While the notes are not issued against a specific reserve, as in the case of the Bank of England, but against the general assets of the bank, and are not even a prior lien on those assets, nevertheless a sufficient supply of gold is carried in the vaults of all the issuing banks to place the redemption of the notes beyond doubt in the minds of the people. In 1899 the total volume of circulating notes outstanding in Germany amounted to 1,322,208,000 marks, and the total metallic reserve held by the eight banks issuing these notes was 911,528,000 or a little less than seventy per cent.

Bank notes in Germany are not issued in lower denominations than 100 marks, and this restriction keeps in constant circulation a considerable quantity of specie for small transactions. The bank notes are not a legal tender, but their credit is maintained by their convertibility at all banks of issue. By means of an extensive system of branches of the Reichsbank scattered throughout the empire, the system of deposit banking is becoming quite popular, thus reducing to a certain extent the use of bank notes in the transaction of business. A large number of joint stock banks located in Berlin and other prominent cities of the empire have been organized, and materially assisted in furnishing banking facilities to the people and educating the masses in the utility of deposit banking. These joint stock banks, as a rule, carry their reserves in the Reichsbank, that institution being the safest and most convenient storehouse of gold in the empire. Thus it will be seen that these banks sustain very much the same relation to the Reichsbank that the joint stock banks of London do to the Bank of England. The policy of the management of the Reichsbank has been to guard well these reserves by a large supply of gold in the vaults, so as to protect the credit system of the empire by establishing perfect confidence. Like the Bank of England, the Reichsbank resorts to the scheme of raising or lowering its rate of discount to protect its reserve, raising its rate in times of danger and lowering it in times of peace and plenty.

In order that the action of the Reichsbank may virtually control the money market, the law forbids all other banks of issue to discount at a rate lower than that of the Reichsbank when its rate is as high as four per cent. Thus when the Reichsbank raises its rate to or above four per cent all of the banks of issue are compelled by law to do the same. When the Reichsbank lowers its rate below four per cent the other banks are allowed to discount at a rate of one-fourth of one per cent lower than the Reichsbank rate. Were it not compulsory on other banks to follow the rate announced by the Reichsbank, business would merely shift from one bank to another and the general situation would in no way be affected or improved. The Reichsbank has about three hundred branches scattered throughout the empire and with the influence of these in addition to the banks of issue the rate of discount as established in Berlin by the Reichsbank is easily maintained and made to control the price of money throughout the empire.

In addition to the specie and bank notes in circulation in Germany the government has notes of its own in circulation. An imperial "war chest" is kept in which is stored a large reserve of gold as an emergency fund to be used in time of war. This fund is estimated at 150,000,000 marks, and in order to prevent so large an amount of cash from lying idle, an issue of imperial treasury notes for an equal amount is put into circulation. These notes are really gold certificates, since they merely circulate instead of the coin.