The midland journal. (Rising Sun, Md.) 1885-1947, 1891-07-24
CHECKS are Prafarred

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of their customers, yet it is remarkable
fact that over ninety per cent of these de-
posts are not currency IN the common ac-
ceptation Of the term. They are not gold,
silver, greenbacks nor bank notes. Ninety
per cent of them are checks. The business
of the country is done chiefly by checks. A
gives B check for thousand bushels OF
wheat; B gives G check for a thousand
bushels of potatoes q gives D check for
fifty barrels of sugar D gives Z check for
hundred sacks of coffee, each man paying
bis debt by check. Back Of the check is
supposed to be currency in bank subject to
the checks of these parties, but the same
ST. 900 in cur ency answers for dozen or
fifty checks Of a thousand dollars each. Not
one of those men desires the currency. He
would not accept the thousand dollars in
silver for he could not carry it. He does
not care to have on his person thousand
dollars in greenbacks or gold. The check
suits him better, provided lie is satisfied in
his own mind that it will be honored when
finally presented for payment, that is if the
bank on which it is drawn certifes that il is
good.
Here then is vast currency in the form
Of checks of which no account is made in
The estimate Of the circulating medium.
The Financier, from which the above is
copied, is bank organ, and stopped just
where the illustration shows most favorable
for the present confidence money system
which is the most ingenious financial inven-
ton ever devised to rob the public. Let us
further illustrate the above by supposing
fb,t A hor,ou.J a. @Innn - ,to,t nil
from the bank. He either offered the bank
good endorser, who had abundance of real
or personal security in sight or deposited
good collaterals with the bank. The bank
then credited him with $1,000 and told A
he could check against this credit. A, B,
G, d and E went on checking against this
credit which rested on AS collateraIs or bis
endorser. The reader will notice there has
been no money in sight in this $4,000 tram
saction. Each mans bank acted on the
faith Of AS bank making the checks good,
and that in turn on the security it held.
Now the question arises where would the
first bank have got the $1,000 to advance 10
A had he demanded it? II would have
taken Its depositors' money that was in its
safe and handed it over the counter to A,
less the interest for the time A had borrow
ed. That interest is the bank 5 profit. But
suppose e, the last one Of these parties,
fails 10 meet his obligation. This $1,000
check in all of these transactions has been
used providing the parties had no other
money! and each party has endorsed his
name ON the backsof it. The check goes
back. to AS bank through all the other
banks, and the bank demands the money
on AS note Of his securieties. 1t very often
happens in the ups and downs Of business
that A and his securities are involved and
can't meet the obligation and there is a
tightening in the money market, or rather
the credit market, men who have deposits in
AS bank are drawing them out, and the
bank can't renew. A is consequently in a
hole, and all FIVE parties are boxed up, and
If they have no other means they will all be
bankrupted. This s'crash" not only ruins
the business of A, B, G, d and E, but the
distress radiates, and affects hundreds oil
other persons more or less. This condition
is constantly occurring, and when the credit
or confidence money volume becomes un-
usually large and some Of these failures
alarm the public, they begin to draw their
deposits (the real money! from the banks
through fear, and then what is known as a
panic ensues. The remedy for this evil is
sufficient amount of money In circulation
to transact business, without having to run
| to the banks to borrow other peoples
money, for banks have very little money Of
their own to loan. They depend on loaning
their depositors' money, hoping business
will move along steadily and the depositors
will not need more than 25 per cent OF their
deposits at any one time. This calculation
often miscarries and then the panic and
bankruptcy follow, and everybody is hurt
who happens in the line of the break, ex-
cept the bank. which has nothing 10 fear
but an interruption of ITS loaning, if it has
been careful to get reliable security on The
ground floor loan of the series of transac-
lions.
The same article from which we have
quoted concludes as follows!
"On given day the forty eight banks Of
New York City received and placed TO the
credit of their customers $165, 193, 347, Of
which 0.54 per cent was gold coin, O01 per
cent was silver coin, 0.65 per cent was paper
currency, and 9S.S6 per cent was checks.
EVERY check was good, aud it was more
couyenient than the currency for the settle
ment of accounts between the parties doing
business
In this vast financial transaction, there
was but 81 IA ofreal money in every 500.
The $9S.S6 was all confidence money. The
editor says "every check was good" But
suppose every check had not been good,
condition which very often occurs, and
which spectators bring abont purposely,
then comes a panic and crash and thous-
ands are injured. The operation financially
is very similar TO railroad accident. A
gang of robbers place distractions on the
track, a smash-up is the result, and the
passengers are robbed. The ungarded rail-
road track affords the robbers their oppor-
tunity and the confidence money of our
financial system gives the spectators and
cornerers of stocks and produce the chance
they are always watching for. In the great