at present. And it is evident, that every four dollars must represent the same value as is now represented by six dollars.

§ 905. Now suppose that the quantity of money remain the same, and that the national products be diminished one third. As the amount of exchanges would, in this case, be one third less than before, and as the 60 millions would be used in the business of exchange, every six dollars would represent no greater value of property than four dollars do at the present time. If the present price of flour is four dollars, it would, in the case supposed, be six dollars; that is, every six dollars would represent as many barrels of flour as every four dollars do now.

§ 906. Hence we learn how to account for variations in prices. There are always circumstances arising, which affect either the amount of exchanges, or the quantity of the circulating medium. If both increase or diminish in the same proportion, prices will not change in consequence. But when, as above supposed, the quantity of money used for purposes of exchange is reduced, less must be given for products bought with it; and we therefore say, prices are fallen. On the other hand, when the amount of products to be sold is diminished, or the quantity of money is increased, more money is paid for the same products; and in this case we say, prices are risen.

$907. Hence we learn, also, the causes of the abun. dance and scarcity of money. Money may be said to be abundant, when there is more than enough to effect the necessary exchanges of the country; and scarce, when the quantity is insufficient for this purpose. When a nation buys more of other nations than it sells to them, it must pay the difference in money; and thus a part of the money having left the country, the amount remaining may not be sufficient for the purpose of exchange. And on the other hand, when a nation exports more than it imports, and re

§ 905. Give another example, in which the products instead of the money are diminished. § 906. How do you account for the fluctuaations in prices? § 907. When is money properly considered scarce, and when abundant? What will produce a scarcity, and what an abundance of money?

reives the balance in money, there may be more than the business of exchange requires. In the former case may would be considered scarce; in the latter, abundant. But there may be other causes, than the importation and exportation of money, for its abundance and scarcity.

CHAPTER XVI.

e Nature and Utility of Banks.—Banks of Deposit and Exchange.

§ 908. THE first institution of banks, it is said, was in Italy, where the Lombard Jews kept benches in the market places, for the exchange of money and bills; and banco being the Italian name for bench, banks took their title from this word. The first banks are supposed to have been only banks of deposit, places where persons deposited or laid up their money for safe keeping, to be ready when called tor.

§ 909. But it may be asked of what use banks of this kind are; and whether a man's money may be kept in a bank more safely than when it is in his own keeping. Deposits of money in a hundred different places, would afford more frequent opportunities for robbery, than when made in one place. And nearly the same care and precaution would be necessary to secure one thousand dollars in each of the one hundred different places, as to secure one hundred thousand in a single place. Money may therefore be kept more safely, and perhaps more cheaply, by depositing it in a bank.

§ 910. But the utility of banks of this kind, consists, chiefly, in their being employed in the business of exchange. In this respect, they effect a great saving of labor. This is done upon the principle of a division of labor. In large

§ 908. What kind of banks are the first said to have been? § 909. Of what benefit are banks as institutions of deposit? 6910. How

commercial towns, great sums of money must, of necessity, pass from one merchant to another. And the time and labor necessary to count out all these large sums of money, and to transport them from one place to another, would be very great. But much of this time and this labor may be saved, by each one's depositing his money in a bank, and by their uniting in employing a banker. And whenever any one of them having money in the bank, wishes to pay another, he may give him an order or check upon the banker for the amount to be paid.

§ 911. But it is obvious, that, if money must be counted out on the presentation of every order or check, a large number of persons must be employed for the purpose; and the expense of making exchanges would still be very great. But the banker may effect the saving of much time and labor, by keeping an account with every person making deposits in the bank. If one of the customers of the bank, has occasion to pay to another one thousand dollars, he may give his creditor an order on the banker for this amount. But the creditor may not want the money for immediate use; he therefore chooses to let it remain in the bank, until he may have occasion for it. In this case, the labor of counting the money, which may consist of many hundred pieces, may be saved, by simply charging one thousand dollars to the drawer of the order, and crediting him to whom it is given with the same amount.

§ 912. Now if we consider that most of the merchants conduct their moneyed transactions with each other through banks, we shall readily perceive the amount of time and labor saved by means of banking to be immense. For it may be that the person, in the case above supposed, to whom the one thousand dollars stands credited, may wish to pay the same, or nearly the same sum, to another creditor of the bank, and this third creditor to a fourth; and in the same manner a thousand dollars may, in effect, be transferred an indefinite number of times from one creditor of the bank to another, by a few moments' labor in writing.

are they useful in the business of exchange? § 911. How may much of the time and labor of counting money be saved? § 912. How often may a certain sum of money in a bank pay a debt without being

§ 913. Banks are useful in remitting payments to distant places. The transportation of large sums in specie from one part of the country to another would be expensive; and it would also expose persons to the danger of robbery. But the expense and risk of thus conveying money through the country, may be avoided by the agency of banks. Consider for a moment the vast amount of trade between the large cities on the Atlantic, and the other parts of the United States; and it will at once appear, how convenient banks are to merchants and other persons who are obliged to send money to distant places.

§ 914. But let us see how the operation of transmitting money by means of banks is performed. A merchant in New Orleans, wishing to pay his creditor in New York ten thousand dollars, deposits the money in a bank, takes from the cashier a draft for that amount on the cashier of a bank in New York, and sends the draft by mail to his creditor there, who presents the draft, and receives the money; and the cashier charges the amount to the bank in New Orleans. Thus the payment of a large sum is made, without the expense to the debtor of carrying it himself, or the risk of intrusting so much money to strangers to be carried.

§ 915. It may here be asked, how the bank in New Or leans avoids the expense and risk of sending the money to New York. Now we must remember that, although merchants in New Orleans buy many goods in New York, merchants in the latter place receive large quantities of cotton, sugar, and molasses from the former; and many remittances are to be made from persons in New York through the banks there, to persons in New Orleans. banks, then, in both places keep accounts with each other, and, at stated times, settle their accounts, when, perhaps, the balance due to either will be very small; and the transportation of but little money will be required.

The

§ 916. Thus payments may be made from one country

counted? 913. What is the advantage of remitting payments through the medium of banks? § 914. Describe the manner in which remittances are made through banks? § 915. By what means

the transportation of money by the banks from place to place saved? § 916 What is the order called which requests the vavment

to another. The orders requesting such payments, are called bills of exchange. A bill of exchange is an order drawn on a person requesting him to pay to some person designated by the drawer. The nature and effect of a bill of exchange we have briefly described in another place. (§ 676.) But as bills of exchange are at present so exten. sively used in commercial transactions, a more particular description of their use as the representatives of money, properly belongs to this place.

917. We have seen how the moneyed transactions be tween different parts of the same country may be facilitated by the transmission of orders or drafts, instead of money. The conveniences of this system, in conducting these transactions between persons in different countries, are equally great. For, besides the difficulties that attend the transportation of money from place to place in the same country, its transportation to foreign countries is attended with the additional danger of loss by shipwreck.

§ 918. A, residing in New York, and owing B in London ten thousand dollars, may make a remittance of that amount in this manner: C, also residing in New York, may have ten thousand dollars due him in London, being the avails of produce sent from this country and sold there. A, wishing to avoid the expense and risk of sending the money across the Atlantic, pays ten thousand dollars to C, and takes his order on the banker in London, with whom the money is deposit. ed, for the same amount, to be paid to B.

§ 919. These bills may be made to perform the office of money. A, going from New York to London to buy goods, wants ten thousand dollars. B, also residing in New York, has ten thousand dollars owing to him in London, payable in six months; and, preferring to receive payment at home, he draws an order on his debtor in London, to be paid in six months from date, for which A gives his obligation to B, payable at the same time. A proceeds with his bill of ex. change to London, where, the responsibilty of the drawee

of money in another country? § 917. What is the advantage of this mode of making payments to foreign countries as from place to place in the same country? 918. Show, by example, the manner of ma. king a remittance abroad. 6919. How may a foreign bill of exchang