Deposits L 4,709,000

The reason is that a central bank which is governed in the capital
and descends on a country district, has much fewer modes of lending
money safely than a bank of which the partners belong to that
district, and know the men and things in it. A note issue is mainly
begun by loans; there are then no deposits to be paid. But the mass
of loans in a rural district are of small amount; the bills to be
discounted are trifling; the persons borrowing are of small means
and only local repute; the value of any property they wish to pledge
depends on local changes and local circumstances. A banker who lives
in the district, who has always lived there, whose whole mind is a
history of the district and its changes, is easily able to lend
money safely there. But a manager deputed by a single central
establishment does so with difficulty. The worst people will come to
him and ask for loans. His ignorance is a mark for all the shrewd
and crafty people thereabouts. He will have endless difficulties in
establishing the circulation of the distant bank, because he has not
the local knowledge which alone can teach him how to issue that
circulation with safety.

A system of note issues is therefore the best introduction to a
large system of deposit banking. As yet, historically, it is the
only introduction: no nation as yet has arrived at a great system of
deposit banking without going first through the preliminary stage of
note issue, and of such note issues the quickest and most efficient
in this way is one made by individuals resident in the district, and
conversant with it.

And this explains why deposit banking is so rare. Such a note issue