Page:Bankers and Credit (1924).pdf/39

 them at a profit; or a merchant, who borrows to buy commodities; or a manufacturer, who borrows to pay for raw material; or an ordinary individual, who borrows because he wants to buy an estate and has not yet provided, by the sale of securities or otherwise, the money that he needs for his purchase—whatever the reason for the purpose of the loan may be, the result will be the same. The borrower gets from his bank the right to draw the sum in question, say £20,000. He pays this £20,000 to the seller, to whom he owes money for bills of exchange or securities or raw material, or whatever it may be, and the seller pays the cheque into his own bank. The cheque goes through the clearing house and transfers £20,000 from the credit at the Bank of England of the paying bank to that of the receiving bank. The borrower's bank holds £20,000 less of cash at the Bank of England and £20,000 more in the shape of a loan to customers. The total of its balance sheet is unaltered and there has been a change, almost negligible in the vast total of its whole figures, in the nature of its assets. The seller's bank, on the other hand, has added £20,000 to its balance at the Bank of England and on the other side of its balance sheet the seller's account has been