England has been included in the list for comparison because, being the financial center, the commercial clearing house of the world, it has a constant movement of gold flowing in and out which gives her a degree of elasticity which would be impossible but for that fact, and therefore England occupies a unique position. Again, both Scotland and Ireland have perfect systems of credit currency to meet their varying needs.

NATIONAL BANK CURRENCY.

Your committee submits that every thoughtful man must inquire why there is not the slightest variation in the quantity of our currency, which can in any way be attributed to the changing conditions of our business. Especially is this fact accentuated when we know that if we had a true credit currency system, such as exists in Canada, our increase and decrease would approximate $250,000,000.

Why this absolute fixity of quantity under all the varying conditions of the seasons? The reasons are these:

First. Our national-bank currency represents actual capital; every $100,000 of it representing $104,000 of cash paid out, the loanable fund of the country being actually reduced because of this system by more than $20,000,000 in these premiums, and when compared with a true credit currency there is a sacrifice of more than $400,000,000 of capital.

Second. Our national-bank currency represents an investment in United States bonds, and is related only to the bonds as a speculation and in no way to the needs of business. Bonds, not business, brought it into being.

Third. The law prohibits the retirement of more than $3,000,000 of national-bank notes in any one month. It would take, therefore, fourteen years to retire the present outstanding circulation.

Fourth. There are no adequate facilities for the current redemption of our national-bank currency; hence, broadly speaking, it is redeemed only when the paper is worn out.

No other courry now has or ever had such a currency except Japan, where our system was imitated, but almost immediately repudiated, and a credit currency adopted in its stead.

NATIONAL BANK-NOTE CIRCULATION, 1890-1906.

Total national-bank notes outstanding at the end of August and December in the years named and at the end of the following April.

The foregoing diagrams, as well as the above-tabulated statement, confirm these conclusions, for, by examination, the House will find there were several falls when our currency ought to have increased, but was actually reduced, and several springs when it ought to have diminished, but was actually increased, proving that bond speculation and not business requirements controls the quantity of our currency. Your committee further submit the following review and survey of the subject for the information of the House:

TRANSACTIONS IN CREDIT.

Alexander Hamilton, with the unerring instinct of a financial genius, stated the underlying principle clearly and well when he said: Every loan which a bank makes is, in its first shape, a credit given to the borrower on its books, the amount of which it stands ready to pay, either in its own notes or in gold or silver, at his option. But in a large number of cases no actual payment is made in either. The borrower, frequently by a check or order, transfers his credit to some other person to whom he has a payment to make, who, in his turn, is as often content with a similar credit, because he is satisfied that he can whenever he pleases either convert it into cash or pass it to some other hand as an equivalent for it. And in this manner the credit keeps circulating, performing in every stage the office of money, till it is extinguished by a discount with some other person who has a payment to make to the bank to an equal or greater amount. Thus iarge sums are lent and paid, frequently through a variety of hands, without the intervention of a single piece of coin.

Though these words were uttered more than a hundred years ago, with what prophetic vision did Hamilton anticipate the practice of our own time, more than 90 per cent of our vast transactions being in some form of credit and less than 4 per cent in actual coin.

If the convenience of the people in any locality or line of business, such as that of the farmer or the manufacturer, prefers the bank note to the deposit and check, the bank note ought to be provided for all those whose credit entitles them to the favor of the bank.

The true bank note is not real money any more than a check is real money. Each should entitle the holder to the amount it calls for in in gold coin.

THE SCOTCH SYSTEM OF CREDIT NOTES.

The great achievements of the Scotch system of credit notes is exceedingly well stated by Mr. Charles A. Conant in these words:

1. It has provided Scotland with an elastic currency adapted to the condition of her industries and adequate in volume to their changing needs.

2. It has enabled the people to carry on numerous commercial and agricultural transactions for which they could not have found the necessary quantity of coin and has economized the locking up of capital in the precious metals.

3. It has made the use of notes of small denominations familiar and popular, and has taught the people the distinction between bank notes as the representatives of credit and the precious metals as the measures of value.

4. It has brought into active use the available savings and capital of the country. 5. It has afforded an opportunity for entering upon business to thousands of poor but honest men and enabled them to lay the foundation of a comfortable home and in many cases of a fortune.

6. It has convinced the people so conclusively of the value and safety of the banking currency system that no serious panic has ever lasted beyond a few days or has ever affected any of the banks except those which were justly the subject of distrust. (Conant's History of Modern Banks of Issue, p. 155.)