value than the amount
originally lent to them, but assists the business development of the
country by setting on foot and maintaining enterprises of a profitable
description. It is possible that some part may be employed in loans
required through extravagance on the part of the borrower, but these can
only be a small proportion of the whole, as it is only through reproductive
industry that the capital advanced by a banker can really be replaced. A
loan sometimes, it is true, is repaid from the proceeds of the sale of a
security, but this only means a transfer of capital from one hand to
another; money that is not transferred in this way must be made by its
owner. Granted that the security is complete, there is only one absolute
rule as to loans if a bank desires to conduct its business on safe lines,
that the advance should not be of fixed but of floating capital. Nothing
seems simpler than such a business, but no business requires closer
attention or more strong sense and prudence in its conduct. In other ways
also, besides making loans, a well-conducted bank is of much service to the
business prosperity of a country, as for example by providing facilities
for the ready transmission of money from those who owe money to those to
whom it is due. This is particularly obvious when the debtor lives in one
town or district and the creditor in another at a considerable distance,
but the convenience is very great under any circumstances. Where an easy
method of transmission of cash does not exist, we become aware that a "rate
of exchange" exists as truly between one place and another in the same
country as between two places in different countries. The assistance that
banking gives to the industries of a community, apart from these
facilities, is constant and most valuable.

[Sidenote: Historical development.]

With these preliminary remarks on some main features of the business, we
may pass on to a sketch of the history of modern banking. Banks in Europe
from the 16th century onwards may be divided into two classes, the one
described as "exchange banks," the other as "banks of deposits." These last
are banks which, besides receiving deposits, make loans, and thus associate
themselves with the trade and general industries of a country. The exchange
banks included in former years institutions like the Bank of Hamburg and
the Bank of Amsterdam. These were established to deal with foreign exchange
and to facilitate trade with ot