The necessary effect of every such addition to the mass is to diminish the relative value of any given portion of that mass in exchange for commodities. If the addition were made by notes convertible into specie, this diminution of the relative value of any given portion of the whole mass would speedily bring back upon the Bank which issued the notes as much as was excessive. But if by law they are not so convertible, of course this excess will not be brought back, but will remain in the channel of circulation, until paid in again to the Bank itself in discharge of the bills which were originally discounted. During the whole time they remain out, they perform all the functions of circulating medium; and before they come to be paid in discharge of those bills, they have already been followed by a new issue of notes in a similar operation of discounting. Each successive advance repeats the same process. If the whole sum of discounts continues outstanding at a given amount, there will remain permanently out in circulation a corresponding amount of paper; and if the amount of discounts is progressively increasing, the amount of paper, which remains out in circulation over and above what is otherwise wanted for the occasions of the public, will progressively increase also, and the money prices of commodities will progressively rise. This progress may be as indefinite as the range of speculation and adventure in a great commercial country.... FOOTNOTES: [31] Herbert Joseph Davenport, _The Economics of Enterprise_, pp. 259, 60. The Macmillan Company, New York. 1913. [32] Charles F. Dunbar, _Chapters on the Theory and History of Banking_, pp. 20-38, G. P. Putnam's Sons, New York and London. 1902. [33] Herbert Joseph Davenport, _The Economics of Enterprise_, pp. 260-6. The Macmillan Company. New York. 1913. [34] It should not be overlooked, furthermore, that the velocity of the circulation of deposits is approximately two and one-half times that of money.--EDITOR. [35] Hartley Withers, _The Meaning of Money_, pp. 57-73. E. P. Dutton and Company. New York. 1914. [36] Irving Fisher, _The Purchasing Power of Money_, pp. 45-47. The Macmillan Company. New York. 1911. [37] This act, passed in 1797 in order to prevent a drain of gold to the continent during the Napoleonic War, forbade the Bank of England to redeem its notes. It remained in force until 1821, when specie payment was resumed.--EDITOR. [38] Report from the Select Committee on the High Price of Gold Bullion. Ordered by the House of Commons, to be printed, 8 June, 1810. CHAPTER X THE USE OF CREDIT INSTRUMENTS IN PAYMENTS IN THE UNITED STATES