The daily telegram. [volume] (Clarksburg, W. Va.) 1901-1926, 1916-03-25

business rs a whole moves on credit,
the form depending upon The customs
Characteristic OF that peculiar business.
The most common form OF credit Is the
book account. where goods are sold
and charged" to the purchaser. When
you go into the BrOcer's and tell him
to charge It," you are opening credit
with him in the form OF book Rc-
count. This ~ common to all retailing
transactions. But In the larger deal
Eings. the credit Is in the form of u
pr0missury note. which is merely n
written promise 10 pay sum certain,
In money, to designated person, firm
or corporation. at stipulated time.
Hundreds of thousands of these notes
are made every day. They are given,
merchant TO merchant. in payment of
debts resulting from the sale of goods,
and while they settle the debt must
themselves he paid in money. in order
that the obligation may be finally dis
charged, for promise never liquidates
debt.
II these promises could be treated as
money and passed from hand to hand.
they might answer very we'll. but they
are OF non-unlform denomination, their
goodness is a matter not commonly
known, and even though the maker
might be "as good as the government"
few know it and few would take the
risk.
And II the holder could walt until
maturity. he would get cash from the
promiser. But he does not want to
wait that long-he wants to turn his
evidence Of debt into money at once:
for with money-real money-he can
get better terms. and for certain pur-
poses, such as paying labnrers. he
must use cash. There must, therefore.
be some medium through which he
can turn this promise into money be-
fore 1T is duG-for n prlce-and that
medium Is the bank The process of
doing this Is called discounting, which
| in other words means buying the pap
or. A simple illustration will explain.
Suppose A sells p a bill Of goods on
three months credit. A does not want
10 wait while B sells the goods and
gets the money to pay him. and there
! fore offers 10 take BIS note for the
amount. but tho note is not money,
and If A would Use the money. he must
| find someone who will give him money
! for 1t. He might find someone who,
for the hope Of gain. would advance
the money, but the logical place to get
this done is the bank. for the bank
always has money. II knows men and
their ability to keep their promises,
and can Judge the quality of the risk.
| a therefore offers the note to his bank
err. who says in substance: IL think
b is good for this amount. If you will
endOrse-promtse to pay if he does not
II will buy that paper evidence OF
debt from ynu." Let us say 1t is for
800, due in three months. The banker
knows that at the end of three months
he will get the 500. and so gives A
$3.50 for it, the S1.50 being interest
on the money for that time at six per
cent. Ordinarily the banker would moi
give A the cash, but credit his account
with the privilege Of checking against
1t, which Is virtually the same thing.
Now, what Is the result? A sold his
goods and got his money at once. T
had three months to sell the goods tc
get the money to pay the note when
the banker presented 1t at maturity
A could use the $3.50 to buy more
goods to sell to c. and the bank has
made profit OF $3.50 for taking the
risk. That Is what banks are for
10 take risks, to know men, to heir
business and make profits for itself
And. this 1t does to very marked de,
gree. Wo could not do business very
well without this help. 1t is one of the
Indispensable adjuncts of business
The promises of business men held il
the national banks Of the country alone
amount to over three billion dollars