62 Colorado College Studies. 



before the bank can sell them, (6) the small deposit of cash 

 for redemption purposes at Washington, (c) the one per 

 cent, tax on the average note-circulation of the bank,* 

 From many banks these take more than the whole profit 

 of the notes, and the banks tolerate the loss as a sort of 

 advertising expense, in order to keep the advantage of 

 being known to be under government inspection. The 

 decline of the note-circulation before 1890 shows that on 

 the average the loss exceeded all the gains, including the 

 advertisement, and the slight increase y since 1890 shows 

 that for two years past the gains have by a very narrow 

 margin exceeded the loss, taking all banks together. The 

 failure of the note-circulation to be elastic is due to the 

 expense and trouble of buying and depositing bonds to 

 secure the temporary addition, and withdrawing and sell- 

 ing the bonds when the time for contraction comes. Unless 

 the bonds are withdrawn, the bank has no motive to with- 

 draw the added notes. 



Since our note-circulation is now kept small by the un- 

 profitableness to the banks of further increase (except the 

 trifling present increase, which may at any time fade out 

 by disappearance of the narrow margin of gain which 

 causes it) the way to make' room for either elasticity or 

 permanent increase is to remove part at least of the causes 

 of the unprofitableness; to relax the checks called 6 and 7 

 above. Public attention seems to be given to the proposal 

 to abolish the ten per cent national tax on state bank cir- 

 culation; but room for increase may be had just as cer- 

 tainly, though not for so great an increase, by reducing or 

 removing the one pe?* cent, tax on national bank circulation, 

 or reducing the required deposit of bonds, or permitting 

 the substitution of other securities bearing higher interest. 



* Minor expenses (like examiner's fees), so far as they are independent of the 

 amount of circulation, may better be included under No. 4; and some which vary 

 with the amount, such as the cost of redemption and reissue, are small enough 

 to be neglected in this article. 



t Increase in the true circulation. Notes of abandoned circulation, awaiting 

 redemption by the Treasury, have no place in such a comparison as this ; though 

 the government reports of circulating money include them in the figures of bank 

 notes, which thus deceptively show a decrease since 1890. 



