A third important monetary law involves the relation of the supply of money to the fluctuations of the demand made on this supply. In every modern business community there is more or less of a seasonal demand for money in some form. Particularly is this true in agricultural sections at harvest time. Then farmers hire additional laborers who must be paid, and incur other expenses incidental to harvesting. In a large country such as the United States this seasonal demand mounts into hundreds of millions of dollars. Clearly, business operations cannot be adjusted so as to have on hand this enormous sum of money to meet the extra demands of a few months at most. And it need not be so adjusted if some provision is made, such as we now have, in our

Federal Reserve Banking Law, for increasing the amount of money to meet in additional demand and decreasing it again when this demand has passed by. A monetary system which permits of this expansion and contraction is said to be elastic.

From our description of elastic money we readily see that credit money alone, either in the form of bank notes or of government notes, serves the purpose. No reasonable scheme can be had which would permit metallic money to stretch and contract with the fluctuation pi business needs. Mine production could not be speeded up sufficiently to meet an increased demand; and if such were possible we can think of no plan for taking the added amount out of circulation when there was no longer need for it.