170.  The various manufactured commodities, and the various property possessed by the inhabitants of a country, all become measured by the standard thus introduced.  But it must be observed that the value of gold is itself variable; and that, like all other commodities, its price depends on the extent of the demand compared with that of the supply.

171.  As transactions multiply, and the sums to be paid become large, the actual transfer of the precious metals from one individual to another is attended with inconvenience and difficulty, and it is found more convenient to substitute written promises to pay on demand specified quantities of gold.  These promises are called bank-notes; and when the person or body issuing them is known to be able to fulfil the pledge, the note will circulate for a long time before it gets into the hands of any person who may wish to make use of the gold it represents.  These paper representatives supply the place of a certain quantity of gold; and, being much cheaper, a large portion of the expense of a metallic circulation is saved by their employment.

172.  As commercial transactions increase, the transfer of bank-notes is, to a considerable extent, superseded by shorter processes.  Banks are established, into which all monies are paid, and out of which all payments are made, through written orders called checks, drawn by those who keep accounts with them.  In a large capital, each bank receives, through its numerous customers, checks payable by every other; and if clerks were sent round to receive the amount in banknotes due from each, it would occupy much time, and be attended with some risk and inconvenience.

173.  Clearing house.  In London this is avoided, by making all checks paid in to bankers pass through what is technically called The Clearing House.  In a large room in Lombard Street, about thirty clerks from the several London bankers take their stations, in alphabetical order, at desks placed round the room; each having a small open box by his side, and the name of the firm to which he belongs in large characters on the wall above his head.  From time to time other clerks from every house enter the room, and, passing along, drop into the box the checks due by that firm to the house from which this distributor is sent.  The clerk at the table enters the amount of the several checks in a book previously prepared, under the name of the bank to which they are respectively due.

Four o’clock in the afternoon is the latest hour to which the boxes are open to receive checks; and at a few minutes before that time, some signs of increased activity begin to appear in this previously quiet and business-like scene.  Numerous clerks then arrive, anxious to distribute, up to the latest possible moment, the checks which have been paid into the houses of their employers.