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ch. 3 THE ANALYSIS OF BANK-MONEY 41

(iii.) Deposits and Overdrafts

We have characterised cash-deposits as furnishingthe ready command over money which is required forthe convenient transaction of current payments. Butthe analysis is complicated, in a modern community,by the fact that a cash-deposit is not the only meansof providing this facility. It is provided, equally well,by the overdraft, i.e. by an arrangement with thebank that an account may be in debit at any time upto an amount not exceeding an agreed figure, interestbeing paid not on the agreed maximum debit, but onthe actual average debit. A customer of a bank maydraw a cheque against his deposit, thus diminishinghis credit with the bank ; but he may, equally well,draw a cheque against his overdraft, thus increasinghis debit with the bank.

The settlement of indebtedness by means of book-entries at banks can, indeed, be done just as effectivelyby transferring debits from one account to another asby transferring credits from one account to another.It is just as effective to pay by increasing the debitbalance of the debtor and decreasing the debit balanceof the creditor as it is by decreasing the creditbalance of the former and increasing the credit balanceof the latter. Thus it is not in the least essential tothe efficient working of the cheque-money system thatany of those who have cheque books should also havedeposits. The resources of the bank might consistentirely of its own capital or they might be drawnfrom a class of customer, namely from those whorun fixed savings - accounts with the bank, quite

statistics are available for the active circulation, since the Joint StockBanks give no figures for the amount of notes held by them in their reserves,though there seems no reason why the figures should not be given. Inthe course of time, however, the totals of bankers’ balances published by theBank of England may, taken in conjunction with the totals of cash andbalances published by the banks, allow some approximate inferences tobe drawn.