A clearing-house is simply a circular railing containing as many openings as there are banks in the association; a clerk from each bank presents, in the form of a bundle of checks, at his opening, all the claims of his bank against all others, and notes the total amount; a clerk inside takes the checks, distributes each check to the clerk of the bank against whom it is drawn, and all that are left at his opening constitute the total demands of all the other banks against itself; and this sum total is set off against the given bank’s demands upon the others. The difference, for or against the bank, as the case may be, may then be settled by a check.(241) The total amount of exchanges made through the New York Clearing-House in 1883 was $40,293,165,258 (or about twenty-five times the total of our national debt in that year), and the balances paid in money were only 3.9 per cent of the exchanges.(242) For valuable explanations on this subject, consult Jevons, “Money and the Mechanism of Exchange,” Chapters XIX-XXIII. The explanation of the functions of a bank, Chapter XX, is very good. Chapter IX. Influence Of Credit On Prices. § 1. What acts on prices is Credit, in whatever shape given. Having now formed a general idea of the modes in which credit is made available as a substitute for money, we have to consider in what manner the use of these substitutes affects the value of money, or, what is equivalent, the prices of commodities. It is hardly necessary to say that the permanent value of money—the natural and average prices of commodities—are not in question here. These are determined by the cost of producing or of obtaining the precious metals. An ounce of gold or silver will in the long run exchange for as much of every other commodity as can be produced or imported at the same cost with itself. And an order, or note of hand, or bill payable at sight, for an ounce of gold, while the credit of the giver is unimpaired, is worth neither more nor less than the gold itself. It is not, however, with ultimate or average, but with immediate and temporary prices that we are now concerned. These, as we have seen, may deviate very widely from the standard of cost of production. Among other causes of fluctuation, one we have found to be the quantity of money in circulation. Other things being the same, an increase of the money in circulation raises prices; a diminution lowers them. If more money is thrown into circulation than the quantity which can circulate at a value conformable to its cost of production, the value of money, so long as the excess lasts, will remain below the standard of cost of production, and general prices will be sustained above the natural rate.