document No. 588, 61st Congress, 2d Session, pp. 96-100.
[98] [Owing to the growth of deposit banking among the farming classes, the increasing diversification of industry in the agricultural States, Sub-treasury operations, and the offer of remunerative rates of interest on loans in New York during the fall, the net autumnal currency movement since 1907 has frequently been to New York. See E. M. Patterson, Certain Changes in New York's Position as a Financial Center, Journal of Political Economy. Vol. XXI, June, 1913, pp. 523-539.]
[99] E. W. Kemmerer, op. cit., pp. 101-105.
[100] Ibid., pp. 118-121.
[101] Ibid., 54. 55.