State Bank Notes. 63 



It would take little change of these restraints to cause a 

 marked acceleration of the increase of national bank notes 

 that is even now visible. National banks are as ready as 

 any others to increase their circulation when the increase 

 pays. 



IMPERFECT CONTRACTION. 



Now let US postpone all the difficulties of securing a 

 sound state bank currency, and suppose that either by 

 adopting a system of lightly taxed state bank notes or by 

 loosening the restrictions upon national banks we make 

 possible the issue of 100 millions more of secure bank 

 notes. There is no way of making the issue possible but 

 by making it profitable. If the checks were so lessened 

 as to let the profit exceed them before the harvest-season* 

 came, there is good reason to believe that a part of the 

 extra notes thus made possible would not only be sent out 

 but kept out without waiting for the crop-season, unless 

 certain legal requirements, hitherto unusual, were imposed 

 upon the banks or certain new conditions attached to the 

 notes. If this occurred long enough before the crop-season 

 to permit the swelling of the currency to affect the amount 

 of coin (either by increasing export or diminishing import 

 of money-metal), it would to that extent merely substitute 

 notes for coin lost; the remainder of the "slack" would be 

 taken up by the growth of business at the crop-season, and 

 this remainder only would have any value towards giving 

 elasticity, the former part being a needless and (if extensive 

 or often repeated) an injurious enlargement of the bank- 

 note circulation. 



But we will take a case more favorable to the proposal 

 of a bank note elasticity, and suppose no such wasted ele- 

 ment in the new issue; suppose the checks to be so skill- 

 fully balanced against the profit that the latter does not 

 emerge suj)erior till the rate of short-time interest rises at 

 harvest-time. The new notes then go out. and the first 

 half of elasticity is thus displayed. But what assurance 



♦For simplicity, the autumnal moving of the crops is spoken of alone, here 

 and later in the discussion ; but the same arguments apply to the spring trade 

 and to sporadic maxima of business. 



