Rising Cycle of Business

This rise in the New York Reserve rates is the first since 1920, when the strained condition of American credit gradually forced the commercial paper rate to 7%. During the ensuing liquidation the rate fell step by step to 4% where it has hung for many months.

Meanwhile American business has again entered a rising cycle, as is plainly attested by such reliable barometers as the stockmarket and the iron and cotton industries. Lately the money market has responded to this new revival of business. Call loans, the barometer of the money market, have recently risen even to 6%, while market rates for acceptances and commercial paper were perceptibly stronger.

This increased demand for funds has at length been recognized by the higher New York rediscount rate, as it has by a similar advance on the part of the Boston Reserve Bank.

Before the war, gold exports could be avoided by raising the rediscount rate, and the swift rise of sterling exchange has caused discussion of the possibility of gold shipments to England lower than had generally been expected. Yet American bankers would be pleased rather than otherwise to witness such an export of gold, if conducted in an orderly manner. Moreover, all things considered, it is doubtful whether England can actually draw on our gold supply in the near future.