lars, must be made by persons in and near Chicago to
those in and near New York, while, at the same time, equally large
sums are due from New York to Chicago. The wasteful process of
shipping these sums back and forth is avoided by the cancellation of
indebtedness between the two localities. It has been the practice for
each small bank to keep a part of its legal reserves in correspondent
banks in one or more of the larger cities on which it draws bills
of exchange for its customers and to which in turn it remits for
collection drafts and checks which it has received. From time to
time, as balances of accounts increase on the one side or the other,
shipments of actual money become necessary, but these are only a small
fraction of the total amount of the bills of exchange. Similarly, the
settlement of accounts between any two localities can be made by
the shipment of comparatively small sums of money. Under the Federal
Reserve Act the reserve banks are in various ways assuming the
functions of the correspondent banks.

The wider use and acceptance of individual checks at long distances
from the banks upon which they are drawn limit by so much the
proportion of special bills of exchange drawn by the banks themselves.
Domestic exchange involves just the same principles as foreign
exchange of funds, except that in the latter, usually, two different
units of standard money are used. In connection with the discussion of
foreign trade below, foreign exchanges will be explained and further
light will be thrown upon the adjustment of the money supplies and
levels of prices of the various sections of a single country as well
as between different countries.

Sec. 9. #Issue of notes#. The issue of bank notes as a mode of lending a
bank's credit calls for consideration here. Yet it must be observed
at once that comparatively few banks in the world have now the legal
right to issue their own notes. In some cases the right has been
granted as a monopoly to certain banks in return for specified
payments and services. But in general the function of bank note
issue has come to be treated as so closely connected with that of
the coinage and regulation of the standard money that it has been
increasingly limited in each country to a central national bank,
or group of banks, which is in many respects practically if not
technically an organ of the government. This public nature of bank
note issues has been strikingly evident in Russia, Engl