REMARKS ON SPECIE RESERVES AND BANK DEPOSITS. 377 
The prominent feature of the case is a transfer, on the books of a bank, effected by 
a check, of a certain amount of deposits from the credit of one person to that of ' 
another. By procuring a discount, or having notes at maturity paid in to his order, a 
merchant, A, has $ 20,000 standing to his credit as on deposit. His notes to B and C 
for $10,000 each becoming due, he orders a transfer, through his checks, of this sum 
to their credit, thereby cancelling his own obligations. Thé deposit now stands 
credited to B and C; and in their turn, having notes to pay, they order its transfer to 
D and E. In this manner, successive transfers of this one sum, of $ 20,000 on deposit, 
may, in the course of a week, cancel indebtedness to the amount of a quarter of a 
million; for at different hours of the same banking day, A may transfer it to B, D to 
C, and C to D; though in ordinary times, certainly, the transfer is not quite so rapid. 
All this practically takes place without the exchange of a dollar i» money, whether of 
specie or paper; and as the average total deposit in our Boston banks alone is from 
eighteen to twenty millions, the mere shifting of the credit for this sum on the bank 
books may wipe out two or three hundred millions of indebtedness every week. "The rel- 
ative amount of the bank circulation or of the specie reserve has nothing to do with this 
result, any more than it has with the position of the planets; for the whole process might 
go on undisturbed, if there were not a specie dollar or a paper dollar in existence. The 
little complication that is caused by different merchants keeping their deposit accounts 
at different banks in the same city, is easily resolved. A, from the Merchants’ Bank, 
pays his note for $ 10,000 to B, at the Traders’ Bank, by transferring that sum in bank- 
bills from the former institution to the latter, A’s deposit account being debited, and 
B's credited, to that amount; then, on the same day, perhaps, C from the Traders’ pays 
his note for $10,000 to D at the Merchants’, corresponding changes of credit being 
made. Each of the two banks now holds $10,000 in bills of the other. At the 
Clearing-House, on the same day, the two banks swap back these parcels of each 
others’ bills which they have received, and the transaction is squared all round. If any 
one thinks that the bank-bills, in their specific character as bank-bills, have any effect 
on the nature of the transaction, he may learn his mistake by referring to the practice 
in the city of New York, where the checks are not paid in “bank-bills, but are merely 
certified as * good” by the teller of the bank on which they are drawn; thus certified, 
they are paid in as money at another bank; and then, at the Clearing-House, the 
banks swap checks instead of bank-bills. 
We are now prepared to understand the phenomena of an easy or a tight money 
market, and the circumstances of a commercial crisis. "The depositors at the banks 
may be divided into the debtor class and the creditor class, the former holding more 
VOL. VIII. 49 
