The conclusion reached therefore, is that an increase in loans and discounts with no corresponding increase in cash or with an actual decrease in cash, reflects a bad state of affairs, even when the advance in loans and discounts appears to be fully offset by deposits. There is one feature which should not be overlooked. The very worst state of affairs may be shown in the bank statement during a period of great commercial activity and inflation in all lines. The reverse is also true. In 1894, following the panic of 1893, the percentage of loans to deposits fell to 80% and the percentage of specie to loans rose to 30%; but no bull market occurred. This was due to stagnation in all lines of business, a period of timidity and conservatism. In 1895, there were signs of a great improvement and the stock market started upward. This improvement, however, proved illusory and premature. Loans rose quickly to 95% of deposits and specie fell below 15% of loans. Then followed, in 1896, the new record of low prices. In studying the bank statement for its effects on speculative prices, surplus reserves will frequently suggest danger or safety. If surplus reserves dwindle too near the vanishing point, the possibility of necessary retiring of call loans is apparent. (See “Bank Statement,” page 125). It is possible to gain valuable knowledge by a careful examination of the bank statement. The points made above are, of course, only of a simple and elemental character. We may go on with our examination as far as we like and scrutinize not only totals, but the position of individual banks. Also, in order to gain a comprehensive perspective, it will be expedient to examine, not only the barometer of the New York situation, but the condition of interior banks. However, it is a pretty good idea to begin with the A, B, C’s. High rates for call money and the calling of loans are responsible for many sharp market movements. A large class of speculators figure that when dividend returns are high and call money cheap and plentiful, they have a tangible influence working in their favor while they are long of stocks. If rates for call money are 2% and a stock returns 6% there is, eliminating speculation, an advantage of 4% per annum in favor of the marginal speculator. This advantage is not so great in carrying stocks on time loans, as rates for fixed periods are materially higher. There is always danger of a flurry in call money, however, and in the event of a wholesale calling of loans there arises the necessity of selling stocks, and a decline occurs. There is also present the element of manipulation in this quarter, and it cannot be gainsaid that many instances have occurred where funds have been suddenly withdrawn for the purpose of “shaking out” an undesirable following or of accumulating securities to advantage; and on the other hand, call money has frequently been made cheap in order to encourage purchases.