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INTERNATIONAL TRADE 
simplest case — at least for recent times — of a banking system 
in which bank notes as well as bank deposits are allowed to grow 
or shrink freely, in which specie plays a very slight part in the 
circulating medium, in which the entire structure, while it rests 
on specie, yet rests on a slender basis of specie. In sum, it is 
one in which we may expect a high degree both of sensitiveness 
to the international flow of specie and of domination by that flow. 
Somewhat different, again, and yet in many ways similar to 
Great Britain and Canada was the United States during the period 
from 1879 to 1914 — from the resumption of specie payments to 
the establishment of the Federal Reserve System. Deposits, 
functioning in the concrete form of checks, formed the largest 
constituent in the circulating medium. The eager competition 
of a multitude of banks, and the general atmosphere of enterprise 
and money-making, led each and every bank to expand to the 
maximum. That maximum was in part limited by law, in part 
was made somewhat elastic because of the difference in policy 
between the more conservative and the more venturesome insti- 
tutions and directorates. It was affected, too, in no small degree 
by the factor of demand for counter cash and large change. Bank 
notes, while more elastic, more available for counter purposes, than 
in Great Britain, were much less so than in Canada. Issued as they 
were under the restrictions of the National Bank legislation, they 
responded very uncertainly to the varying calls for large change. 
During the period when the silver issues competed with them — 
a period, moreover, when the legislative restrictions fettered them 
most — they showed virtually no response to such calls. In the 
later period, after 1893, the fetters were less severely felt. Yet 
even then bank notes were issued only in very uncertain accord 
with fluctuations in the demands for large change; and, as regards 
an individual bank, hardly a trace of connection could be found 
between the circulation of that bank’s notes and the calls on that 
bank for counter cash. The other items of hand-to-hand money 
— United States notes, silver dollars and certificates — were fixed 
in amount: tho the volume in actual circulation was affected