It has been shown above, however, that the policy of the federal reserve banks, while they were concentrating the gold supply, was to cover the pledged paper with gold, leaving the federal reserve notes in circulation and not reduced in volume. By this covering process the total volume of circulating media was reduced, and although the federal reserve notes did not tend to fluctuate greatly in volume to meet the seasonal demands, the total currency did so fluctuate. Federal reserve notes are readily issued to meet the demands of business, and, when the strain has passed a certain amount of gold, federal reserve notes, or some other kind of currency is subtracted from the total currency. The total volume of currency, therefore, rather than the volume of federal reserve notes alone, is elastic, varying with the needs of business and the international adjustment of the gold supply. The greenbacks, silver dollars and certificates, national bank notes, and federal reserve bank notes, are inelastic credit instru ments in our circulating media; but over and above these arc the federal reserve notes, which, as shown, provide an elastic super structure.
Statistical verification of this seasonal elasticity has been made quite impossible during the last few years on account of the dominating influence of the Treasury financing. Figure 8 is
arranged for seasonal comparisons.
The system of issue and redemption of federal reserve notes which has been adopted has had a marked and beneficent effect on our monetary media. The Treasury, federal reserve banks, and the member banks co-operated to substitute federal reserve notes for gold certificates. The reserve notes have increased rapidly in circulation, whereas the gold certificates are pocketed in the federal reserve banks and with the federal reserve agents. The large greenbacks are also being concentrated in these hands or are being converted into small denominations which are finding a permanent field of circulation. The void left by these with drawals is filled with federal reserve notes. The national bank notes will be gradually retired. Thus the currency of the United States is being simplified and federal reserve notes are fast be coming the only currency of $5 denomination or higher. The process of reducing the denominations of the greenbacks and national bank notes, and the process of saturation of the currency with federal reserve notes, render the objectionable greenbacks, silver certificates, and national bank notes less annoying and threatening.