The function of _circulation_ is exercised by the issuing of bank-notes to be circulated as money. When a bank is instituted the stockholders are required to pay in their respective shares in metallic or lawful money. But as the borrower would find coin most inconvenient to carry about, the device arose of substituting notes of the bank, payable on demand, thus leaving the specie in the bank. It was further soon observed that only a very small proportion of these notes were likely to be called for at any one time. Hence a large part of the specie could be used for other purposes instead of being kept idle in the vaults. Under the national bank system now in operation the capital of the bank may be largely invested in United States bonds which are retained in the government treasury, but on which the bank draws the usual interest. The bills of the bank are then guaranteed by the government, so that there is never any loss to the holder of the bills, even if the bank fails. PROTECTION AND FREE TRADE. 7. We have space but for a very brief outline of this important question. It is one which has for a long time agitated the public mind, and one on which honest and highly intelligent men widely differ. A _protective tariff_ so called, is a system of duties levied by the government of a country on certain commodities produced in other countries to prevent their coming into unequal competition with similar commodities of domestic production in such a way as to cripple or destroy the industries implied in the latter. _Free trade_ is opposed to all those duties, the design of which is to afford any advantage to domestic industry. It implies the same freedom between producers in different nations as between those in the same community. The main arguments in favor of protection are as follows: (1) It is the only sure defense of new and feeble industries against the unequal competition of those long established in other or older communities. Freedom of competition is admitted as desirable, but it is denied that this exists under the conditions referred to. A community which has long experience, skilled labor, and accumulated capital, possesses great advantages in the contest with a nation destitute of them. (2) It is urged that a restrictive system gives a steady and uniform market at an expense less than the benefit accruing. (3) It is also supposed to be essential to societary completeness; that is, to such a diversification of industry as will most profitably meet the diversity of ability and aptitude in the community. (4) It is thought to be necessary to the highest prosperity of the unprotected interests. Among these agriculture is the most prominent. It is for its advantage that the tax of transportation be saved by having manufacturing communities in the midst of agricultural areas. Also, a community compelled to confine itself to agriculture mainly, must virtually transport its soil, the land constantly diminishing in fertility.