But we all know that the sovereigns are not actually there. Does the drawing of a cheque create credit? Or is the drawing of a cheque merely the evidence that we actually have what we profess to have? In drawing a cheque we do what the banks do when they grant a loan. When we pay for a suit with a cheque we receive the suit in exchange. When a banker draws a cheque and receives Consols or bills of discount, he really buys the Consols and buys the bills. But some contend that he buys the Consols with nothing. So it can be contended that we bought our suit with nothing in the event of the bank smashing. The cheques we draw become currency, become, in the essential meaning of the word, money. They are not legal tender; but legal tender is only a small portion of the nation’s currency, that portion arbitrarily selected by the legislature for a specific, but important purpose. That that selection is wise is a view not unanimously held by economic thinkers. But it is a selection that must control the policy of bank management to a paramount extent. This does not exclude, however, the scope and expediency of legislative reform. We cannot draw cheques against our deposit accounts. But though we can withdraw these deposits the bank can insist, as I have said, on certain notice. This notice, however, is never insisted upon. It would be injudicious to insist upon it. It would be injudicious because it would give rise to the suspicion that the bank was unsoundly managed and in a bad way. And suspicion is the surest way towards the destruction of a bank. CHAPTER III THE CURRENCY OF CUSTOM A simple illustration has been given of how we entrust our money with a bank and how a bank employs it. Let us in our next step analyse a typical balance sheet of a big bank, for it will help us to get a clearer notion of the functions of a bank and of the character and complexity of the money market. _Dr._ £ _s._ _d._ £ _s._ _d._ TO CAPITAL AUTHORISED 30,000,000 0 0 To Capital ISSUED 3,000,000 0 0 To Reserve Fund 1,125,000 0 0 To Amount due by the bank on Current, Deposit, and other Accounts 37,583,237 8 11 To Acceptances on account of customers 3,153,328 7 11 To Rebate of Interest on Bills discounted, not yet due, carried to new account 53,807 1 3 To Amount of Nett Profit 225,676 10 1 --------------------- £45,141,049 8 2 =====================