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country, and the profit obtained by their issue is a
great help to the small branch offices in paying their
expenses. To some extent it is true that the notes
lent out create capital; if they are maintained and
the circulation increased by the loans, then and to
that extent they render the same service as gold.
The chief argument on the opposite side is found in
the importance of giving to the privileged national
bank enough power to take care of the national
reserve, which it can better do when it decides the
rate of discount; and the power to decide this is
again given it by its privilege to issue notes. But
the question is whether it is not better that the
elasticity of the circulation and credit of the country
should be in the care of several banks. As a point of
superiority over Sweden, Finlanders dwell on the fact
that from 1886, when the Bank of Finland obtained
the monopoly of note-issue, it was, like the Bank of
England, no longer allowed to pay interest on ordinary
deposits, and that in this manner a division of work is
introduced between the national bank and the private
banks, which the Swedish Riksbank would do well
to imitate.
Undoubtedly Finland’s bank has, on the whole,
contributed to strengthen credit, and it cannot be
denied that in recent times it has understood how
to keep a good national reserve which can render
assistance in periods of difficulty. But the Finnish
economist, Professor J. V. Tallqvist, is probably right
when he reproaches the management of former times
for keeping the rates of discount and interest too low,
contributing by that to develop speculation, and giving
away the Bank’s resources so that it could not assist
when assistance was most needed. The Bank acted in
this manner in the latter half of the seventies, when it
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