COMMERCIAL CHRONICLE AND REVIEW. FEDERAL FINANCES-LEGAL TENDERS-FIVE-TWENTY LOANS-NATIONAL BANKS-BANKING LAWJAY COOKE'S CIRCULAR-DEMAND FOR MONEY-CONTROLLER'S INSTRUCTIONS-ABSORPTION OF CAPITAL SPECIE MOVEMENT-STOCK OF GOLD-EXCHANGE-FOREIGN CAPITAL-UNITED STATES STOCKS. THE first half of the month of January is not usually one of much business activity, and this year, although the importations have been large, there has been so much stringency in the money market, and so much anxiety in relation to the course of the finances, that the markets have been generally quiet. The course of the Federal Treasury has continued to attract much attention. The report of the Secretary of the Treasury was pretty generally received as indicative of a course of contraction upon the part of the Treasury, rather than as pointing the way to an increase of the paper inflation. It was very evident that a large amount of money is to be raised, and there were apparently but two ways of doing it; one was to go on with the issue of the five per cent legal tender notes, and the other to sell the remainder of five-twenty stock and then bring forward the $600,000,000 of 10-40 stock payable, principal and interest, in gold. These two alternatives were fraught with the widest possible consequences. The issue of the five per cent legal tenders would only be a continuance of the inflation and depreciation of the currency, while to issue the stock for what it would bring would force a severe contraction, and fall in prices, that might have a disastrous issue. The 5-20 stock continued to sell readily, and has been nearly all taken up by the public, the whole $500,000,000 having been negotiated and the loan closed on the 22d, after which some lots brought a small premium, while, at the same time, all the greenback legal tenders have been issued as follows: Laws of July 1861, and February 1862-gold notes redeemed... February, 1862.... July 11, 1862-$50,000,000 reserve. January 17, 1863 March 3, 1863-additional. March 3, 1863-fractional notes. Total greenbacks........ $60,000,000 150,000,000 150,000,000 100,000,000 50,000,000 20,000,000 $470,000,000 There have also been issued $85,000,000 of five per cent legal tenders, embracing the $50,000,000 sold to the banks, and $35,000,000 one-year notes referred to in the circular of JAY COOKE, given below. The continued subscriptions to the 5-20 loans, by drawing down the deposits of the banks, kept the rate of money high, and, by so doing, caused a continual demand upon the Treasury for the payment of the five per cent deposits, until they are exhausted. The $50,000,000 of legal tenders were not given to the banks until January, and some time elapsed before they were distributed among the institutions. They bear date from the 1st of December. Some of the banks, on getting possession of the notes, loaned them at once at seven per cent interest, the borrower paying up the interest from December 1st, which amounted to five-eighths per cent. The money cost him, therefore, but 7 per cent per annum, or rather less than to borrow in the open market. In fact, while the minimum rate of money is seven per cent, it is not to be expected that the five per cents will be taken to any extent for investment. Those who desire investment could buy the Government six per cent one-year certificates, payable in legal tenders in a few months, or convertible into 5-20's at 98 cents, or at the rate of eight per cent per annum. The five per cents, therefore, became currency, and the department stamped them with the date of issue and paid them out. These notes have by law the faculty of being redeemed in legal tender greenbacks, and $150,000,000 additional is authorized for that purpose. The continued issue of these notes to the whole extent authorized, $400,000,000, will add greatly to the inflation, and it is anticipatsd that the 10-40 stock will be brought forward for sale during the inflation. The peculiarity of that stock is, that the law authorizing it provides that it shall be paid, principal and interest, in gold, whereas the law authorizing the 5-20's provides only that the interest shall be in gold; and the banking law of the last session provides that all the debts of the Government, except interest, shall be payable in the notes of the new National Banks.* The number of new institutions organized is about two hundred and ten, and the number of notes ordered by them is $10,000,000. By the time the 5-20's fall due, three years hence, or April 1867, the number of those notes out may suffice to pay the stock. It is thus a curious fact that the national notes are secured in 5-20 stock, and the latter are made payable in the bank notes; the thing "secured" thus becomes the medium of paying the "security." The holder of the notes will get the stock, and when he has the stock he will get paid in the notes. Meantime, the five per cent legal tenders were received at the Treasury in payment of the 5-20's with a slight distinction. The subscriber who paid in legal tenders gets one-eighth per cent allowance, while he who paid in five per cent legal tenders paid par; and thus discriminating against the interest-bearing notes. The wants of the Treasury were said to be supplied for some time, but this does not seem to have been the fact, because the following circular (referred to above,) from the Treasury agents, indicate the continued necessity of the department to borrow money: * The following is section 20th of the Banking Law (for copy of the whole law, see Merchants' Magazine for April, 1863): SEC. 20. And be it further enacted, That after any such association shall have caused its promise to pay such notes on demand to be signed by the president, vicepresident, and cashier thereof, in such manner as to make them obligatory promissory notes, payable on demand, at its places of business, such association is hereby authorized to issue and circulate the same as money; and the same shall be received at par in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, except for duties on imports, and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, except interest on public debt; and no such association shall issue post notes or any other note to circulate as money than such as are authorized by the foregoing provisions of this act. OFFICE OF JAY COOKE, SUBSCRIPTION AGENT, On and after the 1st of January next, the Treasury Department will be prepared to furnish through this agency a constant supply of the new five per cent interest-bearing legal tender notes. The notes will be furnished in the following proportions, viz: 1.10 of the whole amount (if so much is desired) in notes of the denomination of $10, $20, and $50, and 9.10 in denominations of $100, $500. and $1.000. The notes under $100 will be without coupons, and payable in one year from January 1st, 1864, with interest at maturity. The notes of $100 and upwards will have coupons payable semi-annually, and the principal redeemable in two years from 1st of January, 1864. As only a limited amount of these very desirable issues can be furnished daily, those desiring them are requested to advise the undersigned by telegraph or letter as promptly as possible, as all orders will be filled consecutively as received. These treasury notes will be furnished at par on receipt by the undersigned of the amount in Legal Tender notes or notes of National Banks, or drafts payable in Legal Tender notes on New York, Boston, Philadelphia, Baltimore, or Washington, or the amount can be deposited in any United States Sub-Treasury, on and after the 1st day of January next. in the following cities: Boston, New York, Philadelphia, Baltimore, Washington, Pittsburg, Cincinnati, Louisville, St. Louis, Chicago, St. Paul, and Buffalo, in accordance with the following formula: Deposited by for JAY COOKE, subscription agent, to the credit of Treasurer of the United States on account of sales of interest. bearing Legal Tender notes. In which case the interest-bearing notes will be entitled to draw interest from date of such deposit, provided I am notified by telegraph of time of such deposit. In all other cases interest will commence on the day the remittance reaches this agency, if on or after the 1st of January next. As the Treasury notes will bear a uniform date, the difference of interest will be paid by the purchaser. This mode of distribution is adopted for the time being, in order that those banks, bankers, capitalists, etc., to whom this circular will be sent, and who may have considerable sums of Legal Tender notes idle on their hands, may avail themselves of this opportunity of substituting the interest-bearing for the noninterest-bearing Legal Tenders. The foregoing arrangement is not intended to interfere with the usual sales of 5-20 loan, and the amount to be thus disposed of will not exceed the sum of $35,000,000. The demand for money towards the close of the mouth became less strong, while the causes which produced the demand in the last ninety days began to change. These were-1st, the demand for the use of the Western crops, usual at this season of the year when they are coming to market; 2d, the demand to invest in goods preparatory to the spring trade; and, 3d, the payment of the Government, which sent money to the army and to the interior. All these causes sent money from the city. With the opening of the spring business, they operated in a reverse sense. The crops came forward to be realized upon; the dealers having collected the money distributed by the troops and contractors, brought it forward to replenish their stocks of goods, and it again gradually became more plenty. The operations of the new banks do not as yet affect the market for money. About 210 have been organized, and their circulation is estimated in the Treasury returns for the year at $4,000,000. The controller at Washington has issued instructions to the new banks, in which he speaks despondingly of the state of the circulation. He remarks as follows: The seeming prosperity of the loyal States is owing mainly to the large expenditures of the Government and the redundant currency which these expenditures seem to render necessary. Keep these facts constantly in mind, and manage the affairs of your respective banks with a perfect consciousness that the apparent prosperity of the country will prove to be.unreal when the war closes, if not before." The payments of the department at the West were largely in commissariat's and quartermaster's orders, which sold in the market at 2 a 6 per cent discount. These were taken up by the buyers and converted into 1-year certificates and money, under rules laid down by the Treasury Department as follows: Checks under $1,334 in cash; $1,334 to $2,666 in $1,000 certificates—balance in cash; $2,667 to $3,999 in $2,000 certificates-balance in cash; $4,000 to $5,333 in $3,000 certificates-balance in cash; $5,334 to $6.666 in $4,000 ccrtificatesbalance in cash; $6,667 to $7,999 in $5,000 certificates-balance cash; $8,000 to $9 333 in $6,000 certificates-- balance in cash; $9,334 to $10,666 in $7,000 certificates-balance in cash; $10,667 to $11,999 in $8,000 certificates-balance in cash; $12,000 to $13.333 in $9,000 certificates-balance in cash; $14,667 to $15,999 in $11,000 certificates-balance in cash; $16,000 to $17,333 in $12,000 certificates-balance in cash; $17,334 to $18,666 in $13,000 certificates-balance in cash; $18,667 to $19,999 in $14,000 certificates-balance in cash; $20,000 to $21,333 in $15,000 certificates--balance in cash. The certificates thus largely paid out for checks were sold in the New York market as low as 974. They, for the most part, are private investment of the banks, because they yield 8 a 84 per cent interest and are payable in a few months in legal tender. The large investments in 5-20s had the effect, as will be seen in another page of this number, to reduce the deposits in bank, and the loans also, to an amount of nearly $60,000,000 from September to January. The five per cent deposit certificates and the five per cent legal tenders were to a considerable extent funded in the 5-20s, thus absorbing much capital. The wants of business were not large, however, since little business paper was created by its progress. The imports continued largely to exceed the exports, and the resulting balance was met by the exportation of specie, which has steadily risen in value. The movement of specie has been as follows: The advance in price, under the steady demand for export and customs, was about 8 per cent in the month of January, and the quantity received from California declined considerably. As a consequence the available stock was much diminished. The Government paid out during the month for interest on the public stock due January 1, about $6,000,000, and received back about as much from the customs, while the banks lost comparatively a small amount. The larger portion of that exported was apparently derived from the interior. In view of the probable large imports and the probable decline of exports for the coming year, the available stock of gold becomes a source of solicitude, and various estimates have been made as to the supply and demand. The latter has been stated at $104,000,000 for the year, or an average of $2,000,000 per week, while the former is computed at $141,000,000, including that in banks and the probable supply from California. It is, however, the case that as gold rises in price there is more disposition to hold it, and consequently less is available for export, and the payment of duties becomes more onerous. Pushed to an excess, this would of course stop imports and also the ability of the Government to pay interest on its stock. Many propositions were introduced into Congress to stop speculating in gold, under the impression that the rise was partly owing to those operations. It does not appear, however, that this is entirely the case. Our readers will remember that in February last we published a table of fifty-five leading articles of New York commerce, quoted in the prices current as compared with gold. Bringing forward those aggregates to the present time, we have results as follows: These figures show the fact that most commodities have risen rapidly in price, while gold has remained comparatively stationary. The rise has affected every article on the list, as well those which were of Western origin and great staple exports as those which were of Southern origin and of which the supply was cut off by the war. The decreased supply of any important articles of commerce necessarily, by substitution, causes a rise in most other similar commodities, and raw materials, produce, importers' and manufacturers' goods have all risen in value, but in different degrees, as they have been more or less affected by the war and the Government demand. In times of war, as at present, three leading influences come into action. 1. Irredeemable paper money. 2. Great decrease in production, as in the case of cotton and cotton goods. 3. Great and unusual demand for all articles used for the support of armies and for the unavoidable waste which attends the conduct of a campaign. Now it will be observed that while other articles have been under these influences, gold has not been affected by them. Its production has been undiminished, its consumption and use have been greatly decreased, because it has been thrown out of general circulation, and the stock in the banks and Sub-Treasury is not less than it was. On the other hand, all goods have diminished in supply, and many sustain an unusual |