The Purchasing Power of Money
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ADDENDUM A.1 (In this revised edition figures for 1910-1912 are given on pages 304, 317. See also page 492.) A.2 Data have just become available by which to bring down through 1910 the statistics of Chapter XII. The results are as follows: MAGNITUDES IN THE EQUATION OF EXCHANGE FOR 1910*1 M M' V V' P T MV + M'V' PT As first calculated 1.64 7.24 21 52.8 103.7 397 416 412 As finally adjusted 1.64 7.23 21 52.7 104.0 399 415 415 A.3 The table shows that the figures, as first calculated, conform admirably to the equation of exchange. The adjustment needed, to produce perfect conformity, in only one case reaches the half of one per cent! A.4 From the adjusted figures we may calculate the percentages of cash and check transactions (MV ÷ MV + M'V' and M'V' ÷ MV + M'V'). These are 8% and 92%, which may be added to the table on page 317. The ratio of deposits to money (M'/M) is 4.4, which shows a great increase over 1909. The disproportionate growth of deposits relatively to money and the excessive velocity of circulation (52.7) of deposits, substantially equal to the unprecedented figure for 1909, are disquieting symptoms and serve only to confirm the forebodings in the text. A.5 For aid in working out the figures in this addendum I am indebted to three of my students, Mr. H. A. W. Duckert, Mr. J. M. Shortliffe, and Mr. M. G. Hastings. Notes for this chapter 1. The above figures may be inserted by the reader in the tables on pages 280, 284, 285, 290, 292, 293, 304. The methods of deriving the figures are in general the same as those explained in the Appendix to Chapter XII. The antecedent figures on which the above table depends may be inserted by the reader as follows: M. On page 432 add (to the bottom of columns 1-8 incl.) in the table the following: 1910, 3.42, 3.42, .32, 1.41, 3.3%, 1.46, 1.64. M'. It is not necessary to complete the table on page 435, as the Comptroller's Report for 1910 (p. 54) gives for the first time deposits subject to check (7.82 billions). To this 7.82, however, three corrections are needed: (1) subtract .29 for "savings accounts" improperly included (estimated for me by the Comptroller's Office at half of the figure in note a, lower table, p. 54, Comptr. Rpt.); (2) subtract .54 as "exchanges for clearing house" (= 5/4 times those for national banks); (3) add .25 as the Comptroller's Office estimate, for me, of unreported deposits subject to check. By applying these corrections we obtain 7.24. V. I have simply taken 21 as a safe approximate estimate on the basis of the previous statistics of V (p. 478) and its assumed relation to V'. M'V'. Add to columns 1-7 of table on page 448 the following: 1910, 97.3, 66.4, 429.3, .89 (by extrapolation, an unsafe guide), 382, 52.8. P. This is obtained (on the principles of the table on page 487) from the index number 131.6 of wholesale prices for 1910 (kindly supplied in advance of publication by the Bureau of Labor) and the average price 96.2 of stocks as given by the Commercial and Financial Chronicle, both being compared with the respective figures for 1909, viz. 126.5 and 97.5. They are combined by "weighting" the wholesale prices 10 and the stock prices 1 and reducing the results so that the average for 1909 shall be 100. T. This is obtained: (a) by continuing columns 1-5 of the table on page 479 by inserting: 1910, 160, 113, 162, 154; (the extension of column 2 for 1910 is made by means of somewhat more complete data than those enumerated on pages 480-482); (b) by combining the result, 154, obtained for column 5 with the figures for railway cars handled. These were 19.8 millions for 1909 and 22.3 for 1910. Column 5 being weighted 10 and the car figures 1, we get as indices of trade: for 1909, 1718, and for 1910, 1763, showing an increase of 2.6%, which, applied to the (corrected) estimate of the absolute trade of 1909, viz. 387 billions, gives 397 as the absolute trade in 1910. (The opportunity is here taken to correct an inadvertence on pp. 480 ff. It should have been there stated that, of the 44 categories mentioned, some are alternative and not independent items, viz. those having the same names and differing only in the number of cities; also that the dates given do not imply that the items opposite are in all cases used for all the intervening time, but only for such periods as the items were actually available.) It is noticeable that the changes in business in 1910 as compared with 1909 are somewhat irregular; the sales of stocks have declined; exports and imports (both of them) have declined about 10%. Notes for Chapter I End of Notes