which the banks were authorized to issue against deposits of coin and bullion. This privilege was accorded to all the Irish banks of issue,-instead of but one, as in the case of England, and they were thus put upon an equal footing with no apparent purpose of concentrating issues finally in a single institution. The Irish banks are required, however, to keep the coin held against additional circulation wholly at their head offices, while all their notes are required to be redeemed on demand at the place or places where issued. These requirements compel them to keep a supply of coin at every branch, in order to redeem notes issued from that branch, and it is the practice for a bank to redeem any of its notes at any of its branches where they may be presented. The fact that the privilege of additional issues has been availed of to only a limited extent, while the coin holdings of the banks have been large, would seem to indicate that the fixed limit of authorized issues has not operated greatly to restrain the business development of Ireland. One reason for this is doubtless found in the fact that the population and the volume of business were so greatly decreased in the famine years, while the authorized circulation remained untouched. The limit has proved in practice so generous that Ireland has enjoyed a currency fluctuating with the seasons and with the varying demand for money, in much the same manner as an untrammelled banking currency.

The circulation was nearly £1,000,000 above the limit in 1846, standing at £7,266,000, but declined as low as £4,310000 in 1849. The average returned in 1854 to £6,296,000 and increased pretty steadily until 1860, when it stood at £6,840,000. A decline then set in, which reached its lowest ebb in 1863 at £5,405,000. Another period of increase carried the average circulation for 1872 as high as £7,674,000, after which it fell to £6,065,000 in 1879, rose to £7,297,000 in 1882 and fell to £5,885,000 in 1887,-the lowest average for twenty years. The authorized circulation of each bank, with the circulation and specie holdings for the four weeks ending July 25, 1908, is shown in the following table:

The average circulation shown consisted of £2,331,710 in notes of denominations under £5 and £3,959,397 in notes for £5 and more.

The elastic character of the Irish currency, in spite of the restrictions of law, gives an interest to the fluctuations during the year which result from the varying demand for money. Beginning with January, the amount of the circulation usually declines,-slowly at first, but more rapidly in May, June, and July, until it reaches its lowest point at the end of August. Then begins the process described by Mr. Gilbart, as a consequence of the law that "the monthly circulation must depend upon the quantity of produce brought to market within the month":

Now, it has been the custom in Ireland to commence bringing the produce to market immediately after the harvest. Hence arises the increase of the notes in September, and their further increase in the following month. But in the beginning of the year the landlords collect their rents, and receive from their tenants the notes for which this produce has been sold; this brings the notes back to the bank, either to be placed to his credit (if he have an account there), or, otherwise, in exchange for a letter of credit on Dublin, or a bill on London. The circuit of a note, then, is this:-It is obtained from the bank by a corn-merchant, who pays it to a farmer for his corn, which he ships. to England. The farmer afterwards pays the note for rent to his landlord, who brings it back to the bank. '

One of the peculiar features of the Irish circulation, like the Scottish, is the large proportion of small notes. The

1 The History, Principles, and Practice of Banking, II., 250.

Select Committee of the House of Commons in 1826 recommended fixing a limit of time in the future beyond which the circulation of notes below £5 should cease, but the testimony given before the committee was against such a restriction and it was not adopted. The arguments made against the restriction were that it would check the growth of manufactures, make difficult the sale of small lots of agricultural produce, and curtail the accommodation which the banks are able to give their customers and especially their cash credits. The transfer of gold, it was pointed out, would be inconvenient and costly, and once sent out of the country it would rarely come back. The Act of 1845 prohibited notes of fractions of £1 and required the banks in their reports to state separately the notes in circulation under £5. These returns have shown a large proportion of small notes in circulation and a marked increase from September to January over the spring and summer months. This circulation of small notes has contributed, with the widely diffused system of branches, and the existence of several strong joint stock banks without the power of issue, to afford reasonably adequate facilities for the development of banking in Ireland. The number of banking offices in Ireland increased from 333 in 1872 to 571 in 1895 and 785 in 1908.

CHAPTER VIII.

THE BANKS OF GERMANY.

The Bank of Prussia and the Share of the State in its Profits-Other Banks of Issue in Prussia and the Smaller States of GermanyThe Reform of Currency and Banking under the Empire-The Sales of Silver and the Withdrawal of Paper Money-Absence of Legal Tender Character in the Bank-Notes.

THE

HE existing banking system of the German Empire is a part of the fabric of imperialism which was so industriously built up by Prince Bismarck from the beginning of his premiership in 1862 until his retirement from office. The Imperial Bank of Germany is in a measure an expansion and development of the Bank of Prussia, which was founded in the time of Frederick the Great, but it has already absorbed the circulation belonging to the banks of most of the other German states and is authorized to absorb the entire paper circulation of the Empire as it is surrendered by the local banks, in much the same manner as the Bank of England is authorized by the Act of 1844 to absorb the circulation of the country banks of England and Wales. The circulation of the Imperial German Bank, while modelled in many respects on that of the Bank of England, is capable of a somewhat greater degree of elasticity, by virtue of a legal provision for an emergency circulation above the usual limit, and the notes are not a legal tender.

The Bank of Prussia was created by virtue of an edict of June 17, 1765, under the name of the Royal Bank of Loans and Current Accounts at Berlin (Konigliche Giro- und Lehnbank zu Berlin) with a capital of 1,000,000 thalers ($750,000)

It con

and was at first exclusively an institution of state. tinued to be a state institution until 1846, when the new demands for capital for railways and for the extension of commercial relations led to an extension of the scope of the bank and an appeal to private capital to carry it on. Two ordinances of April 14 and July 18, 1846, authorized the increase of the capital by a sum of 10,000,000 thalers ($7,500,ooo) and admitted the shareholders to a part in the administration by means of a central commission composed of fifteen members, who were authorized to appoint a commitee of three to exercise a regular supervision over the acts of the directors.' The capital owned by the State had been increased by the setting aside of profits until it had reached in 1846 1,197,553 thalers ($900,000), and the portion furnished by the public was increased in May, 1856, to 15,000,000 thalers and again by the law of September 24, 1866, to 20,000,000 thalers, ($15,000,000), divided into shares of a par value of one thousand thalers each. The capital credited to the state had been increasing in the meantime until it attained in December, 1867, a total of 1,897,800 thalers ($1,425,000).

The government took care to keep its hands firmly on the direction of the bank, in spite of the new privileges given the shareholders, and limited the right to participate in the general assembly of shareholders to the two hundred holding the largest amount of stock domiciled in Prussia. Supreme control was reserved directly and exclusively to a privy council (Bank Kuratorium), composed of the President of the Council of Ministers, the Ministers of Finance, of Justice, and of Commerce, and a fifth member named by the King. The direct management also was confided to a director and a committee of direction appointed upon the King's nomination. This official control was compensated in a measure by exemptions from imposts and from certain taxes which were imposed upon other similar establishments. The bank was compelled, however, to pay interest on the deposit of the public funds and to pay three and a half per