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Money in the Western Legal TraditionMiddle Ages to Bretton Woods$
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David Fox and Wolfgang Ernst

Print publication date: 2016

Print ISBN-13: 9780198704744

Published to Oxford Scholarship Online: April 2016

DOI: 10.1093/acprof:oso/9780198704744.001.0001

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Deposit Banking and the Use of Monetary Instruments

Deposit Banking and the Use of Monetary Instruments

(p.489) 23 Deposit Banking and the Use of Monetary Instruments
Money in the Western Legal Tradition

Helmut Siekmann

Oxford University Press

This chapter analyses the development of deposit banking through banknotes and the use of different monetary instruments in banking. It outlines the evolution of paper money in the Western world from its origin as deposit receipts. The fifteenth century saw the beginning of the use of financial instruments other than coins for monetary functions. Two basic forms of notes can be distinguished: ‘drafts’, which were written receipts for coins or precious metals (usually gold or silver) held in safe custody accounts, and ‘bills’, which certified the promise to deliver coins or precious metals at a specified date or ‘on demand’. However, as more banks issued promissory notes, the term ‘banknote’ came into use for all payment instruments issued by a bank other than coins. The appearance of banknotes paved the way for a new monetary system. Money was now being created by market forces and not by a sovereign power.

Keywords:   deposit banking, banknotes, monetary instruments, banking, paper money, deposit receipts, drafts, bills, promissory notes, monetary system

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