State Bank Notes. 59 



towards reducing the whole; perhaps no effect at all, be- 

 cause other banks will issue more instead before the more 

 rapid return for redemption comes into play, or the legal 

 maximum, if any, is reached. And if some banks are still 

 conservative when the motive to be so is thus diminished, 

 other banks will surely, in such a country as the United 

 States, be more tempted by the profit than deterred by the 

 possible future evil, which is made scarcely more probable 

 by their venture; unless, indeed, the number and character 

 of the banks be so limited by law that a joint agreement is 

 practicable (a case which will be mentioned below). The 

 point is, that we cannot look to this check, unless supple- 

 mented by an agreement among the banks, to prevent an im- 

 mediate increase of bank circulation if the latter were made 

 otherwise profitable; for some banks would surely grasp 

 at the profit. 



4. Legal limitation of the number of note-issuing hanks, 

 either by requiring a special legislative charter for each, 

 or by imposing onerous conditions for going into business 

 under general law. This check acts upon a part of the 

 field only, of course; leaving the banks which come within 

 the jDrivilege free to increase circulation, except so far as 

 other checks interfere. 



5. A legal maximum of bank note circulation. This, 

 if set low enough, is perfect insurance against an undesir- 

 able enlargement. Evidently, however, it allows no "elas- 

 ticity " beyond the maximum, and does nothing to prevent 

 the circulation rising to near the maximum, so that further 

 elasticity is impossible unless that begins by decrease; 

 and the decrease must then be due to other checks, and 

 not to this, unless the maximum itself is made different for 

 different times of year. 



6. A legal minimum of reserve or of securities. So 

 far as this minimum is greater than the amount of reserve 

 or of securities which the banks would hold of their own 

 accord, it is a check upon circulation by reducing the profit. 

 In our national banks it takes the form of an amount of 



