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By Root 1404 0

place of payment in money. [6] Since it was the general custom to make payments in this way, anybody could accept a bill that still had some time to run even when he wanted cash immediately; for it was possible to reckon with a fair amount of certainty that those to whom payments had to be made would also accept a bill not yet mature in place of ready money. It is perhaps hardly necessary to add that in all such transactions the element of time was of course taken into consideration, and discount consequently allowed for. Now it is true that this might increase the technical difficulties in handling the circulatory apparatus, which was already not an easy matter to deal with for other reasons, such, for example, as the different amounts of the bills. But, on the other hand, it offered a profit to any holder who did not pass the bill on immediately but kept it for a while, even if only for a very short while, in his portfolio. Used in this way, the bill was able to make up to a certain extent for the lack of fiduciary media. Even though it might not be due for a long time ahead, the holder could regard it as liquid, because he could pass it on at any time.

Despite this, bills of this sort were not fiduciary media in the sense in which notes or deposits are. They lack the characteristic features and properties which enabled the fiduciary medium, the indefinitely augmentable product of the arbitrary issuing activity of the banks, to become a complete substitute for money for business purposes. It is true that the cooperation of issuers and acceptors can give the circulation of bills the capacity of unlimited augmentation and unlimited lease of life through the agency of bill jobbing and regular prolongation, even if technical difficulties alone are sufficient to prevent the bills from ever being used in business to the same extent as money substitutes. But every increase in the amount of bills in circulation makes negotiation of individual bills more difficult. It reduces the resources of the market. In fact, the holder of a bill, as distinct from the holder of a note or of a current account, is a creditor A person who accepts a bill must examine the standing of the previous endorser, and also that of the issuer and the others who are liable for the bill, but in particular the primary acceptor Whoever passes a bill on, in endorsing it undertakes responsibility for the payment of the amount of the bill. The endorsement of the bill is in fact not a final payment; it liberates the debtor to a limited degree only. If the bill is not paid then his liability is revived in a greater degree than before. But the peculiar rigor of the law relating to its enforcement and the responsibility of its signatories could not be eliminated, for it was these very characteristics alone that had made the bill a suitable instrument for the cession, in place of money payment, of unmatured claims for which the common-law provisions regarding indebtedness are little suited. To whatever extent the custom of issuing or endorsing bills in place of payment in money may have established itself, every single payment that was made in this way nevertheless retained the character of a credit transaction. It was necessary in each individual case for the parties to the transaction to begin by coming to a special agreement as to the present price to be paid for the claim that would not fall due until some future time; if the amount of bills in circulation increased greatly, or if doubts happened to arise concerning the solidity of the position of any of the signatories, then it became more difficult to place the bill even on fairly tolerable terms. Issuer and acceptor had then in addition to make arrangements for covering the bill before it fell due, even if only by negotiating a prolongation bill. There is none of this in the case of fiduciary media, which pass like money from hand to hand without any sort of friction.

The modern organization of the payment system makes use of institutions for systematically arranging the settlement of claims by offsetting processes.