the original check would very soon be presented for payment, when it must be paid either in notes or in coin, notes or coin to an equal amount must be provided as the ultimate means of liquidation. It is not so, however. The person to whom the check is transferred may perhaps deal with the same banker, and the check may return to the very bank on which it was drawn.
This is very often the case in country districts; if so, no payment will be called for, but a simple transfer in the banker's books will settle the transaction. If the check is paid into a different bank, it will not be presented for payment, but liquidated by set-off against other checks; and, in a state of circumstances favorable to a general extension of banking credits, a banker who has granted more credit, and has therefore more checks drawn on him, will also have more checks on other bankers paid to him, and will only have to provide notes or cash for the payment of balances; for which purpose the ordinary reserve of prudent bankers, one third of their liabilities, will abundantly suffice.
§ 5. On what the use of Credit depends.
The credit given to any one by those with whom he deals does not depend on the quantity of bank-notes or coin in circulation at the time, but on their opinion of his solvency. If any consideration of a more general character enters into their calculation, it is only in a time of pressure on the loan market, when they are not certain of being themselves able to obtain the credit on which they have been accustomed to rely; and even then, what they look to is the general state of the loan market, and not (preconceived theory apart) the amount of bank-notes. So far, as to the willingness to give credit. And the willingness of a dealer to use his credit depends on his expectations of gain, that is, on his opinion of the probable future price