INTERNATIONAL PAYMENTS 207 
somewhat by the operations of the Government Treasury (the 
“Independent Treasury’), whose policy it was to hold more of 
cash in its vaults at some times, at other times to push cash into 
circulation. 
The gold was held by banks as reserves. A considerable part, 
nevertheless, was in everyday circulation, chiefly in the form of 
gold certificates. The total available was steadily swelled by the 
output of the domestic mines, which found its way regularly to 
the mints and to the channels of circulation or reserve. As re- 
gards quick drain or quick replenishment the supply was subject 
to the international movement only. Here was the one really 
flexible item. It was mainly from this source that a demand for 
larger bank reserves could be met; and it was thru this that a 
drain on bank reserves made itself felt most effectively. The 
dominating effect which the international movement might be 
expected to show was merely mitigated and concealed by the con- 
siderable supplies of gold from the domestic mines and by the 
heterogeneous character of the rest of the circulating cash. The 
case thus resembles in some essential features the British and 
Canadian: deposits swelled as a rule to the maximum ; reserves 
not far from the minimum; bank discounts and loans, the money 
market and the tone of trade, easily and quickly affected by the 
cash holdings of the banks; those cash holdings having as their 
variable or flexible constituents the monetary supply of gold; 
this supply of gold swelled with increments from the domestic 
mines at a fairly steady rate, but subject to variation mainly from 
the international movement.! 
In all countries using deposits and checks freely, the looseness 
of the connection between bank reserves and bank deposits leads 
not infrequently to a chronological order different from that 
assumed in the Ricardian reasoning. An inflow of specie may 
!T say “mainly” from the international movement. It is true that the United 
States Treasury was at times a factor, endeavoring as it did to influence the banking 
and business situation by letting cash out from its holdings or impounding it. This 
endeavor to exercise a stabilizing influence, however, was not steadily maintained ; 
it proved of varying and often of negligible effect. It was no more than a tentative 
and wavering precursor of the deliberate and well-equipped procedure for the same 
purpose which was subsequently incorporated in the Federal Reserve Svstem:.