The result of this policy, of the silver legislation, and of the refunding of the 4-1/2 per cent bonds has been a large increase of the money in circulation.  At the date last named the circulation was $1,404,205,896, or $23.03 per capita, while on the 1st day of December, 1891, it had increased to $1,577,262,070, or $24.38 per capita.  The offer of the Secretary of the Treasury to the holders of the 4-1/2 per cent bonds to extend the time of redemption, at the option of the Government, at an interest of 2 per cent, was accepted by the holders of about one-half the amount, and the unextended bonds are being redeemed on presentation.

The report of the Secretary of War exhibits the results of an intelligent, progressive, and businesslike administration of a Department which has been too much regarded as one of mere routine.  The separation of Secretary Proctor from the Department by reason of his appointment as a Senator from the State of Vermont is a source of great regret to me and to his colleagues in the Cabinet, as I am sure it will be to all those who have had business with the Department while under his charge.

In the administration of army affairs some especially good work has been accomplished.  The efforts of the Secretary to reduce the percentage of desertions by removing the causes that promoted it have been so successful as to enable him to report for the last year a lower percentage of desertion than has been before reached in the history of the Army.  The resulting money saving is considerable, but the improvement in the morale of the enlisted men is the most valuable incident of the reforms which have brought about this result.

The work of securing sites for shore batteries for harbor defense and the manufacture of mortars and guns of high power to equip them have made good progress during the year.  The preliminary work of tests and plans which so long delayed a start is now out of the way.  Some guns have been completed, and with an enlarged shop and a more complete equipment at Watervliet the Army will soon be abreast of the Navy in gun construction.  Whatever unavoidable causes of delay may arise, there should be none from delayed or insufficient appropriations.  We shall be greatly embarrassed in the proper distribution and use of naval vessels until adequate shore defenses are provided for our harbors.

I concur in the recommendation of the Secretary that the three-battalion organization be adopted for the infantry.  The adoption of a smokeless powder and of a modern rifle equal in range, precision, and rapidity of fire to the best now in use will, I hope, not be longer delayed.