INTERNATIONAL FINANCE 



Table XII. Prices in the United States. 



79 



and is under the control of bankers. In Great Britain banking money is increasing 

 at the rate of about 30,000,000 a year; whereas the total savings of the country avail- 

 able for investment in securities or in other forms of property or for the acquisition 

 of other wealth are now about 350,000,000 per annum. In other countries the amount 

 of money under the control of bankers also represents but a small part of the savings 

 available for investment. Although the general public changes its policy in the matter 

 of investments from time to time, at one period demanding high-class stocks with 

 low rates of interest, and at another low-class stocks with high rates of interest, bankers 

 pursue practically the same policy in periods of good and of bad credit. Banking 

 money in Great Britain is mainly engaged in financing international commerce and 

 national trade from the producer to the consumer, and the nature of the securities 

 upon which banking funds are advanced is practically the same from period to period. 

 The fluctuations in the rate of interest are brought about by the changing volume 

 and values of the goods to be financed in proportion to the funds which bankers have 

 at their disposal. The great production of gold in recent years has enabled payment 

 to be made to the backward countries, whose systems of banking and of currency are 

 not highly developed, with unusual facility, and has kept down the demand that 

 otherwise would have been made upon banking credits in proportion to the values of 

 the goods to be financed. Nevertheless, the volume of international trade has become 

 so great that relatively high rates of interest have been current notwithstanding the 

 great production of gold. 



High rates of interest for banking money are sometimes brought about by a sudden 

 feeling of anxiety and consequent contraction of credit, a condition of things that 

 subsequently creates a redundant supply of money and brings low rates 

 of interest. Owing to the banking crisis in the United States in 1907, the 

 breakdown of the banking system of that country at that time, and the 

 exceptional demand upon the stock of gold in Great Britain, the Bank of England 

 rate in that year averaged 4. i8s. 6d. per cent. In the following year, when trade, 

 both in the United States and in other countries, seriously suffered from the after effects 

 of the crisis, and when the demand for banking accommodation was exceptionally 

 small, the average Bank of England rate was only 3. os. 3d. per cent. In 1909, when 

 trade was still affected in some measure by the previous crisis in the United States, 

 the average rate was still as low as 3. is. 8d., although the Bank rate rose to 5 per 

 cent in October in consequence of a great rise in the price of cotton and an unusual 

 drain of gold to Egypt. In 1910, however, the money market felt the effect of the 

 rapid recovery in trade in America, of the rise in the prices of commodities, and of 

 the exceptional lock-up of bankers' resources in financing a real-estate speculation in 

 the Western states of the American Union, and the average Bank of England rate rose 



Bank 

 rates. 



