RDP 9303: The 1893 Bank Crashes and Monetary Aggregates 4. Alternative Series of Monetary Aggregates within Australia 1893–1914

Having estimated the amount of deposits ‘locked up’ under the various schemes of arrangement it is possible to present an alternative series of monetary aggregates net of such liabilities. The data must be treated with caution. Even M1, currency in the hands of the public and current accounts in trading banks, is subject to biases. As noted above, the estimates of currency in the hands of the public in the 1890s rest on a projection of post-1900 per capita figures. Hoarding during the panic would not be reflected in the series being used. On the other hand, the current account figure is overstated to an unknown extent as most current accounts were swept into reconstruction schemes at their formation although they were released considerably faster than were fixed deposits[11].

It is now possible to compare the revised estimate of monetary aggregates with the series produced by Schedvin. Netting out the deposits locked up in long dated liabilities and stock suggests a significantly more severe contraction in monetary aggregates than the earlier series shows. Table 4 shows that the contraction is centred on the year 1893 when M2 falls by more than 47 per cent and M3 shrinks by 41 per cent. While the extent of the decline in monetary aggregates is far greater than that shown by the series based on the Butlin, Hall and White data, the length of time taken to rebuild monetary aggregates is virtually identical.

Table 4: Estimates of Revised Monetary Aggregates, M1, M2 and M3, Australia 1890–1914
Dec. (£ms)
M1 M2 M3
1890 37.353 108.387 118.439
1891 35.197 108.232 119.572
1892 34.082 108.014 120.385
1893 30.788 56.911 71.240
1894 33.341 60.947 76.648
1895 38.558 70.276 87.670
1896 42.222 75.063 93.050
1897 41.717 76.055 95.579
1898 40.973 74.456 94.091
1899 46.052 82.928 104.839
1900 46.688 87.574 111.821
1901 47.792 89.506 115.802
1902 48.073 91.916 119.745
1903 47.387 90.731 119.466
1904 45.910 90.670 120.638
1905 47.091 97.814 128.252
1906 51.641 106.833 139.393
1907 57.879 113.806 150.187
1908 57.253 114.975 155.248
1909 58.279 119.533 162.342
1910 67.245 133.627 179.336
1911 77.077 150.320 202.437
1912 78.385 154.675 213.946
1913 74.908 152.017 217.735
1914 83.168 164.943 235.365
M1 Currency plus trading bank demand deposits. Schedvin (1972).
M2 Currency plus trading bank demand and time deposits. Schedvin (1972) series less data in Column 2, Table 3.
M3 Currency plus all trading bank and net savings bank deposits. Schedvin (1972) series less data in Column 2, Table 3.

Footnote

See ‘Special Terms to Current Account Depositors’ in ‘Synopsis of the Schemes of Banking Reconstruction’, AIBR (1893) pp. 766–769. [11]