36 
MONEY 
for the notes. The only thing that is very certain 
is that if a bank’s notes once get into circulation 
and remain in circulation for some years, the average 
cover required will be a very small percentage of 
the amount of notes outstanding, as the demand to 
xchange them for coin will always nearly equal the 
demands to exchange coin for them, and such dis- 
crepancies as occur will be known to be due at 
particular seasons, and therefore can be provided 
for shortly before they occur. 
No one ever supposed that the proportion of such 
“cover ” held against convertible notes directly 
affected their value. Their value will be the same 
as that of the coin into which they are convertible, 
whether I per cent., 50 per cent or 100 per cent. are 
“covered,” so long as conversion is believed to be 
obtainable if asked for. The effect of variation in 
the amount of cover on the value or purchasing 
power of money, is to be looked for only in its very 
trifling influence on the world demand for the metal 
of which the coin is made: the greater the cover 
held against notes the less is that metal economized. 
Legislators have very commonly believed that 
bankers are apt to underestimate the amount of 
cover which it is necessary to hold in order to secure 
convertibility at all times, and they have also often 
thought that, even when convertibility is secured, 
bank-notes are likely to be issued at times in excess 
of what is desirable in the interest of stable prices 
and business. They have therefore been inclined 
to make laws for the purpose of compelling bankers 
to keep more ‘‘ cover ”’ than they would do of their 
own volition. The more cover kept, the less profit 
on the issue of notes, so that such laws, when effective, 
tend to damp the otherwise natural desire of banks 
to issue as many notes as possible. In the extreme 
case, where 100 per cent. of cover must be kept