bond-secured circulation, would result in alternate scarcity and inflation, with results fatal to the steady development of the country. More money is required at some seasons. of the year than at others, and the banks are permitted to meet the demand as it arises. There is no danger of permanent inflation. Owing to the competition of the banks and the development of branch banking, excessive issues cannot remain out. The extra issues in the fall of the year are returned to the banks as the volume of business decreases and fewer customers ask for accommodation. The periodical fluctuations in the Canadian issues supply a most perfect refutation, if one were needed, of the principles of the Currency School.

When business increases, the volume of the currency expands with it; and there is never a currency famine in the country. When business is brisk, accommodation can be obtained as easily and as cheaply as during the dull season; and the bank rate remains steady throughout the year. Owing to the competition of the banks and the large number of branches, the issues in excess, when the volume of business contracts, are automatically returned for redemption; and there is at all times just sufficient money to transact the business of the community. The annual average circulation per capita in Canada is small; but, owing to the regular expansion and contraction, the needs of the country are always supplied. Though a maximum limit is placed to the issues of the banks, the amount of their unimpaired capital,- the limit has never been reached. The banks are not able to put out or keep out the whole amount of the notes they are entitled to issue. A few banks issue almost up to the maximum, but the proportion of the total bank circulation to the capital has seldom been much in excess of fifty per cent. There is thus room for a very large increase in the business of the country; and, before the maximum is reached, banking will be so profitable that the banking

capital of the country in one way or another will be largely augmented. The temporary needs are well supplied, and for a long time the banks could meet any permanent increase without making any new arrange

ments.

The branch bank system, which enables the banks to expand and contract their issues according to the needs of the business of the country, also has the effect of preventing any local currency famine. The banks are as able to grant accommodation in remote country districts as in the commercial centres. They are not organized as agricultural banks, yet they serve all the useful purposes of agricultural banks. The farmer in the Far West and the lumber operator in the Maritime Provinces pay little more for accommodation than the merchant in Montreal or Toronto. The rate of discount varies from six to eight per cent., as low a rate as can be obtained in America, except in a few of the Eastern financial centres of the United States. The Canadian banks are enabled thus to equalize the rates by means of the branch bank system which they have adopted. There are more than five hundred branches of the thirty-eight chartered banks; and through these branches the banks are able to collect the available capital of the country, and to lend it where it is most needed. It is not the farmer who has any ground for complaint. He obtains accommodation for seven or eight per cent., while the Western farmer in the United States pays twelve or fifteen. If any one has reason to complain, it is the Eastern borrower, who is thus deprived of whatever advantage he might derive from a low rate. The banks draw off the surplus capital of the East, to distribute it evenly over the country, with the consequence that the rate is higher where capital is accumulating than it would otherwise be. But the class which suffers is not likely to be carried away by arguments for soft money; while the farmer, who might yield to the

temptation, is benefited by the system. The system is one adapted to assist in developing a new country. In the United States a bank would not be organized till the business of the district was sufficient to warrant it, and even then there would be no material increase of capital available. In Canada the new district can draw, according to the discretion of the local and the general manager, on the capital collected in more settled parts of the country; and, so long as there are districts requiring development, so long the system will be the one best suited to the needs of the country. At present it is admirably suited for the development of the country, and the perfection of its adaptation has hindered the rise of that discontent which found expression in the United States in a demand for free silver.

Had Canadian banks been restricted by legislation to a system which would not permit them to avert local and temporary currency famines, the assistance they have rendered to the farmer and to the development of the country could not have been given. But in the absence of government bonds the branch system has been encouraged; and the local banks, which reproduce the limitations without the safety of the national banks of the United States, are not increasing in number. Since 1885

new bank has been chartered, while the number of branches has nearly doubled. This means not only an increasing safety to the community,- for the dangers of the discretionary system are in the existence of small local banks with local management and local risks,- but also an increasing adaptation of the system to the needs of the country. The presence in remote districts of agents of the large banks allays any suspicion of the distant money power, and creates a general impression that the banks are the servants of the community. The wider area of their operations on account of the existence of branches makes the banks pursue a larger policy. They

must protect and accommodate their country customers as well as their city customers; and they are more ready to do so, because these country customers are a main source of their profit by rendering it possible to put out and to keep out a larger proportion of notes. There is, therefore, a solidarity of feeling throughout the country; and the remote districts have never had any cause for regarding the money men of the financial centres as their natural enemies.

In this absence of mutual suspicion and distrust, and in the complete adaptation of the banking system, which is the main cause of the feeling of solidarity, we find the fullest explanation why there has been no silver question in Canada.

UNIVERSITY OF NEW BRUNSWICK.

JOHN DAVIDSON.

MONETARY CHANGES IN JAPAN.

I.

(1871-77.)

THE history of Japanese currency, so far as it concerns the purposes of the present article, dates from about the year 1871. The disorganization immediately following the Restoration in 1868 prevented the national government from taking any effective steps in the direction of monetary reform; and, in consequence, the local lords (daimyo) took advantage of the existing confusion to flood their territories (han) with depreciated paper. In a government ordinance issued in 1869 the bare outlines of the modern system become visible. According to this law, a mint was to be established in Osaka, and a standard silver coin was to be struck on the model of the Mexican dollar. This coin, called the "yen," was to contain 416 grains, fine, and was divisible in 100 sen and 1,000 rin, corresponding to American cents and mills. A subsidiary coinage of silver, with fineness reduced to

, and a copper coinage were authorized. In addition, provision was made for gold coins (10 yen to contain 248 grains), which, however, were in no sense to form part of the current money of the empire. The declared purpose of the Japanese government, at this time, was to make the silver yen the standard coin of the country.

At the end of the following year (November, 1870) the mint, under the energetic administration of foreigners, began operations. But the work had scarcely begun when the government determined to abandon the silver standard, and to adopt the gold standard. Why this change was made has never been definitely ascertained. The explanation ordinarily given is that certain Americans, then employed as advisers of the Department of Fi