INCOME DEPOSITS, BUSINESS DEPOSITS, AND SAVINGS DEPOSITS

Let us now consider bank money (or any other kind of money) from the standpoint of the depositor (or holder of it). A man holds a stock of money, whether in the form of bank deposits or in any other form, for one or other of three reasons.

He may hold it to cover the interval between the dates when he receives his personal income and the dates when he spends it. If his receipt of income and his expenditure against it were nearly simultaneous, the average amount which he would need to hold for this purpose would be inappreciable. If everyone received all his income on quarter days and paid his bills the same day, all cheques being drawn at the same moment in anticipation that the cheques paid in would be cleared just in time to meet the cheques paid out, the bank deposits required to finance the normal circle of exchange between earnings and consumption would be next door to nothing; whilst if bills were paid, not simultaneously, but within a few days, the aggregate bank deposits of private individuals, whilst standing at a high figure for a few days, would be very low on the average of the quarter. The money balances of the working classes approximate, indeed, to this situation, in so far as they receive their wages on Saturday and pay them away again the same day or shortly afterwards.