make foreign payments almost as well as coin. Token coins are not standard coins, and will not make foreign payments, but are legal tender for small sums, and may be readily exchanged for standard coin at little or no loss. Bank of England notes are not exactly coin, but can be readily turned into coin by those who dwell near the Bank of England, and are received as equivalent to coin by other persons. Cheques are not coin, but orders to receive it on demand, and are valuable in proportion to the probability that the sum will be received. Accepted bills are an engagement to pay coin at a day named; if we overlook the possible failure of the acceptor to pay them, they are, as it were, deferred money. A certificate of consolidated stock entitles the holder to an annuity, that is, to quarterly sums of money.

We get back, in short, to that with which we started. Standard legal tender coin is that in which all commercial transactions and documents are expressed, but according to infinitely various circumstances, the receipt of the money is more or less probable, more or less deferred, more or less involved in legal complexities, and also variable in amount, as interest is or is not to be received in addition. All other commercial property, mortgage deeds, preference shares and bonds, and ordinary shares, resolve themselves into more or less probability of receiving coin at future dates; and thus we pass insensibly from the golden sovereign in hand to the most flimsy chance of receiving gold which is still like the bird

in the bush.

The word cash is used with exactly the same ambiguity

as money. Originally cash meant that which was encaissé, i.e. put into the chest or till. Strictly speaking, it should consist of actual specie, and the word is used in some English banks to include only coin of the realm. But I find by actual inquiry that bank cashiers use it with every shade of meaning. Some take Bank of England notes to be cash. Good cheques upon a bank paid into that bank are evidently as good as cash. Others go so far as to include cheques upon other banks of the same town, and even country bank-notes are sometimes included in cash. The question is evidently one of degree, and cannot be settled except by the general adoption among cashiers of some one arbitrary line of definition.

In ordinary life we use a great many words with a total disregard of logical precision. Who shall decide, for instance, what objects are to be included under the names building and house? Let the reader attempt to decide which of the following objects is to be considered a house, and why ?-namely, stables, cow-houses, conservatories, sheds, lighthouses, tents, caravans, hulks, sentry-boxes, ice-houses, summer-houses, and parish pounds. The difficulty is exactly analogous to that of deciding what is money or cash.

CHAPTER XX.

BOOK CREDIT AND THE BANKING SYSTEM.

CONSIDERABLE economy of the precious metals arises, as we have seen, from passing about pieces of paper representing gold coin, instead of the coin itself. But a far more potent source of economy is what we may call the Cheque and Clearing System, whereby debts are, not so much paid, as balanced off against each other. The germ of the method is to be found in the ordinary practice of book credit. If two firms have frequent transactions with each other, alternately buying and selling, it would be an absurd waste of money to settle each debt immediately it arose, when, in a few days, a corresponding debt might arise in the opposite direction. Accordingly, it is the common practice for firms having reciprocal transactions, to debit and credit each other in their books with the debt arising out of each transaction, and only to make a cash payment when the balance happens to become inconveniently great. An insurance broker is one who acts as a middleman between the owners of ships and the underwriters who insure them in shares. He has therefore to make many small payments to underwriters, for the premiums on policies, and at intervals has to receive back the indemnity for any

insured vessel which has been lost. It is the common practice to avoid cash payments; the broker credits the underwriters with the premiums and debits him with losses, and only pays or receives the balance when large.

To represent the highly complex system of book credit which is organized by the bankers of a large kingdom, we shall have to employ a method of diagramatic notation. I will therefore remark that the simplest case or type of book-credit is represented by the formula

P— Q.

Each of the letters, P and Q, indicates a person or a firm, and the line indicates the existence of transactions between them. Only in special cases, however, will this direct balancing of accounts render the use of cash or of a more complex system unnecessary. Generally speaking, there will be a tendency for a surplus of goods to pass in one direction, so that money must pass in the opposite direction. The manufacturer sells to the wholesale dealer, the latter sells to the retailer, and the retailer to the consumer. By the intervention of the banker, however, the transactions of many different individuals, or even of many branches of trade, are brought to a focus, and a large proportion of payments can be balanced off against each other.

Single Bank System.

To obtain a clear notion of the way in which bankers help us to avoid the use of money as the medium of exchange, we must follow up the rise of the system from

the simplest case to the complete development of the complex organization now existing in the United Kingdom. Let us imagine, in the first place, that there is an isolated town having no appreciable dealings with other parts of the world, and possessing only a single bank, in which each inhabitant has deposited all his money. If any person a, then, wishes to make a payment to b, he need not go to his banker, draw out coin, and carry it to b, but may hand to b a cheque requiring the banker to pay the coins to b, if needed. But if b makes payments in the same way, he will not need to draw out any coin. It would be a mere formality for b to receive the coin due from a, and then pay it back over the counter to the credit of his account with the same banker. The payment is made by merely writing the sum of money to the debit of a's account, and to the credit of b's account. If b wishes to make another payment to c, a similar record in the banker's ledger will accomplish the business. However many other traders, d, e, etc., there may be, their mutual transactions may be settled in the same way, without their seeing a single coin. We may represent this elementary banking organization by the following diagram,

in which it is obvious that P represents the single banker, and a, b, c, d, e, his customers. The deposit