The Late Commercial Crisis [pp. 100-126]

THE LATE COMM3IERICIAL CRISTS.
receiver simply trusts their promises to pay, andl is seldom dis appointed. But whether there be bank bills or not, the great
mrass of actual exchanges will, in intelligent communities and in
normal conditions, be accomplished through checks, drafts, time
or demand notes, and bills of exchange. Whatever be the legal
money, it will be used only for small payments, retail transactions, wages, travel, payments to parties not conversant with
these instruments or the credit of the drawers of them, and for
the payment of inter-bank or clearing house balances. The great
bulk of payments, loans, etc., are made without handling a cent
of money, or passing anything but these orders for it, or promises
to pay it, which are freely taken because believed or credited to
be convertible into it, if the holder demands it. Therefore, in
ninety-nine cases out of a hundred, he does not desire it, and no
money is handled. It has recently been proved at the London
Clearing, House that checks discharge nearly 150 times the payments made by money, metallic or paper. The case cannot be
far different in New York or our other chief commercial centres.
Nothing can prevent this, so long as men prefer putting their
money in bank vaults to the trouble and risk of privately handling and keeping it, and it is more convenient and safe for paydr
and payee to handle it by check drawn to order or bearer than
in any other way.
This being so, it follows that banks require to keep on hand
but a small proportion of the money, be it coin, or legal tender,
or other bills deposited with them, to meet all the demands
made upon them in ordinary times or normal conditions. They
can, and will, indeed must, loan out most of it, in order to meet
the expenses of keeping it, and reap a profit in addition. Without this profit they would have no motive to keep it, unless otherwise paid for the service —an office much better discharged by
the safe-deposit companies. Besides, it is for the interest of the
community that this capital thus collected for safety and convenience, should not lie idle, but be loaned to those solvent persons who need it. It follows, therefore, under any system,
whether paper or metallic, that banks and bankers must owe
more im-mediate obligations than they have funds to meet, if a
demand be made at once for the immediate payment of them all.
But in normal or quiet times, there is no danger, or even possibility of this. There is no danger of this for prudent and sol
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[January,