ABSTRACT
The world of money and banking did not stop at the introduction of transferable deposits. Insightful and entrepreneurial bankers soon realised that the metallic money sitting idle in the banks vaults could be put to profitable use. When there is sufficiently wide agreement on means of payment, the good that plays the role of a commonly accepted medium of exchange is called commodity money, and a system of payments based on this good is called a standard. Later on, bankers attracted even more business by offering paper claims for gold or silver stored in the banks vault. These claims were known as banknotes or redeemable paper money. Although paper money is often easier and safer to use than the underlying assets, in the days characterised by a metal standard people hesitated to use banknotes for payments involving large amounts, lest large-denomination banknotes be lost, damaged, or forged.
