REMARKS oe SPECIE RESERVES AND BANK DEPOSITS. 379 
foster, and is powerless to relieve; and which is no more affected by the amount of the. ` 
specie reserves than by the state of the weather. : 
To the holders of this immediate bank debt, it makes no difference whether it exists 
in the form of bank-notes in their pockets or safes, or in the form of deposits in the 
bank payable on demand. Neither does it make any difference to the bank, whether, 
for the debt which it owes to its depositors, it issues its promises to pay on demand in 
what are called bank-bills, or simply has an entry on its books that such sums on 
deposit are due on demand to such and such persons. At any rate, it is for the 
owners of the deposit, and not for the bank, to determine how much of the debt due 
to them shall exist in the form of bank-notes, and how much in the form of a deposit. 
If they have more bank-notes than they need, they pay them into the bank to increase 
their deposit; if they wish for more notes, they can draw out by checks, if they see 
fit, the whole of their deposit. But as no one deems proper, in these times, to keep 
any considerable sum in bank-notes in his own possession, he will not change his 
deposit into these notes unless he has occasion to pay a debt to some other person; and 
then this person, for the sake of safety and convenience, will immediately reconvert 
them into the deposit form by paying them back, perhaps into the same bank, perhaps 
into another, so that the aggregate amount of the deposits in all the banks together 
remains at about the same point, with very little fluctuation. Strange as it may seem, 
the pressure of a severe crisis serves rather to augment, than to diminish, the aggregate 
of deposits. Many persons of moderate means, who can afford in ordinary times to 
keep a small sum in bank-bills in their own possession, are now compelled to part with 
them, in order to pay their debts or to purchase necessaries. The bank-bills thus pass 
into the hands of traders, who immediately. pay them into the banks, and thereby 
increase their deposits and somewhat diminish the active circulation.* Even if these 
traders have notes of their own to pay on the same day on which they receive the bills, 
they often prefer to lodge the bills in bank in order to increase their deposit, and then 
pay their note with a check, which transfers this deposit to the credit account of their 
creditor. 
These explanations make it sufficiently evident, that deposits not only perform all 
the functions of money, but that they are money, and almost the only form of money 
which is used in paying debts of any considerable magnitude, or in making any pay- 
ments which are large enough to be effected through the banks. In such transactions, 
the agency of bank-bills is as trifling, in comparison with that of the deposits, as that 
of silver and copper money is in proportion to that of bank-bills in the petty payments 
ji * See note to page 372. 
