SERIES CORRELATED WITH EXPENSES 247 
ment should not be interpreted as meaning that such relations 
hold in every district-year; the association discovered is that found 
generally, or as a rule, to prevail. Neither should it be understood 
that there is necessarily a direct causal connection between these 
items of expense. Both items being positively correlated with 
:ime deposits, are positively correlated with each other.5 
Table 145 also shows the type and net amount of deviation 
of ratios of interest and discounts on borrowed money, calculated 
from the respective district averages, for each variable amount of 
deviation in ratios of interest on deposits taken from their district 
averages. By direction of deviation, the two series are negatively 
correlated; by amounts of deviation, correlation is moderately 
positive. That is, whenever and wherever high or low ratios of 
interest payments on deposits occur, ratios of interest and dis- 
counts on borrowed money tend to be low or high, respectively. 
Moreover, in all groups except two, the greater the deviation from 
type of ratios of interest on deposits, the greater the deviation of 
ratios of interest and discounts on borrowed money. 
The inverse relation by direction of deviation may be explained 
as follows: Ratios of interest on deposits to earning assets are 
positively correlated with those of time deposits to total deposits; 
and time deposits ratios are positively correlated with ratios of in- 
vestments to earning assets. Relatively large investments, as per- 
centages of earning assets, indicate that banks have funds 
adequate for the accommodation of their customers, thus reducing 
the necessity of borrowing from each other and of rediscounting 
with the Federal Reserve banks. Hence the inverse relation 
between ratios of interest and discounts on borrowed money and 
those of interest on deposits. The direct and the inverse correla- 
lion, respectively, between interest on deposits and salaries and 
wages and between interest on deposits and interest and discounts 
on borrowed money are shown by the distribution of the fre- 
quencies in Table 146. 
(3) Interest and Discounts on Borrowed Money 
In the discussion of the items of expense which, according to 
district deviations, are correlated with salaries and wages, it was 
found that the relations obtaining between interest and discounts 
5 See the discussion of this point, pages 201-202.