42

A TKEATISE ON MONEY

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distinct from the customers who run cash-accounts ;in which case the cash-accounts would consist entirelyof debit-accounts {i.e. overdrafts) and not at all ofcredit-accounts {i.e. cash-deposits).

In Great Britain in particular—I do not venture tospeak with confidence as to banking practices else-where—there has been a growing practice of econo-mising the amount of the cash-deposits by developingthe technique of the overdraft . 1 In the case of largeand well-organised firms, the tendency is for theircash-accounts to tend on the average (reckoning cash-deposits plus and overdrafts minus) towards zero, or,at any rate, a very low figure, partly by the use ofthe overdraft and partly by investing temporary sur-plus balances in bills or in loans to the money market.If the minimum balances, maintained in pursuance ofan agreement for the remuneration of the bank, besubtracted, the average cash-accounts of big business(reckoned, as above) bear a very small proportion tothe volume of the cheques passing through theaccounts. But private individuals also are making anever-increasing use of overdraft facilities.

The reader must notice that it is not the amountof the customer’s used overdraft appearing on theassets side of the bank’s balance-sheet, but the amountof his unused overdraft, which does not (at present)appear anywhere at all in a bank’s statement of itsassets and liabilities, which corresponds to a cash-deposit ;•—so that it is the total of the cash-depositsand the unused overdraft facilities outstanding whichtogether make up the total of Cash Facilities. Pro-perly speaking, unused overdraft facilities—since theyrepresent a liability of the bank—ought, in the sameway as acceptances, to appear on both sides of theaccount. But at present this is not so, with the resultthat there exists in unused overdraft facilities a form

1 The original home of the overdraft was, I think, Scotland . It hasnever won much favour in the United States .