144 THE FARMER AS A BUSINESS MAN. 



make no profit, and have withdrawn their circulation, while 

 remaining national banks. Few, if any, of the large banks 

 which some people would like specially to reach, care any- 

 thing about the matter. The wealth of the country has so 

 increased that deposits furnish about all the loanable capital 

 which can be profitably employed. In times of stringency or 

 panic, when deposits are withdrawn and hoarded, it would be 

 profitable to the banks, and convenient for the public, to be 

 able to loan their own notes. During the years following 1893 

 many national banks which had withdrawn or reduced their 

 circulation, drew out new currency to be applied to this 

 purpose. Doubtless it was profitable, or it would not have 

 been done. But it was also very convenient for borrowers. 

 The reasons for this changed condition are quite obvious. In 

 the first place, government bonds no longer bear six per cent 

 interest but three per cent. Most banks can make more than 

 three per cent upon money, and whatever more they could 

 make is a loss if they lend to the government at that rate. 

 Let us see how the account stands in the case of a national bank 

 issuing its own notes. It deposits in the treasury $100,000 in 

 bonds, upon which it receives three per cent interest. Upon 

 this security the bank is permitted to issue notes to the amount 

 of $90,000. The account would then stand, assuming that the 

 entire issue is loaned: — 



Outlay: 



Bonds $100 000 



Income : 



Interest on bonds $3,000 



Interest on $90,000 notes, 6% . . . . 5,400 



$8,400 

 Less tax on circulation (1 per cent) 900 



Total income $7,500 



In this computation I luive assuuied the rate of interest on 

 circulation loaned to be six per cent, which is probably a fair 

 average rate for the country, and also that the entire issue of 



