186 ECONOMIC PRINCIPLES

country banks, and may amount to two-thirds of the issues
the privilege for which has thus lapsed. It will be seen that,
of the total authorised issues of country banks, amounting
in 1844, for 279 issuing banks, to £8,631,647, the increases
of the fiduciary issues of the Bank of England account
for £6,262,500. Only 40 banks continued to exercise the
right of issue at the end of 1902, with an aggregate actual
issue of about £800,000.
The note-issues of the Bank of Germany are limited in
a manner resembling, in its chief points, the provisions of the
English Bank Act. Its fiduciary issue, since 1899, is limited
to 460,000,000 marks, and six other banks, which continue
to issue notes under corresponding restrictions, have,
together, privileges of fiduciary issue amounting to 81,600,000
marks. The securities held against these fiduciary issues
are not stock exchange securities, but bills of exchange,
maturing within go days, and bearing three good names,
in general, though two names may suffice. Thus the
ordinary investments of a commercial bank serve as cover
for these note-issues.
Besides the limit of fiduciary issue named above, the
German banks are required to hold cash to the amount of
not less than one-third of the notes in circulation. Thus, for
the full utilisation of the privileges of fiduciary issue of the
Bank of Germany, a holding of 230,000,000 marks in cash
would be necessary, giving a circulation of 690,000,000 marks.
[f the circulation exceeds this, the Bank must hold cash to
the amount of one-third of such excess, and, if its cash
holdings fall short of the entire excess, a payment at the rate
of 5 per cent. per annum on the amount not covered by cash
must be made to the Imperial Treasury. This permission, to
increase the fiduciary issue on payment of a fine, enables the
Bank to afford accommodation under conditions which
would involve a breach of the law in England, while the tax
on such issues acts as a stimulus to discontinue them when
they can be dispensed with. This privilege has been used
with considerable frequency. The lack of such an “elastic
limit” in the English system compelled the practical adoption
of an equivalent to it, on three occasions of pressure, by the act