universal desire, and being also a commodity that can more easily than anything else be carried away and concealed, if once stolen, becomes an object of property calling for especial efforts to protect it against theft, burglary, etc. And it requires about as much labor and expense to provide for the safe keeping of a small sum, as for that of a large one.

Hence a vault or repository, in which one man can take care of the money of several men, is likely to occur as a means of economy, at a very early day. The man who keeps it is called a banker, and the money left with him is said to be deposited.

213. Banks, (2) as places of exchange.

it

Suppose a dozen men employ the same banker to keep their funds. It is not necessary, when any one of them wants his money, or a portion of it, to make a payment to another, that he should actually go and take the money out of the bank and pay over. A much shorter method is to give the payee a draft on the banker. The draft being taken to the banker, he will credit the amount to the payee and charge it to the payor, and the exchange is as truly made, without the handling or counting of a dollar of the money, as it could be in any other way. The entries in the books must of course be made at any rate. But by this means millions on millions of

dollars of exchanges may be made without the labor of counting or handling a single dollar of the money.

214. Saving of labor thereby.

And, in fact, in all civilized countries, a large share of the exchanges and payments are made in this way. Men that have occasion to handle much money, make their deposits in some bank, make all their larger payments in checks, and keep on hand only the amount of money that is necessary for the smaller balances, that are daily and hourly occurring, when it is necessary to effect a balance, pay a bill, or "make change," without the trouble of going to the bank.

215. Clearing houses.

In towns and cities, where there are several banks, a bank for bankers alone, is usually established. This is sometimes called a "clearing house."

So long as there is but one bank in a town, all the men who keep bank accounts at all, will have their deposits there. But, in case there are several, each business man will give checks on the bank he does business with. A, for example, gives B a check, but B has no business with A's banker. He takes the check to his banker. Hence a necessity for the

bankers themselves to exchange with one another; this is usually done every day after banking hours.

16. Banks, (3) for discount and loans.

It is manifest that if millions of dollars of exchanges can be made without handling the coin, they could be made, a large part of them at least, just as well if there were no coin in the vault at all.

But let us now take a different starting point; let us suppose that a man who has capital (money) to lend, starts a bank. He can, not only keep the money of other persons on deposit with his own, and make their exchanges for them; but besides all this he can lend money of his own to those who may have occasion to borrow.

Nor is this all. He can lend, also, a part of that which he has on deposit. After a short time he will find out about how much comes in, on the average, per day, and, of course, also how long, on the average, each dollar remains with him, and how much on the average, he has on hand at a time. Now suppose he should find that he has, on an average, a hundred thousand dollars on deposit, and that, on the average, each dollar remains with him twenty days, it is manifest that he can lend seventy or eighty thousand dollars of that which he has on deposit, for short periods-anything less than twenty days

and yet always be able to meet the drafts that may be drawn upon him by the depositors—always I say-except when the day of winding up operations comes. He must cease making loans before that day arrives, in order to prepare for its arrival.

217. Banks (4) for issue of bills.

But we have another expedient still, affecting the business of banking, and of making exchanges thereby, namely, the issue of bills or bank notes.

Gold and silver, in large quantities, are heavy, and inconvenient, besides being attended with risk and loss. Hence, several consequences.

(1) In the first place, drafts on banks, are likely in themselves, to pass from hand to hand for some time, as representatives of the money that is on deposit in the bank. This the customers themselves will do, rather than take out the money itself, and carry it about with them.

(2) But, in the second place, the banker himself may issue his bills, provided he has capital of his own. In this case, instead of keeping the money deposited by each customer, separate and distinct, he counts it, places it to the credit of the depositor, and when he calls for it, gives him his own bills; that is, pieces of paper on which is written, or printed, or both, a promise to pay a given amount

on demand, at the banking house of the banker who issues it.

And this paper "currency" is-as gold and silver are not a mere representative value. As such, it circulates so long as the credit of the banker is good, and does the work of money quite as efficiently and more conveniently than coin itself could do.

218. Paper currency saves loss.

(1) There is always some wear of coin in use— old coins become defaced. This is a complete and total loss, as much so as if a similar portion of gold and silver had sunk to the bottom of the ocean.

(2) Again, some of the coin will be lost in the way last named. A ship sinks at sea; a conflagration takes place; and in other ways coin disappears from the use of men.

It has been computed that in these ways not less than one per cent. of the coin actually in use is lost annually; this, as we have seen, is nearly half as much as the rate of interest in some of the more wealthy nations of the world. But,

(3) There is also safety to the individual himself in having paper that will serve in making his exchanges, instead of coin.

Suppose a man makes a draft, or holds a certifi