BANK DEPOSITS AND ADVANCES

Wanganui Chronicle, Volume 79, Issue 182, 6 August 1935, Page 6

BANK DEPOSITS AND ADVANCES

811, Your leading article on “Bank Deposits and Advances’- m xuesdav s ‘ • enronicß ’' will surprise several htudenls of banking principles. You appear to support mu popular illusion taut bailies leiiu deposits. . io use your rvductio ad ausuruuni method ot reasoning let us suppose that you me 1 u" ii so that A uepvisits XiUUO in Uc ba.iA.’ iiie bank leuds Hint to B, whu I pavs it 1" ' . "ho <lupo;-its it m the i oaiik. liic muiK then has 12000 ot 1 i iiauiiitiuo an.« only tIUUO oi assets trc-ni winch, io draw interest un x-OJO ami it is bankrupi. \v hat is Ih. titn bankii g , I think the LolloV'mg exaiuplc will illustrate it: Suppose tiia-t A uus a larni bill he needs a team ut nurses and a plough v. hich I’ is willing to sell lor ~2t'U. .But A has no uioui v. B might accept A s 1.U.1 . and receive inteicst on lua debt. But A. Y 1.U.1.. wouki have a negotiable value liimted iu those who anew A and knew the value c-f fit, farm, and B would preler an 1.0. U. with wide negotiability. \lso B would rather nut nave the possible job of dunning A lor interest, a mere tore applies to the banker for a luau. Now, mu banker hasn't got 2UL* so'civigus, but he has the reputation vi being a prudent judge of Die value ut properl v and u careful cxaiuincr and registrar of titles to wealth; and he agrees that if A will give him a mortgage over A s land he, the banker, will accept, the liability to pay B. In effect, B prefers the banker’s 1.0. l .. in the form of a credit in the bank books,