State Bank Notes. 75 



a troublesome process, has been shown in the earlier part 

 of this imper. And if it is thought necessary to secure for 

 the money-supply an elasticity of volume, in addition to 

 the existintr virtual elasticity by change of speed in circu- 

 lation and by additions of metal, it is possible to have 



elasticity without notes. 

 Our choice of means is not restricted to notes. The 

 Treasury itself is a ready-made apparatus. Whenever 

 Treasury receipts exceed Treasury payments, the circula- 

 tion outside contracts;* whenever the payments predomi- 

 nate, the circulation enlarges. When such a change comes 

 without any corresponding need of trade, the disparity is 

 set right by the usual automatic methods, /. c. by a quick- 

 ening of the average speed of circulation or an increase of 

 bank reserves in the cases of needless contraction and ex- 

 pansion respectively, followed (if the disparity is large 

 enough and lasts long enough) by a change in the rate of 

 short-time interest and ultimately by a change in the ex- 

 port or import of metal. When the expansion or contrac- 

 tion happens to fit a need of trade, w'e have a true elasticity 

 imparted by the Treasury action. In fact, several impor- 

 tant outpours and absorptions of money by the Treasury 

 occur every year; if they could be made to fit the needs of 

 trade better than they do now, the circulation would be 

 made elastic pro tanfo. For instance, nearly all the in- 

 terest on the public debt is paid in April and the corre- 

 sponding quarter months, now that the interest-bearing 

 debt is mostly the 1907 four per cents. If the interest were 

 made semi-annual, and payable in March and SeiDtember, 

 about 11 millions t of interest-money would be cast into the 

 channels of business at croiJ-moving time, and another 11 

 millions in time for the spring trade, while there would 

 be a corresponding contracting influence at work through 



♦Contracts relatively ; that is, if greater forces are just then expanding it, 

 Treasury action merely diminishes the expansion. The word " enlarges," in the 

 next phrase, is used in the same relative sense, though the enlargement is usually 

 absolute also. 



t Instead of the present arrangement of 514 millions in October, and SVa more 

 in January, when it is not wanted. 



