Monday, November 24, 2008

More About Money

I haven't read them in awhile, but I have several collections of essays by Robert Benchley, the newspaper columnist and humorist from the 1920's and 30's. In a book called The Early Worm (Harper, 1927), his essay, A Plan to Stabilize the Franc, contained this tidbit:
It is much simpler for a nation to go on a budget than for a private family, because a nation never uses real money anyway. A nation says "Here are twenty million francs," or "Give me a hundred million dollars' worth of chips," and, if you push right up close to the counter and ask to see it, what do you find? A couple of theater-ticket stubs, a right-hand glove, and a piece of paper saying, "I.O.U. $100,000,000. . . . A. Mellon." There probably isn't $125 in actual cash in the whole United States Treasury at this very minute. And $45 of that belongs by rights to me, on account of the Government having disallowed my deduction for hotel expenses in my 1925 income tax."
Does that sound familiar? Here's more, from the same essay:
This system of dealing in dream-dollars, which seems to be the special prerogative of governments and large corporations, is called "Credit," and a pretty how-do-you-do it is, too. "Credit," as applied to you and me, means that we have until the fifteenth of the month to dig up the actual gold ore with which to pay our bills. But for a large corporation or a nation it means that, so long as the Treasurer can sign his name, they are on Easy Street. I sign a check, in a kidding way, and give it to Altmeyer's Meat Market. And what does Altmeyer do? Right away he presents it at my bank! And then hell breaks loose. Telephone-calls, registered letters, night-sweats - you'd think the whole world had gone money-mad. And I have to go and get a printing-press and print him his money in half a day.

But let Mr. Mellon sign a check for a billion dollars and no one even looks at the signature to see if it is genuine.
What amazes me about this is how little has changed in the 81 years since Benchley wrote that...


  1. Money float is fun, too.

    I like it when banks tell you that they can't credit a deposit by check for 5-14 days. The truth is, in this computer age, the teller at the window can look at your account, and the account of the person who wrote the check your presenting for deposit, as you stand at the counter!

    Banks still use the old 10 day float principle to have access to free investment money. Any idea what the 24 hour rolling interest is on a million dollars? It all adds up.

    So I watch for the look on the teller's face. Does what she see in the other person's account please her, or worry her.

    Unfortunately, given what banks charge for bad checks, they're not motivated to tell what they actually see.

    I deposited an 18,000 check in my Wells Fargo account in Santa Cruz one day. Two days later my banker calls me up to inform me that the check bounced. "Why did you even present it, if you knew the guy's balance was insufficient to cover it?" I ask. "He might have made a deposit the next day to cover it," he replies, but obviously he didn't. "We have a policy to honor deposits by our customers, based on their confidence in the person giving them the check."

    I should have asked why banks won't tell depositors about impending illiquity, but I know what the response would be: Privacy.

    But privacy, like the float, is something the banks use to gouge you.

    Is it usury, or just unethical fees?

  2. 2 typos above.

    "the check you're presenting"