State Bank Notes. 67 



upon the banks. Suppose, for instance, that the increase 

 of the ordinary note-circulation is prevented by fixing a 

 maximum for it as nearly as possible at the point where it 

 now is, admitting hereafter no new issue of notes on the 

 ordinary terms, except in place of such circulation with- 

 drawn;* and that extra circulation be permitted on some 

 such terms as these — the extra notes to be issued only dur- 

 ing two or three specified months just before and during 

 the crop-season, and the whole circulation of the bank to 

 be reduced to its former dimensions by, say, January 15 

 following. The reduction, or its equivalent, may be made 

 certain by requiring from the bank a deposit of money on 

 January 15 in place of any excess of notes still outstand- 

 ing; the government either to undertake the subsequent 

 redemption itself, or to return the money to the bank as 

 fast as the redemption proceeded. The money being kept 

 idle by the government meanwhile, the effect on the money- 

 supply of the country is the same as if the excess of notes 

 had been wholly retired before January 15; and the con- 

 traction has begun some time before the date, as the bank, 

 besides its actual redemption, began to accumulate money 

 for the final alternative redemption or deposit with the 

 government. The extra notes could then have precisely 

 the same appearance as the ordinary notes, and have the 

 same validity as between the bank and the holder; it would 

 make no difference whether the notes redeemed and re- 

 tired were the same individual notes that went out in the 

 extra issue; all that is necessary is the retirement of a 

 certain amount of the notes of that bank, drawn indiffer- 

 ently from the old and the new ones. The whole matter 

 would be settled between the government and the bank, 

 and no one else would be troubled with any discrimination 

 among the notes he handles. A second period of possible 

 issue may be provided for the "spring trade"; but there 

 should be at least one space of a month or two in each 



* Giving prefcrenco to newly organized banks in allotting this substituted 

 ordinary circulation ; if any were left, old banks that wished to enlarge their 

 ordinary circulation could have it. 



