State Bank Notes.' 77 



with watering it by a note-element, it is buying business 

 security and a charm against popular delusions. Some- 

 thing might be said, even if no project for elasticity 

 through Treasury payments is accepted, for the belief 

 that our best policy is to prefer safety to elasticity, to 

 arrange the checks on profit so as to insure the gradual 

 extinction of the bank notes,* to substitute nothing for 

 them, and so let coin flow in; when that is done, to increase 

 the coin reserve against greenbacks by 15 or 20 millions 

 annually till it equals the whole volume of greenbacks and 

 they can be converted into coin certificates. When a gen- 

 eration has grown up that has never seen a bank note or a 

 government note, the seed of many a folly will be dead in 

 the popular mind. 



The principal conclusions we have reached may be 

 summarized as follows: 



1. The extinction of the national bank notes requires 

 no creation of other money. The coin to take their place 

 will come in without perceptibly greater national sacrifice 

 than has attended the extinction of a still larger amount of 

 notes in the past few years. 



2. An elastic bank note system would probably cause 

 progressive increase in the amount of note-circulation, 

 unless restraints hitherto unusual were applied. Such re- 

 straint might be given by causing the notes added in the 

 temporary expansions to bear interest after a set time, or 

 by expressly requiring the issuing banks to reduce their 

 circulation within the old limits before a set time. 



8. Nothing is to be gained, either towards elasticity or 

 towards permanent enlargement of local circulation, by 

 substitution of state control for national control. The in- 

 crease or diminution of bank notes is determined by the 

 relation between the profits and certain well defined checks, 

 and the state governments cannot apply the checks better 

 than the national government can. 



* Which of course does not imply a disappearance of the national bank system. 



