BUSINESS definitely receded during the third quarter of I934, following signs of irregularity which had begun to appear in the preceding three months. Toward the end of the quarter, the recession became less rapid, the business curve of our index chart showing little further decline in September, after a considerable drop in August. The speculation curve at the end of the quarter was considerably lower than at the beginning, though it showed a small recovery in August, and did not revert to the July low in September. Bond prices were weak during most of the quarter, despite the continuance of an abnormally low level of short time money rates. That government measures to stimulate business had failed to bring about a sustained and substantial recovery was clearly demonstrated by the recession of the third quarter. This failure presents two rather different, though not entirely separable, aspects: the first of these relates to the effectiveness of Administration measures, once production and activity had risen to a higher level, to sustain activity at the higher prices made inevitable by higher costs. If there was an increased flow of funds into the hands of consumers because of shorter hours and higher wage rates for labor a development not susceptible of statistical proof it did not result in buying sufficient to maintain the production rates of last spring. The effects of the introduction of codes had, after a year of their operation, pretty well worked themselves out; but at the higher price levels that had been reached readjustment to meet demand was necessary, and this adversely affected both business activity and the prices of industrial products. A second aspect involves the failure to maintain the confidence of business in the whole gamut of governmental measures undertaken by the Administration. Criticism of the Administration's industrial program became insistent during the quarter; there was increasing distrust of past and anticipated monetary measures in part because of the action taken regarding silver; and realization of the adverse budgetary aspects of government spending on public works and of federal provision for relief was heightened by the clearly evident deterioration in the business outlook. The quarter until near its end was thus one of growing apprehension and loss of confidence, despite the fact that the recovery program was in part reorganized. It cannot be doubted that this apprehension exerted an important retarding effect on business activity. Probably its most important effect was the weakness which appeared in the bond market, at a time when further advance was indicated by most factors except the condition of the government finances and the confused monetary situation. In the closing month of the quarter, certain factors which had retarded business in the summer showed improvement. The drought, after inflicting great hardships in the agricultural districts, was broken in September. The nationwide textile strike, which had closed down many mills, was brought to an end, with a consequent increase in operations and employment in that industry. Meanwhile retail trade in part, at least, as the result of government spending had shown unmistakable improvement, despite the curtailment in manufacturing operations. The economic situation abroad continued unsatisfactory. Slowing down of business in countries still on the gold standard was ev'ident, and there occurred a sharp drop in sterling exchange which proved a disturbing element in international markets. Part of this decline was seasonal; but it became large as gold began to leave the United States, since these exports were regarded as signifying the willingness of the United States to maintain the dollar on its present basis at least for the time being.' Following such action by this country the decline in sterling probably marks a further step in competitive debasement of currencies, whether such a development is intentional or unintentional.

allowed for, the decline was steady after the middle of I929. Early in August I930, the items without such adjustment reached a seasonal low point; but the gain thereafter fell short of the full seasonal movement until the middle of November. Then appeared the unusual demands which subsequently dominated the situation, and brought the volume of currency above the figures reached at the previous peak, late in I920. Chief among them has been the demand for the purpose of hoarding; but the published statistics are subject to many influences in addition. These published figures are simply a count of our currency which is held outside the United States Treasury and outside the federal reserve banks. They thus include the pocket money of individuals, till money held by merchants and others,

W E are reproducing the chart of bond yields NV 7 and money rates, monthly, beginning with the decade of the nineties, last published in this REVIEW for July 1923, pp. 2I4, 2I5. The curve for money rates shows commercial paper, seasonally adjusted for the years i890-94; without seasonal adjustment for the years I9I5-22; and adjusted tentatively, on the basis of one-half the pre-war seasonal movements, for the years I923 to date. The bond-yield index is based on ten railroad bonds. For the years I890-I9I0, the index computed by Wesley C. Mitchell is presented; for the years I9Ii-i8, that index adjusted to conform to the level of our ten railroad bond index during the period I9I9-22; and, for the years I919 to date, our own index. For both commercial-paper rates and bond yields, the changes in the series are indicated by the use of slightly different legends on the chart. It will be noted that, at the end of I930, the adjusted monthly figure for commercial-paper rates was lower than at any time since the decade of the nineties; a rate appreciably lower is shown only once on the chart, namely, in the second half of i894.1 Another striking fact evident from the chart is that the peak reached in I929 is substantially below that of I920. The differing commercial credit situations of the two years are reflected in this contrast, since the stringency of the earlier period arose from business inflation to a greater degree than that of a later period. Federal reserve operations also tended to moderate the stringency in commercial rates. Despite the large cydical swings evident, moreover, a downward trend is discernible in this class of rates, especially since the establishment of the federal reserve system in I9I4. It may be mentioned in passing that time rates on collateral loans, as quoted on the New York Stock Exchange, have not shown such a trend, though present quotations are very low. Unlike commercial-paper rates, bond yields have not reached conspicuously low levels. They are still above 4 per cent, whereas they were below this figure during much of the first decade of the century. The sharp fluctuations in the bond market since last September are clearly shown by the movements of the yield index. The rise in yields toward the close of last year now appears merely as an interruption of the decline beginning late in I929, but it has not yet brought bond yields below the post-war low of this index, reached at the end of I927. The maximum divergence between the level of bond yields and ' The rise in January I93I was due entirely to the seasonal correction (shortly to be revised) which allows for a decline in this month greater than is justified by post-war experience.

SINCE publication of the monthly index chart was begun in I919, two important revisions of the money curve (C) have been made. In its original form, the curve was based on rates for two grades of commercial paper, adjusted for seasonal variation on the basis of indexes computed for the interval I890-9I6, with a horizontal normal (at 4.645 per cent).' Beginning with January I922, the seasonal correction was reduced so that allowance was made for only onehalf the pre-war seasonal variation, and in May I923, the first important revision was made, the entire curve being recalculated back to January

XATITH the revisions made in recent years, a most comprehensive body of statistics relating to currency in circulation has been built up, and placed upon a homogeneous basis for an extended period.' This article presents monthly and weekly series for the volume of currency after correction for seasonal variation, and examines such figures in relation to the business and other factors affecting them. Seasonal variation, which forms a large part of the total movement of the weekly and monthly series, was discussed by Mr. Bertrand Fox in this REVIEW, Vol. XIII, pages 26-30, where the weekly indexes of seasonal variation are presented. Monthly seasonal indexes appear on a later page. Business needs for currency determine the seasonal fluctuations of money in circulation, and are the most important cause of other-thanseasonal fluctuations. But influences not of a business nature also affect the series; and explanation for certain of the movements observed in post-war years hinges upon the method used in counting the amount of currency outstanding. The figures apply to money outside (a) the Treasury and (b) the federal reserve banks. The count thus obtained does not embrace the reserve funds of the general banking system, but it does include the till money of banks other than the reserve banks.2 Such till money accounts for something less than one-fifth of the total; the rest is made up of pocket money, merchants' till money, and hoards. Probably bank holdings are to be regarded as an intermediate step through which currency Dasses from the reserve banks into business channels or back from business into the reserve banks. Nevertheless, differences in fluctuations of vault cash and other money have at times been marked. A final point to be noted is that some of the money counted is in circulation outside the United States in Cuba and Canada, for instance, as well as in European countries which absorbed United States currency during and after the war.

QNLY a few statistical series measuring the volume of business are available for a long enough period to make possible satisfactory comparisons of a considerable number of past cycles with the present. Monthly (or at least quarterly) figures are necessary, and most of the prewar statistics relating to business volumes are on an annual basis. For the measurement of physical volumes, a satisfactory series for pigiron output has been developed by Professor Warren M. Persons, going back as far as I877 in quarterly form, and to I884 in monthly form.' For the measurement of dollar volumes there is the series for bank clearings in seven selected cities outside New York City compiled by Doctor Edwin Frickey, and published in this REvIEw for May and August I930. These figures go back, on a monthly basis, to i875. For the postwar period, bank debits of certain selected cities (again excluding New York, and also certain other cities especially affected by speculative transactions) are used to measure the dollar volume of business. Fluctuations in bank debits paralleled very closely those in the clearing figures for the post-war years, and the differences between the two series are probably less than the inaccuracies unavoidable in comparisons of such series over a long interval of time. This discussion will give chief attention to the clearings or debits figures. Such statistics are, of course, only one way of measuring fluctuations in business activity; but they have the advantage of covering a great variety of payments and are expressed in dollars, in which we are accustomed to reckon business transactions. On the following page, there is presented a chart of the adjusted figures for clearings or debits during periods of business decline and recovery.2 The low points of the indexes have been plotted on the middle line of the chart; when more than one low point appears, the last low point falls on the middle line. The period of d cline (except for I875-79) is from the last significant high point of the preceding period of activity to the low point; the period of recovery, from the low point to normal (in most instances). In i888, and again in I89I, when the fluctuations were mostly or entirely above normal, six months of recovery are shown. In I895, normal wa not reached, though closely approached, on the recovery. The pre-war figures are corrected for trend (as well as seasonal movements). Consideration is now being given to the determination of a trend line (or normal) for the past few years. Until such a normal has been satisfactorily ascertained, it is necessary to show I929-30 without correction for trend. The years I92-22 are likewise shown without such correction. The application of trends would tend to increase the amount of declines, and decrease the amount of advances; but over the short periods for which the figures are shown, such periods embracing wide fluctuations, the correction for trend would form a small proportion of the actual movement. For the I922 recovery, the final point is approximately at normal. The curve for debits in I929-30 is placed on the chart to facilitate comparison with the two declines which appear to resemble its movement most closely those of I920-2I and I883-84. The high point is placed on a level with that shown for I883, and twenty months (the duration of the I920-2I decline) from the middle line. This placing of the curve is not to be regarded as an expression of opinion as to the precise extent of possible further decline, or the exact length of time until the curve turns up. The twenty-month interval is the longest shown on the chart except that of the late seventies, which is not regarded as comparable because of the peculiar movement of the clearing figures in these years, attributable at least in part to the

THE weekly index of money rates, published currently by the Harvard Economic Service, was designed to furnish a sensitive, adequate, and timely index of changes in money conditions. Open-market rates were chosen as a basis for this index. The great bulk of shorttime borrowing, it is true, takes the form of loans negotiated with the commercial banks by their regular customers; but the available data on such loans those published in the Federal Reserve Bulletin are monthly and not weekly figures. We recognize that open-market rates are more sensitive to changes in money conditions than rates on bank loans, which are to some extent determined by custom and fluctuate only within a narrow range, but both classes are affected by the same general influences, and resemble each other in the general contour of their movements. Since New York City is by far the most important money market in the United States, the rates considered relate to that market. The different means by which funds find employment in the market are well known: they comprise investment in (i) demand loans on collateral (call money), (2) time loans on collateral (time money), (3) bankers' acceptances, (4) commercial paper, and (5) short-term securities, notably Treasury certificates. Rates on these 5 classes of short-time investments were examined to determine (i) the most representative maturities in each class and (2) the classeswhich would yield the most satisfactory weekly index of money conditions. An inspection of the movements of rates on the first class of loans (call money) soon leads to the conclusion that this series, because of its wide and sometimes erratic fluctuations, is not a good representative of the general money market (Chart 2). Our selection was, therefore, made from the remaining classes of short-time investments. The following paragraphs give the reasons for this selection, present the indexes, and summarize some results of the study. In the case of time loans and bankers' acceptances, a middle range of maturities was selected. For the former, rates on go-day and 4-months loans were chosen in order to avoid the premium on longer maturities which arises when an advance in rates is expected, and the corresponding premium on shorter maturities when a decline is anticipated. Another reason for selecting these maturities is that they represent the bulk of transactions. For bankers' acceptances, 60-go day maturities were chosen in order to avoid the relatively low rates existing on the very short maturities, and the relatively high rates on the longer. The choice of maturities was simplified, in the case of commercial paper, by the fact that the great bulk of the transactions are now for 4-6 months. Prior to the war, 60-go day paper formed an important element in the market, but it is now of much less importance; moreover, from the beginning of I9I9 to February I924 the weekly rates on this class of paper, as published by the Commercial and Financial Chronicle, were identical with those published for prime 4-6 months paper. Early in February I924, the Chronicle ceased the publication of quotations for the 60-go day maturities. Of the two important classes now quoted by the Chronicle prime and good 4-6 months paper we chose the former, which represents the higher class of credit. The Federal Reserve Board's index of the yield on Treasury certificates, which was used in the examination of such yields, embraces, in the main, issues maturing 3-6 months from the date to which the index applies. At some dates, however, the issue or issues included had as little as 2X2, or as much as 7; months to run. On the whole, therefore, these maturities fall within the range of maturities selected forthe other classes of short-time investments. Chart I presents the data selected for the four classes of short-time investments. The rates shown are as follows: for prime 4-6 months commercial paper, the average of the range of quoted rates; for time loans, the average of the means of the range of quoted rates on g9-day loans and on 4-months loans; for bankers' acceptances, the average of the means of bid and asked rates on 6o-day and go-day acceptances.

THE present survey was undertaken with two objects in view: (A) to analyze developments in the building industry in the light of current statistics and of the relationships shown between the construction industry and general business in the past and (B) to examine the data available for the volume of construction for the purpose of determining the statistical series suitable for current use. A summary of our conclusions follows. A

I NDICES of the cost of constructing a standard reinforced concrete factory building, supplied by the Aberthaw Construction Company of Boston to the REVIEW, are shown in the accompanying table. The basic figure is the actual cost of construction of a sevenstory reinforced concrete factory building erected by the Aberthaw Company in I9I4. Estimates have been made of the cost of putting up the same building if construction were begun on January I, I920, July I, I920, and on the first of the month from January to October I92I. The index number for any given date is secured by expressing the estimated cost of construction, beginning on that date, as a percentage of the actual cost in I914. Although the indices are based on the estimated costs of constructing a selected type of building they show the fluctuation in costs of reinforced concrete construction in general. The building chosen as a base was actually constructed between August 22 and December 31 I9I4; building costs were so uniform during the year that it is accurate to consider the base to be the entire year. This b,uilding was chosen for two reasons. The building itself is typical of the reinforced concrete structures erected by the company, as is also the proportion of costs involved for the various classes of labor and various kinds of materials. In the second place, its construction was an almost ideally handled job ; that is, a job which involved no waste and no unusual costs. Consequently, actual and estimated costs correspond closely, both for the job as a whole, and for its component parts.