relative increase of
the price of food-products and of other necessities of daily life at
a greater rate than general prices. This aspect of the much discussed
rising cost of living must be carefully distinguished from that of
the change of the _general_ price level, and also from that of the
relatively slower change of wages. See Vol. I, pp. 437, 445-446 on
population and food supply.]

[Footnote 20: See on the labor theory of value, Vol. I, pp. 210,
228-229, 502.]

PART III

BANKING AND INSURANCE

CHAPTER 7

THE FUNCTIONS OF BANKS

Sec. 1. Nature and classes of banks. Sec. 2. Functions of banks. Sec. 3. The
essential banking function. Sec. 4. Time deposits. Sec. 5. Demand deposits.
Sec. 6. Discount and deposit. Sec. 7. Nature of banking reserves. Sec. 8. Bills
of exchange, domestic. Sec. 9. Issue of notes. Sec. 10. Divergent views of
typical bank notes. Sec. 11. Banking credit as a medium of trade. Sec. 12.
Productive services of banks. Sec. 13. Income of banks.

Sec. 1. #Nature and classes of banks.# Banks perform a variety of useful
functions in every modern community. All these functions touch in some
way upon the use of money, and banking problems always are related to
money problems. It is our purpose now to understand the general nature
and work of banks in relation to the general business activity of the
community. A bank, as one first comes to know it, is a building (or
a room in some building) in which there is a fire- and burglar-proof
safe. In this room are men receiving and paying out money and acting
as bookkeepers. Gradually one comes to understand that the bank is
perhaps not the building but the business organization that is there
performing these transactions.

In the United States there were in 1913 about 26,000 banks
reported.[1] These may be classified first according to the source
from which they derive their charters or authority to do a banking
business as: national, state, and private. The last are unchartered
and act under the general state laws governing private contracts;
in general they are unsupervised.[2] Banks may be classified also
according to the two main types of business they perform, as banks
for savings and commercial banks. Most banks do mainly a general
commercial business; some are distinctly banks for savings; but in
truth this dividing line can be less and less sharply drawn between
banks as wholes; rather the distinction must be made be