ns likely to result in increased demands upon them
arise, banks are likely to act "panicky"; to call in their balances
from correspondents; to sell bonds; to call loans; and greatly to
curtail or absolutely to cut off new discounts. This action spreads
the panicky feeling among their customers, and creates such pressure
at the reserve centers as to cause curtailment of accommodations and
panic there.

At the very best, this reserve system is accompanied by high discount
and loan rates and by speculation on the stock market. High rates
result inevitably from the hoarding of currency which it involves, the
supply of loan funds being abnormally diminished, and speculation
follows from the concentration in slack times of funds in New York
City, which can only be employed in call loans on stock-exchange
collateral. Stock brokers regularly take advantage of this situation,
speculate themselves and inspire speculation among their customers.
The mutual dependence of the stock and money markets thus produced by
this reserve system is disadvantageous to both, fluctuations in
values, uncertainty, and irregularity on both being the result.

(_e_) _Lack of Elasticity in the Currency._--The money of the United
States consists of four main elements, gold and silver coin, United
States notes, and national bank notes, and none of these fluctuate in
volume in accord with the needs of commerce.

The gold element depends primarily upon the output of our gold mines
and upon the international movement of gold, increasing when that
output increases and when our imports of gold exceed our exports, and
decreasing under opposite conditions. These fluctuations, however, are
quite independent of our commercial needs. Silver dollars, which
constitute the major part of our silver currency, for several years
have been unchanged in quantity, and the volume of United States notes
has remained at $346,681,016 since the resumption of specie payments,
January 1, 1879.

National bank notes fluctuate in volume as a result of changes in the
number of national banks and in the prices of government bonds.
Whenever a new national bank is organized, a specified portion of its
capital must be invested in government bonds, which bonds are usually
deposited with the Comptroller of the Currency in exchange for notes;
and, when the price of government bonds rises, banks holding more than
the minimum required by law frequently retire a portion of their
circulatio