Front Page Titles (by Subject) 4. Proportional Reserve. - Money and the Mechanism of Exchange
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4. Proportional Reserve. - William Stanley Jevons, Money and the Mechanism of Exchange 
Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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4. Proportional Reserve.
The issuer of promises to pay money on demand may be required to keep a reserve of coin never less than, say, one-fourth of the whole outstanding notes. This is analogous to the method on which the National Bank currency of the United States was lately regulated, and it is, perhaps, better to enforce the keeping of a certain amount of reserve than to leave the matter entirely to the discretion and good faith of the individual issuers. As the banker sees his reserve running down nearly to the legal limit, he will be compelled to use additional caution, in order to avoid a breach of the law. But if the untoward state of trade and credit causes any large portion of the outstanding notes to be presented, the legal tender reserve will be diminished in a greater proportion than the amount of notes, which is larger in absolute quantity. If there be 100,000 dollars of outstanding notes, and 40,000 dollars reserve, then it is obvious that the presentation of 20,000 dollars of notes will reduce these numbers respectively to 80,000 dollars of outstanding notes, and 20,000 dollars of reserve; and if the law required the reserve to be one-fourth part of the liabilities, no more notes could be paid. Thus, from the moment that the banker allow his reserve to touch the legal minimum, it become unavailable to him, except by a breach of law, and it may be said that the law is of little use except when broken. This system, in fact, reduces itself, when it comes into operation at all, to the Minimum Reserve method last described. The banker cannot touch his reserve just when he most wants it, and the deadlock thus occasioned was acutely felt in the United States during the panic of 1873.
This method of regulation has, moreover, little or no effect in removing the motives for an extension of the circulation. The greater part of the value of every additional note kept in circulation is a gratuitous addition to the loanable capital of the bank, and bears interest as long as it can be kept afloat.