A man having £1,000 in the bank could draw upon it up to the total amount. He could sign a cheque for £100 and then for £500 (making £600) and then for another £400. Supposing he put nothing in during that time, he would have exhausted the whole of what he had in his bank; he would have come to an end of what is called, in the terms of banking, his “balance.” There, you might think, was an end of his power to draw cheques. He had got back all his money, so the bank and he had nothing more to do with each other. At first, of course, that was the regular state of affairs. A man could draw out all that he had in the bank, but no more. It seems common sense. But the banks had plenty of other people’s money lying about which had not been drawn out, and much of which had not yet been invested in capital enterprises, such as mining, or what not. They would say to the man who had once put £1,000 into their hands and who had now drawn it all out: “You still want to carry on your business; but you have exhausted all the money you had with us. You will probably want to borrow some money to tide you over until the time when further sums begin to come in to you through what you sell in your business. We are prepared to lend you money out of what we have to use from other people’s deposits. You will pay a certain ‘_interest_’ upon it (that is, so much a year on each hundred pounds we lend you--say £5 a year for every £100), and you shall pay us back when you can.” The bank accompanied this offer with the right to draw further cheques to, say, another thousand pounds, which the bank would “honour”--that is, for which the bank would pay out money which did not really belong to their client but was lent to him by the bank out of other people’s balances. And this extra amount, which the bank thus allowed their client over and beyond what was his own money was, and is, called an “over-draft.” At first, before the banks would allow anybody an “over-draft” (that is, a loan), they required the borrower to give security. He had to leave with them gold or silver plate or a mortgage upon his land, so that if, in the long run, he found himself unable to pay back, the banker, could sell the security and recoup himself. But it was obviously convenient and useful when a client was in a big way of business to grant him an “over-draft” from time to time although he had no security to offer. The bank said to itself: “Here is a merchant making very large profits every year. It takes him some time to get his money in from the foreigners to whom he sells goods oversea, but he is bound to get it sooner or later. So, without asking him for any security (for perhaps he has no plate or title deeds or what not to give), it is still well worth our while to let him have an over-draft (that is, a loan) out of the other people’s money. He will pay us interest upon it, we shall make a profit, and when the foreigners pay him he will be able to pay us back.”