n and regulation,
and of requiring in return for this privilege some substantial
services or payments to the government.

Sec. 11. #Banking credit as a medium of trade.# The credit which, in five
ways, banks sell (see above, section 3) serves, in most cases, the
purposes of money to their customers. This is least true of time
deposits, for the motive of the depositor in such cases is usually to
_invest_ his funds for a time rather than to keep them available as
money. However, there are many cases in which persons save for some
moderately distant use--such as the purchase of furniture, of a piano,
of a house. The safety and convenience of time deposits, combined
with the reward of a small rate of interest, cause great sums, in the
aggregate, to be deposited as _temporary_ savings, which otherwise
would be hoarded in the form of money and thus withdrawn from
circulation. In all such cases the time deposit is serving both as
an investment and as a monetary fund for future use. This is a great
economy in the use of money, for experience shows that in the savings
banks of America the average reserves of actual money kept against
deposits are only about 1-1/2 per cent. In countries where banks are
little known, the amount of actual money hoarded is therefore vastly
greater than it is in the United States where there are $5,000,000,000
of individual deposits in _regular_ savings banks, besides large sums
in time deposits in commercial banks.

Demand deposits, while not money, clearly perform the function of a
reserve of purchasing power for depositors and reduce by so much the
amount of money each must keep at hand to meet his current needs of
purchasing power. If the depositor's credit balance bears no interest,
he has no motive to keep a balance greater than he would require
of actual money, and he has the motive to spend it or invest it in
income-bearing capital whenever his balance (plus his cash in hand)
exceeds his monetary needs.[12] Thus demand deposits are often spoken
of (somewhat inaccurately) as "deposit currency," being funds at
the command of depositors which are as disposable and as active and
current for the monetary function as so much actual money would be.
It is estimated that the rate of turnover of deposits in the United
States is about 50 times a year. We may view the demand deposits
subject to check as either a substitute for money or as a means by
which the rapidity of circulation and the monetary ef