Discussion — Reading 3: Charles Dunbar

This session covers Reading 3: The Check System, a chapter from Chapters on the Theory and History of Banking by Charles Dunbar

The reading is a description of the checking system in the US in the late 19th century. It reinforces what we covered in Lecture 5 by describing the "decentralized" check-based payment system of the United States in the late 19th century. Just like the lecture, Dunbar starts with the "one big bank" example and builds toward multiple banks coordinated through a clearinghouse.

*[A] payment for goods or of a debt is effected by a simple transfer of a right to demand money from the bank; and so too if the recipient of the check gives it in payment to some third person, and he to a fourth, and so on. To this extent the check is plainly made a substitute for the sum of money for which it calls.*

In the 1890's we transferred bank deposits using checks. Today, we transfer bank deposits using debit cards or PayPal. But it's the same basic principle.

Study Questions

Money and Banking 2022 INET ED Master Thread