B starts a banking business, but upon an entirely different plan, or basis. He takes no deposits in the ordinary way, but if anyone comes to him desiring to borrow, or sell him promissory notes, he will lend his credit, and take all good notes and checks offered him, and in exchange give his own notes in such denominations and form as are suitable for circulation as currency, until he has exchanged $100,000 of his notes for $100,000 of the notes of the same people who have borrowed the $100,000 from the other banker. Now, this is not a strange thing for B to do, because the bankers of Scotland did this for one hundred and forty years before they took deposits subject to check. Now, let us return to A and B. As a matter of course, some of these notes of B will be deposited in A's bank, and B will have taken in some of the checks on A's bank. At 10 o'clock each morning A and B meet; A presents B's notes for redemption and B presents checks upon A for redemption, and the one pays the other the difference. Sometimes the balance is due to A and sometimes it is due to B. At the end of six months or a year, it will be at a stand off. A has paid B as much as B has paid A. Now, can anyone of you men here tell me what difference there is in the transactions of A and B, except this, that the notes of B amounting to $100,000 payable to bearer on demand are outstanding, while the deposits at A's bank amounting to $100,000 and payable to order are outstanding. Those notes of B's amounting to $100,000 are a bank Credit Currency. They are issued against, or upon B's credit. They pass from person to person, from hand to hand and are currently redeemed every day. While the deposits at A's bank amounting to $100,000 are against A's credit, and the checks against them are redeemed every day. It is perfectly evident that if the capital of A and B combined is ample to meet the business requirements of that town, the form of credit offered by them will also adapt itself to the peculiar needs of each citizen. In other words, on a limited scale, you have a perfect banking system in that country town; bank credit being given to each person in precisely the form he wants it. Now, let us go a step further. Let A and B unite and incorporate the A-B Bank with a paid-up capital of $100,000, each man paying in $50,000 and the bank, so organized, taking over the liabilities. The one bank could then furnish the people of that community their deposit, or order credit, and their current credit, or currency at exactly the same cost to the bank; for the amount of the reserve will determine the cost of the note credit as well as the book credit. The bank being a country bank will carry a 15 per cent reserve, or $15,000 cash, to protect the deposit of $100,000 subject to check, and also a 15 per cent reserve, or $15,000 cash, to protect the $100,000 of demand notes outstanding. The actual cost to the bank in each case is 6 per cent on the reserve of $15,000 or $900 per annum.