The independent. [volume] (Lincoln, Neb.) 1902-1907, 1903-12-24


credits, popularity known as "depos-
it's
Of course, all will agree that when
A deposits" 500 with Banker B, the
latter becomes debtor to A in the sum
of $780, agreeing to repay the same
on demand or at stipulated time up
on AS order. Again, all will agree
that when A delivers to Banker B his
(As) certain promissory note for $500,
due 80 days after date, with interest
at 'steen per cent, and receives in ex-
change therefor ten deliberately print
ed notes of Banker B. each for $10-
then A and B have snapped credits,
to the advantage of B and the disad
vantage Of A.
In either case Banker b Is debtor
for 500. In the first the evidence is
recorded In his bank ledgers and in
the customers pass book given to A.
In the second, the ten handsomely en-
grayed notes are evidence of the
debt owing by Banker b.
Now, 1t Is well known that, in the
| first instance, Banker B might loan to
G SIS to $85 of the hundred received
from A, retaining the $25 or SIS as
a reserve" c might in turn de
post" the SIS with Banker B and get
a little pass book. Then Banker B
could loan d $50 to $50, who in turn
would deepest" Banker B
could be owing $500 to $500 to his
"depOsitors' and have no actual coin
but the original 500 received from A,
| biIt ho ~ cf< nr,r -
make up the difference.
II instead of using pass books as
evidence of his debts, Banker B had
| simply issued his own artistic notes
in exchange for those of his clisto-
mers, Mr.. Laughlin argues that the re-
suit would be nowise changed. Bank
er B would owe no more and no less;
his customers likewise, but they would
use bank notes instead of checks in
making payments in their own bust
ness. All of which Is true in meas
ure, but purposely misleading.
1t must not be forgotten that no
check is in the remotest degree a Te-
gal tender in payment of anything.
1t is in no sense money" but an or
der for money. On the contrary, bank
notes usually carry some power Of le-
gal tender-they are receivable for
taxes even il not good as against
judgments. No banker would think of
paying one of his customers can
celled checks in payment Of one in
coming; but he could pay out and re-
pay time after time, his own notes
as they kept returning to him.
Let us see what difference there
could be under asset currency"
Given a bank with 100000 capital
fully paid mp in gold coin. Without
dollar of deposits to begin with. the
bank could loan that hundred thou
sand 0ess what was used in fitting ND
the bank to customers. In the very
nature of things large portion OF
that gold would find its way back in
to the bank vaults as deposits" In
course of time the deposits would
greatly exceed the banks capital. Sc
far there has been an imitation OF
credit due to customers borrowings
and deposits and the use of checks
instead of actual coin in exchanges
But
Is introduced. The banks capital has
already been converted into assets,
which is convenient term for custo.
mers' notes. 1t may now issue $780,
900 in printed bank notes and loar
them on customers notes. the bank
notes being a first lien upon the "as
sets" of the bank AS these banI
notes would carry some Of the lega
tender powers of money, they would
In fact. act exactly the same In ordi
nary business channels as II the banl
had been given without cost $50 90,
IN rold coin. And all the borrowing
loaning, depositing, checking out. etc.
! which took place with the orleina
100000 of the bank's capital coul,
be repeated with this 100000 OF asse
, notes.
: May we infer that as soon az IN,
, bank had issued It's 100000 In asse
notes Tint lts deposits would shrinl
500 000g That Il what Prof. Iaughlll
wants MS TO think. but he Is to-
shrewd To saw so In 80 many words
Unless there should he n shrlnkawe q
n dollar In deposits for every dollar q
l n40Nt rnfaa ta~u~d than thn fumulta M