PAPER CURRENCY 189

Actually only a fraction of the rights are used, since they
are less remunerative than appears at first sight. In order
to obtain notes for issue, the unsigned blanks must be
procured from the Federal Treasury, and an equivalent
nominal value of bonds of the Federal Government must be
deposited, as also a sum in cash equal to 5 per cent. of the
amount to be issued, with which the Treasury may redeem
the notes when presented to it for that purpose by the public,
This currency, being redeemable either by the issuing bank
or the U.S. Treasury, circulates freely throughout the
country. Should the issuing bank become insolvent, the
notes are, as in Canada, a first lien on the assets of the bank,
and these include, as in that case, a double liability of the
shareholders. The bonds, held by the Treasury, may, if
necessary, be sold to provide for the redemption, and thus
10te-holders have ample security against ultimate loss.
The consideration of the variety of methods of regulating
 note-issues adopted by different countries, of which some
examples have been given, leads to a closer enquiry as to
the purposes aimed at in such regulation. The primary
condition which it is sought to secure is the safety of the
dote-holder from loss under all circumstances. But more
than this is involved. As stated at the beginning of the
chapter, the relation of the supply of the circulating medium
to the price-level, in the territory in which it is used, is also
‘mportant, This is especially the case when paper currency
IS concerned, for its circulation is not international. Thus
its influence on prices, if any, is local. Yet, so long as
convertibility is maintained, it seems that any excess will be
Promptly removed from circulation by being presented to
the issuers for redemption. May not, however, prices be
really maintained at a somewhat higher general level, through
the use of notes, than they would have attained on a purely
Metallic basis? The answer is, without much doubt, Yes.
As an example, the crop-moving season of each year may
be taken, To move the crops, much currency is needed, If
the currency is purely metallic, its increase will require
‘Mportations from other countries, in all likelihood, These
Will be difficult to obtain, and may be inadequate. A drop