the amount in the country remains the same throughout the entire year,
resulting in an accumulation of all the surplus capital of the country
in a few centers when not employed in the moving of crops, tempted
there by the offer of interest on call loans. Interest being paid,
this surplus capital must earn this interest paid with a profit. Being
subject to "call," it can not be loaned, only in part at best, to the
merchant or manufacturer for a fixed term. Hence, no matter how much
currency there might be in the country, it would be absorbed, prices
keeping pace with the volume, and panics, stringency, and disasters
would ever be recurring with the autumn. Elasticity in our monetary
system, therefore, is the object to be attained first, and next to that,
as far as possible, a prevention of the use of other people's money in
stock and other species of speculation. To prevent the latter it seems
to me that one great step would be taken by prohibiting the national
banks from paying interest on deposits, by requiring them to hold their
reserves in their own vaults, and by forcing them into resumption,
though it would only be in legal-tender notes. For this purpose I would
suggest the establishment of clearing houses for your consideration.

To secure the former many plans have been suggested, most, if not all,
of which look to me more like inflation on the one hand, or compelling
the Government, on the other, to pay interest, without corresponding
benefits, upon the surplus funds of the country during the seasons when
otherwise unemployed.

I submit for your consideration whether this difficulty might not be
overcome by authorizing the Secretary of the Treasury to issue at any
time to national banks of issue any amount of their own notes below
a fixed percentage of their issue (say 40 per cent), upon the banks'
depositing with the Treasurer of the United States an amount of
Government bonds equal to the amount of notes demanded, the banks to
forfeit to the Government, say, 4 per cent of the interest accruing on
the bonds so pledged during the time they remain with the Treasurer
as security for the increased circulation, the bonds so pledged to be
redeemable by the banks at their pleasure, either in whole or in part,
by returning their own bills for cancellation to an amount equal
to the face of the bonds withdrawn. I would further suggest for your
consideration the propriety of authorizing national banks to diminish
their s