The Twin Falls times. [volume] (Twin Falls, Idaho) 1905-1916, 1916-04-20
y . + n =
TALKS ON THRIFT +
= T. a. s. = =
TALKS ON BANKING.
HOW THE BANK @MAKES" MONEY.


1t would seem that after the bank |
takes your money, protects it, pays
it back on demand or as you order,
lends you money, discounts your
neighbor's note for you, it would have !
nothing else to offer in your behalf |
But it hast makes" money for you,
and incidentally makes money for it
self.
When you see the president or the
cashier of bank signing his name to
a row of four crisp new bills (they
always come in sheets Of FOUR you
may wonder what he is doing, and
what is behind it all. We will show
you by a simple illustration. Let us
suppose you want to borrow thou
sand dollars and offer your note to
your banker. He knows you, knows
that you will pay, and wants to ac-
comomdate you He looks at his
books and says: Il can't spare the
money. The law says l must have Is
cents out of every dollar l owe my
depositors in cash, or where | can get
it on demand: and l have just what
| the law requires. If ! give you credit
for the note and let you check against
| it, ! increase my debts and make my
condition worse, for if l do not pay
you in cash l must stand ready to
do So"
But being a resourceful banker, and
| knowing how he asks you to wait
minute while he goes to his strong
box He finds a government bond
which he bought year ago when he
had plenty of money, for cash. and
comes back smiling and says: Very
we'll, in three days you can have your
money. l will turn this bond into
bank notes for you" So he sends the
bond to Washington, and in return
the government sends him 200 crisp,
new, IS bills, to be signed by two
officers of the bank, cut and handed
out to you.
The government keeps the bond as
security that he will redeem the notes
in lawful money" on demand-that
is, pay greenbacks or gold for them if
demanded (but this is seldom done),
pays him interest on the bond and
you pay him interest on your note
for the use of his notes, and both are
!. satisfied.
You see, by this proposition he has
turned your note into bank notes,
with himself behind it and the gov
eminent behind him. Your promise
wouldn't go very far from home, these
promises will. Everybody knows
. them. They are money and circu-
late as cash.
Now, what has the banker done by
this process? He has furnished the
community as well as you with cir
culating medium, handy to carry
cheap to create, and satisfactory t
z all. He has taken your credit an6
turned it into bank credit. He makes
money and you take the money he has
Z made and make some money for your
( self. 1t is very simple proposition
understood by few, but practiced b.
Z many. If you don't fully UNDERSTAND
I it, ask your banker to tell you NOR
about it. This feature of banking
Z however, is performed in this countr
4 only by banks under control OF tn
! federal government, namely, the ma
\ tional banks and federal resery
i banks, but Is a common banking prac
Z tice the world over, differing In forI
X but not In substance, 1t being UNI
4 versal function of the bank to tur
J credit which is unknown into thf
Y which Is known and will therefore }
4 freely taken, and bank note credit
J the most common and useful form.