The government was able in 1872 to begin its payment to the Bank at the rate of 200,000,000 francs per year; the payment of the indemnity to Germany was completed in August, 1873, and in 1874 the Bank began its preparations for the resumption of specie payment. France, having a less expanded state of credit than most other commercial countries, had felt the revulsion of 1873 but little, and it was, therefore, possible to make a large reduction in the discounts of the Bank, and thus to carry on the double operation of accumulating specie and withdrawing notes, The withdrawal of small notes of 25 francs and less was carried on even faster than the general lowering of the circulation, in order to force the introduction of specie into general use and thus to insure the presence of a large mass of metal in the hands of the public, before the Bank should begin its payments. The specie in the Bank reached its highest point in June, 1877, when it stood at 2,281,000,000 francs, showing an accumulation by the Bank of over 1,500,000,000 francs in three years and a half, independently of any made by the public. Of this specie, not far from sixty per cent. was gold, it being the policy of the Bank to hold much gold, partly because gold alone could answer demands for use in foreign trade, and partly because of the uncertainty which obscured the future value of silver.

The precise period at which specie payments should be resumed was determined by the law of August 3, 1875 in which it was provided that when the advances made by the Bank to the State should have been reduced to 300,000,000 francs, payment of the notes in specie should begin. By the end of 1876 only 338,000,000 francs remained unpaid, and it would not have been difficult at any time in 1877 to complete the operation. The year was permitted to pass, however, without taking the final step, the Bank in the meantime dealing upon the specie basis. A payment of 10,000,000 francs, which lowered the government debt to the required point, was at last made pro forma December 31, 1877, and specie payment was resumed with the opening of the new year without shock and without much thought on the part of the public. By the terms of the law the notes continued to be a legal tender for all debts, as they are to-day, but their forced circulation by non-payment was at an end.

At the moment of resumption the outstanding notes of the Bank amounted to nearly 2,462,000,-000 francs. This was a great reduction from the maximum reached in 1873, but the amount was still nearly double that which had been usual before the war. It soon became clear that, with the free choice between specie and paper afforded by resumption, France had adopted a permanently larger paper circulation. This was in large measure due to the change of habit produced by any protracted use of forced paper, - a change which makes it highly improbable that any nation, after such an experience, will easily return to the use of paper and coin in proportions the same as were once found satisfactory.

Unfavorable conditions in 1878, 1879, and 1880 caused a moderate decline, which at one moment lowered the issue to 2,107,000,000 francs. Deficient crops, especially in 1879 and 1880, caused large imports of wheat and heavy exports of gold, a large proportion of the latter finding its resting-place in the United States. The Bank of France relieved the situation by some increase of its loans, but parted with not less than 500,000,000 francs of its gold. With the return of good harvests the loss of specie was made up, and the increased demand of the public for notes soon began to show itself. Perhaps to some extent by the direct exchange of specie for notes, and in general by an increased proportional call for paper in payments received from the Bank as compared with the use of paper in payments to it, the notes outstanding and the specie holdings of the Bank both began to increase, and the growth of that part of the circulation which simply represents specie in hand, and is not an extension of bank credits in profitable operations, became rapid. In 1884, the issue having risen to 3,162,000,000, the limit was raised to 3,500,000,000 francs. This limit was raised four times during the next twenty years, finally giving the Bank the right to issue 6,800,000,000 francs. The importance of maintaining a limit of circulation which is certain to be raised before it can be reached is not clear, but it is probably to be found, if at all, in the frequent opportunity thus afforded for legislative review of the use which the Bank makes of its extensive privileges.1 During 1913 the circulation of the Bank varied from 5,350,000,000 to 6,050,000,000 francs, and its specie ranged from 3,815,000,000 to 4,175,-000,000 francs, being usually not far from seventy per cent. of the issue.

By the force of circumstances, then, rather than by positive legislation, the Bank of France has been made the storehouse for a vast mass of specie, conveniently represented in circulation by bank-notes, and thus holds in its charge a large part of the currency of the country. As the specie thus held becomes in fact a reserve protecting all the cash liabilities of the bank, it is clear that it is an effective safeguard against the ordinary chances of an insufficient banking reserve, and that the Bank of France thus secures great steadiness of movement in its ordinary operations in compensation for the heavy responsibility thrown upon it.

1The committee which, in 1897, reported to the Chamber of Deputies the bill extending the charter, frankly recognized the futility of the limit, but acceded to it as probably harmless, and agreed to the advance from 4000 to 5000 millions as affording an ample margin for some time to come. - Journal Officiel, 1897, Doc. Pari. Chambre, p. 176.

The composition of this vast reserve is hardly less remarkable than its growth. The resumption of specie payments by France took place after the fall in the value of silver had compelled the countries of the Latin Union to suspend its free coinage at their mints. At that moment the Bank held approximately 1,200,000,000 of gold and 867,000,000 of silver. During the years of specie export, referred to above, the Bank parted with gold until its stock in the winter of 1880-81 was reduced to less than 540,000,000, and accumulated silver to the amount of more than 1,200,000,000. With the return of favoring conditions the Bank was not slow to replenish its stock of gold, and soon showed that it had adopted a definite policy of restricting its holding of silver and strengthening its holding of gold. Its silver after fluctuating within moderate limits has declined slowly but almost continuously since about 1890 and in 1913 was less than 700,-000,000 francs. Its gold, on the other hand, with Some important fluctuations, has tended upwards, exceeding 3,000,000,000 francs in 1913 and usually making about four fifths of, the cash reserve, often rising above that proportion and less frequently-falling below it.