The Cheque System.

About the year 1772 the Banks of London discontinued the issue of promissory demand notes payable to Bearer, and thenceforward advanced to their customers by crediting in their books. To facilitate this reform they gave to such customers books containing a number of bills of exchange, drawn upon the Banker, payable to Bearer on demand. To obviate difficulties arising from the absence of any acceptance upon this new form of Bill, and to make the Cheque as like a Bank Note as possible, it was established as a custom among Bankers that possession of a customer's funds by a Banker should be equivalent to acceptance. Cheques became, therefore, a substitute for Bank Notes.

Now, according to Macleod ("Mechanism of Banking," c.vii., "Princples of Economics,") everyone who really understands the subject has declared that banking advances practically augment the capital of a country—a doctrine, by the way, which Mill considered a doctrine of robbery—and if it be true, judge how far retching must have been the benefits of the Cheque System by means of which the ordinary business of London and other Banks has been simplified with "the daily creation of millions of promises to pay."

Mulhall, in his "Dictionary of Statistics," states that in 1839 the ratio of Cheques to Notes and Coin was 93.2 as compared with 6.8, but that in 1881 the proportions were relatively 98.9 to 1.1, This is, of course, for London only.