State Bank Notes. 53 



against it. The question, highly imijortant for other pur- 

 poses, whether the notes are redeemable in gold or in a gold 

 dollar's worth of silver, has no bearing on this discussion. 

 In either case the note-element is between zero and a quarter 

 of the export-price of 60 million ounces, minus the cost of 

 silver bought in case of falling price to keep up the backing 

 of notes issued earlier — that kind of purchase being cost 

 without addition to the money-supply. It would be an 

 extreme supposition that silver should fall to 60 cents an 

 ounce in the next ten years; that would be about 2^ cents 

 annually. Such a fall would require, if the annual pur- 

 chase for note-issue were $24,000,000, a purchase of sup- 

 plementary silver amounting to less than a million dollars 

 in the first year, to 10 millions in the last year, but averag- 

 ing about 5 millions annually through the ten years; while 

 the note-element due to upholding the price of silver would 

 average (with silver at an average of 72 cents) between 

 zero and 11 millions. Deducting the 5 millions of cost for 

 supplements, we have minus 5 and pZits 6 millions as the 

 limits of the note-element; that is, it might possibly be a 

 more expensive way of obtaining new money than import- 

 ing gold would be.* On the less extreme suj^position of a 

 fall of silver to 70 cents in ten years, the average annual 

 supplementary purchase (the principal purchase being still 

 24 millions) would be something less than 3 millions, mak- 

 ing the note-element somewhere between minus 3 and 2>lus 

 9 millions.f The increased expense, in the later years, of 

 maintaining such a note-system in case of a j)rogressive 

 fall of silver is of course a serious objection to the system, 

 unless it is believed that silver will not continue to fall. 

 If silver does not change in price, the note-element is the 

 same as under the Act of 1890; with silver at 84 cents, it 

 is between zero and 12^ millions. Greater purchases would 



♦A loss of this kind, payable in future, has already been incurred by the 

 country through its largo purchase of silver, if silver does not rise again, and if 

 the notes of 1890 or silver dollars are ever given a 100 per cent, backing or are 

 witlidrawn and the silver sold. 



t Silver then averages about 77 cents, and the note-elomeut, aside from cost 

 of supplements, is between zero and ll!-2 millions. 



