The elements of political economy, with some applications to questions of the day . of value for what would be worthless prom-ises. Banks, therefore, rely on their credit with thecommunity, and issue notes, or promises. Followingtheir example, when they can not get sufficient meansin ordinary ways, governments also issue their prom-ises to pay, or coin their credit. In this manner theyget the use of wealth by giving in return only a form ofcredit. 139. We have now mentioned book-credit, bills of ex-change, and promissory notes as forms of credit. Anotherand fourth form is the check, which serv
The elements of political economy, with some applications to questions of the day . of value for what would be worthless prom-ises. Banks, therefore, rely on their credit with thecommunity, and issue notes, or promises. Followingtheir example, when they can not get sufficient meansin ordinary ways, governments also issue their prom-ises to pay, or coin their credit. In this manner theyget the use of wealth by giving in return only a form ofcredit. 139. We have now mentioned book-credit, bills of ex-change, and promissory notes as forms of credit. Anotherand fourth form is the check, which serves as a substitutefor money in a very remarkable way. A check is anorder on a bank to pay some one a given sum ofmoney. The person who signs it keeps a deposit accountat the bank, and by the check he transfers to anotherthe right hehad to draw onthat deposit. Asimple illustra-tion may serveto show howchecks save theuse of that a country merchant, A, has been buyingwool, which he takes to New York and sells to B, awool-broker, for $1,000. B pays A by a check on his. I50 EXCHANGE. bank, X. B at once sells the wool to a manufacturer,C, and C pays B by a check on the same bank. Then Csells cloth to D, a wholesale dealer in dry-goods, to theamount of $i,ooo, and is also paid by a check on , A, before going home, purchases dry-goods of Dto the amount of $i,ooo, and pays D by giving him the checkhe received from B on the bank X. No money was re-quired in all these transactions. A was the owner of Bsdeposit, and he gave his right to D. Now D gave a checkto C for $i,ooo, and thus transferred his right to a depositof $i,ooo to C, and C gave a check for the same sum toB. So, at the end of the whole circle of transactions, Bhas the same sum (leaving profit aside) on deposit as atfirst; no money has left the bank ; no money was usedby any of the four; and yet the four transactions amountedto $4,000. 140. The use of checks depends on the habit ofdepositing funds in ban
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Keywords: ., bookcentury1800, bookdecade18, booksubjecteconomics, bookyear1887
