The Birmingham age-herald., 1912-12-08
Enormous Gain in Bank Deposits

As the race has progressed in all forms of social activity, the operations of banks have responded to this progress. In the first half of the last century in this coun- try exchanges of goods were performed either by primitive barter or by passing some form of money as medium of exchange from the buyer to the seller. Checks were little used. and only in the larger cities The uses of credit were very little developed. What q contrast with the business methods of today Our vast exchanges of goods-Yalueu at billions of dollars-are performed mainly by checks drawn on deposit accounts in banks. We have the gold standard, In which contracts and prices of goods are expressed, and in which our various media of exchange are directly or indirectly convertible, but gold is seldom used as a medium of exchange. We have gold and silver certificates, greenbacks and national bank notes, but the amount or the transactions in goods performed by them is insignificant as compared with those performed by checks drawn on de- posits.
 A glance over the totals of the items for all national banks from 1866 to the pres end day shows that the increased busi- ness of the country has been met, not by any significant increase of the note is- sues. but by an extraordinary increase of the deposit currency-that is checks drawn on bank deposits. While note have risen from about $30O, 000 to $70OOOO,OoO deposits have risen from $500 000,OOO to S4,- 400, ,000. .000 and the figures for banks out side the national system strengthen this showing, for they issue no notes, pro- viding only deposit currency.
 Hundred and Fifty Billion in Checks
 But this it not the real comparison; with should p pOmDarpd not dC- tual deposits, but the amount of checks drawn on these deposits. The real eX- tent of the use of the deposit currency as q medium of exchange can be approNl- mately seen in the amount of clearlnss. These figures disclose the Tact that trahs- actions to the amount of over Sloo,oO0'VO . 600 are performed annually in the United States by the deposit currency as a medium of exchange. In other words, modern business has created methods or exchanging goods by first expressing thelr worth in dollars. borrowing on tnelf value thus expressed, which accordingly appears u deposit account to the 'reult of the borrower, and on which checks are drawn to be used in paying maturing obligations. Thus, goods on the way from the producer to the consumer are coined into means of payment.
 Obviously, then, the service that banks perforIn for the community apart from
 
 loaning, is not merely that of issuing notes. Quite the contrary, the function
 of issue is less important than the func- 1 tions of discount and deposit. In lact the function of issue is not essential to i a modern bank in this country; because l bv use of the functions of discount and ] deposit 1t can create an effective aha really elastic medium of exchange in It's deposit currency This evolution out of business experience, without any heip from legislation. has appeared mainly Ill Great Britain and the United States mot
 being of importance on the ooh.lilenl' j. Our various state banking institutions do all their business-which is greater than that of national banks-without issuing notes. The fact then is known to all .hat banking can if necessary, be carried on without the issue of bank notes. Ihe supposltion, therefore, that the banking and monetary question is primarily one