solvent the banks must be, although unable to meet upon the instant any considerable demand for specie. If called upon they may have no alternative but to suspend payment. Their bills paid, no new loans being made, they would again have all their capital in hand in its original form. Under such conditions, suspension of specie payments may be a matter of a few days only. The consumption of merchandise would go on as before, the liabilities on either side being discharged by mutual offset until they are wholly retired. A suspension of specie payments may have hardly any other injurious effect than to arrest for a time the operations of production and trade. It is a common thing to speak of the issues of banks as "paper money based upon specie." The exact reverse is the fact. Paper money is based, not upon specie, but upon merchandise, and is retired thereby, specie interposing, as a rule, not between producer and consumer, but only between issuers of symbolic money.

The proceeds of bills discounted are ordinarily taken in the form of credits to remain on deposit with the issuers, to be drawn according to the wants of those in whose favor they are granted. Notes, subsidiary paper money, find their way into circulation chiefly by means of cheques against deposits for the payment of wages, current expenses, and the like. As they are drawn for specific purposes they presently return in greater part to the issuers, a small amount as pocket money remaining in the hands of the public.

As the capital of banks when first established may be largely paid in in bills, these supplying in their payment, which may be demanded in coin, the reserves proper to be held, to the extent that the proceeds of loans made by them are undrawn, these may be treated, in part, as reserves for new loans. Issues so made do not inflate the currency, as they have behind them the proper constituent for their redemption. The owners of undrawn proceeds of loans well understand the use that is to be made of them and do not object, the banks being strengthened instead of weakened thereby. When demanded in large sums, all that the banks have to do is to call in their loans, or negotiate new ones for themselves, payable in coin, for gold is always to be had at prices not ordinarily much above those demanded for other kinds of merchandise. It is to be remembered that nearly all the issues of symbolic money, though nominally payable in gold, are resolved by merchandise, the ordinary subjects

of consumption. The holder of a barrel of flour is just as potential in money as the possessor of gold who has to purchase and consume flour as the condition of existence. Gold, however, has the advantage that it is not subject to decay, while the uses to which it can be put are always certain to maintain its value the world over. It has the same significance everywhere. There can be no overstock of it, while flour may be largely in excess of demand, the consumption of it on a large scale being restricted to a few races. Ordinarily, however, the supply of merchandise for consumption, and of gold, keep an even pace, so that the holder of gold has no advantage over a holder of merchandise, even of the kind which, to maintain its value, must be presently consumed.

The greater part of the issues of banks and bankers in all commercial countries is based upon the undrawn proceeds of loans. On the 30th of September, 1892, the loans of the National banks of the United States equalled $2,153,498,829. Their own loanable capital equalled $1,029,077,041, made up of $686,573,115 of share capital, $238,871,425 of surplus funds, and $103,632,501 of undivided profit. Their deposits equalled $1,775,251,128. Their loans consequently exceeded their own means by $1,124,421,788. The loans and discounts of the State banks equalled $654,654,490; of Trust companies, $310,174,726; of private banks and bankers, $69,310,687; the total being $1,034,139,903. The share capital of the State banks equalled $233,751,171; the surplus funds and undivided profits, $90,358,080. The capital of the Trust companies equalled $80,645,972; their surplus and undivided profits, $60,768,148. The capital of the private banks and bankers equalled $34,590,227; their surplus funds and reserved profits, $11,259,164. The total loanable capital of the three equalled $510,372,762. Their loans in excess of their capital equalled $513,767,141. Their deposits equalled $1,153,264,953, made up of $648,513,809 with State banks, $411,659,996 with Trust companies, and $93,091,148 with private banks and bankers. The loans of all classes of issuers equalled $3,187,637,732, a sum $1,648,187,929 in excess of their loanable capital, amounting to $1,539,649,903. Their deposits equalled $2,928,516,081. By the means described the whole available capital of the country is made the basis of reproduction, not a dollar that can be spared remaining unused. The advantage inures chiefly to workmen, as their

wages are in ratio to the amount of capital employed, while the prices of all articles of consumption are reduced in like ratio.'

As all issues of currency properly made are retired automatically and within brief periods by the consumption of their constituent, their denomination or amount is to be suited to the means or wants of the humblest as well as the largest consumers. There is the same reason for the issue of notes of one dollar as of ten or fifty dollars. No bank, however, would on the score of convenience and economy issue notes for less than one dollar. It is often urged that no notes should be issued for less than ten dollars, in order to force specie into use, so that in the event of a breakdown in paper money the people shall have something to fall back upon. The same reason might be used against the use of cheques of less amount than fifty dollars. It is to be remembered that the purpose of symbolic money is to take the place of metallic money, which is to be wholly discharged from the exchanges, except as subsidiary coins. There can be no more inflation with a symbolic currency, properly issued, than with a metallic currency, as the purpose of each as money is to reach some article of consumption. The amount of specie to be held is a matter of experience, the issuer, where the capital of a bank is fully paid, always inclining, as a matter of caution, to an excess, as much to maintain a high credit as to be always prepared for any emergency. With a proper system no considerable adverse balance could arise in the foreign trade of the country, as the instruments could never be in excess of the means of expenditure.

1Statement showing the number; amount of share capital; loans and discounts; surplus funds; undivided profits, and deposits of the National banks of September 30, 1892, and of the State banks, Loan and Trust companies, and private banks and bankers at the close of the fiscal year 1892.

SAVINGS BANKS.

In addition to the deposits with banks and bankers which, as capital, are made the basis of increased issues of symbolic money, are deposits with savings banks, the accumulated earnings, or reserves, of those who, having no adequate means of investing their earnings or savings, intrust them to institutions especially equipped for such purpose. As the deposits with savings banks are ordinarily made. in the notes of banks of issue, or in cheques upon the same, they represent capital in a form fitted to serve as a basis of reproduction, for the prosecution of enterprises of all kinds, or for permanent investment. Deposits with savings banks, as with banks of issue, are payable presently in gold, as an undertaking, or guarantee, that the property upon which they are loaned, or into which they are converted, has a value equal to that of an equal amount of gold, — of the universal equivalent. There is this difference between deposits with banks of issue and those with savings banks. The former, arising out of the discount of bills, are used as the instruments for the distribution of the merchandise which such bills represent, and are retired by their use. If not returned to the issuer, through the purchase of merchandise, they are to be taken in by paying out a corresponding amount of specie. However issued, they are certain to pass into the hands of the holders of merchandise by whom they are presently deposited in a bank which, if not the issuer, to strengthen itself, immediately demands from the issuers payment in specie. On the other hand, deposits in savings banks, though payable on demand in coin, represent accumulations to be invested, their owners having no present use for the same. As they will be drawn only to meet the occasional wants of the depositors, the aggregate amount, with a healthy state of affairs, steadily increases so that the whole mass at any one time may be safely treated as a proper subject for investment. Of course in the event of disturbance or apprehension there may be runs upon savings banks for specie, to be ordinarily returned, as the apprehension subsides, to the banks from which it was drawn, or to some other institutions of the kind. the purpose of savings banks is to invest the money of the laboring classes, or of those who cannot well invest for themselves, and as it is always understood that the deposits are to be invested in property which cannot be immediately converted into gold, in the case

As

of a run upon them they are allowed to defer payment for such time as is assumed to be necessary for the conversion of their assets. The amount of deposits in all the savings banks of the United States, September 30, 1892, equalled $1,712,769,626, of which $705,777,557 were held by the savings banks of the New England States, the amount averaging $150 per head of their population. As in these States savings banks may make loans to manufacturing corporations, they are of great aid in carrying large stocks of merchandise for which there may be no present remunerative demand, as the money of these banks for such purposes, and in any amounts, can be had at the lowest current rates. The manufacturers in these consequently have a great advantage over those in other States who have no such facility for borrowing. In the State of New York the deposits in the savings banks equalled $588,425,421. The deposits in the savings banks of the State of California equalled $127,000,000. Had all the States deposits in savings banks at the rate of those in New England, the total for the country would reach $10,000,000,000. There are few manufacturing establishments and no savings banks in the States of Mississippi and Texas, which may largely account for their hostility to interests in which they have little or no share, but out of which deposits in savings banks chiefly arise.

MONEY BY LAW.

There are two kinds of money by law - a debased coinage, and notes payable at the pleasure of the issuer; both to be received at their nominal value in the discharge of debts. The latter is by far the more dangerous and disastrous expedient, as debased coins. have, ordinarily, no other support than the value of the metal they contain; and by no sophistry can one be persuaded that a coin of a half an ounce of silver has the value of a full ounce. New contracts will be made in them only at the value of the metal they contain. So soon, therefore, as those existing are discharged the mischief resulting from the debasement is substantially at an end. Notes issued to serve as money are a very different affair. They may be issued and accepted in entire good faith, being promises