The purpose of these regulations is to set a limit to the extent to which banks may expand the volume of their loans and discounts, in the belief, apparently, that, if at least the prescribed proportion of cash is all the time kept on hand, the banks will be able to meet their obligations. As in the case of the regulations concerning investments, the authors of these failed to recognize the significance, from the point of view of the cash demands likely to be made upon banks, of the kind of paper admitted to discount. If discounts be confined to commercial paper, the demand obligations they create will be met for the most part by transfers of credits on the banks' books or by the return of the notes issued, and, as foreign experience has demonstrated, the adjustment of cash resources to needs can safely be left to the judgment of the bankers themselves, who, through variations in the discount rate, rediscounts, and other means, can regulate it with ease. If investment paper is admitted to discount, reserves less than one hundred per cent of the demand obligations thereby created are unsafe, since a less amount is likely to force liquidation on the banks' customers, with the results above indicated. The most elaborate regulations for the prevention of inflation have been developed in connection with legislation concerning note issues. The reason for this is the fact that commercial banking was at its origin and for a long time thereafter carried on almost exclusively through note issues, the conduct of checking accounts being a comparatively recent development. The phenomenon of inflation was, therefore, first observed in connection with note issues and associated with them. Even now the essential similarity of note issues and checking accounts as banking instrumentalities is not universally recognized. The means of safeguarding note issues which have been incorporated into legislative enactments are the prior lien on assets, the safety fund, the requirement and sometimes the mortgaging of special assets, and the limitation of the total issues. By the prior lien is meant the provision that in case of failure the note holders shall be paid in full before any of the assets are distributed among other creditors. By the safety fund is meant a required contribution from each bank, usually a percentage of the amount of notes issued, placed in the hands of some public official and kept for the redemption, in case of failure, of such of the notes of failed banks as cannot be redeemed out of the assets of the banks themselves. Additional contributions from the solvent banks are required for the replenishment of the fund when it has been depleted.