Cheap Money

While money rates are now undoubtedly low, there are plenty of precedents for the present situation in recent years. The rates are now undoubtedly lower than at any time since the entry of the U. S. into the War in April, 1917. Yet 60-day time money went for 2% in June, 1914, 2 3/4 in July, 1913, and 2 1/2 in early months of 1911 and 1912 both, while it touched 1 3/4 in midsummer, 1908, and 1 1/2 in 1894. Commercial paper similarly was down to 3 1/2 early in 1911, 1912 and 1914, to 3 from May to August, 1909, and to 2 3/4 in 1894. Present time money at 3% and commercial paper at 3 3/4% are not therefore so very sensational, after all. Yet the drop in rates has come so quickly that considerable disarrangement has been produced. The savings banks, which in Manhattan have been paying 4% on deposits, have decided to continue that rate. But there is further talk of reducing the New York Federal Reserve rediscount rate from 3 1/2 to 3% in order to bring it into closer relationship in the market rates. Yet opposition to such a step has developed, on the grounds that the present surplus of funds will not long continue, that inflation may be caused by too low rates, and that bankers are trying to promote Mr. Coolidge's election by reducing interest charges to stimulate business.