With the currency based upon the general assets of the bank having a priority of lien over all other liabilities, being

•True elasticity in bank note circulation implies automatic adjustment of the volume to the needs of business. Heretofore the Canadian system has worked perfectly because the banks have been able at all times to supply all that has been needed without exceeding the maximum limit, and that limit was so well beyond the need of the country that the banks

Elasticity of the Currency under the surveillance of not only the government hut, better still, the entire hanking fraternity, and safeguarded by the double liability of stockholders, it is believed that the note circulation of Canada is absolutely safe, and possesses advantages over any other system.

The system of branch banks which prevails in Canada is not only an advantage to the banks, but a decided convenience to the people. Nearly every bank of any considerable size in the dominion has a number of branches scattered throughout the provinces, there being in all about 650 branches. Weekly reports are made to the head bank, and thus the manager is kept fully posted as to the business transacted by the branches. By this system sparsely settled portions of the dominion are provided with banking facilities through a branch bank, where the business in that particular section would not be sufficient to support an independent bank. The branch may be conducted in a small and inexpensive manner suited to the needs of the community, while it furnishes the benefits of the financial strength and solidity of the parent institution. Then again, through its various branches a bank is able to loan out its funds advantageously where money is most needed. In one province there may be an abundance of money seeking investment, with large deposits in the banks, while in another where the work of development of natural resources is going on, there may be a demand for money, and small deposits in the banks. Now by transferring the surplus funds from the one province to the other both are accommodated, and this can be done easily and readily through the agency of the branch bank system. Not only is the public accommodated, but by this means the banks are able to earn have seldom been able to push their notes out so as to raise the total beyond 75 per cent. of the maximum. Of late, however, the rapid development of the country without proportionate increase in its banking capital has changed this and their issues now approximate very nearly to the lawful maximum at all seasons, larger dividends, in consequence of using their assets to the best advantage. Under this system the farmer in the Northwest is able to borrow money almost as cheaply as a resident of Quebec.

Mr. B. E. Walker, President of the Canadian Bankers' Association, in explaining the advantages of the branch system, said: "In Canada, with its banks with forty and fifty branches, we see the deposits of the saving communities applied directly to the country's new enterprises in a manner nearly perfect. The Bank of Montreal borrows money from depositors at Halifax and many points in the maritime provinces where savings largely exceed the new enterprises, and it lends money in Vancouver or in the Northwest, where the new enterprises far exceed the people's earnings." As water "seeks its level" so money will to a certain extent flow where the greatest demand for it exists and the highest rates of interest are paid, but by means of the system of branch banks this ebbing and flowing of the financial tide is greatly facilitated.

A third advantage growing out of this mobility of the financial system is that a financial stringency in any part of the Dominion can be instantly relieved by transferring funds from any other part, thus averting what might, under other circumstances, become a panic or commercial crisis.

In the United States under our law there can be no branch banks in our national banking system because every national bank must have a capital of at least $25,000, and when a stringency arises in any part of the country, the banks both there and elsewhere usually look out for their own welfare, and money does not flow to the point where it is needed, as under the branch bank system.

While the law does not specifically require the banks to carry a reserve, in order to protect their notes, nearly all of the Canadian banks maintain a reserve as a means of demonstrating their strength and as a practical necessity in the conduct of their business.

The Canadian government issues a paper currency called "Dominion Notes" which is a legal tender and redeemable in gold on demand. These notes are issued in denominations of 25c, $1, $2, $4, $50, $100, $500 and $1,000, and together with a small proportion of silver, furnish the circulating medium for small transactions, the bank notes not being issued in denominations below $5, and above that amount only in multiples of five. In making payments every bank is compelled, if required, to pay small Dominion notes to an amount not exceeding $100. Thus the notes readily circulate, keeping the bank note circulating at par with it, and the whole upon a gold basis. There is no limit upon the issue of notes by the government, but for all over $20,000,000 an equal amount of gold must be held by the minister of finance. Below that amount the government reserve consists of gold and Dominion bonds.