Types of Warehouse Receipts
Two kinds of warehouse receipts for deposit banks have developed over the centuries.
One is the regular form of receipt, familiar to anyone who has ever used any sort of warehouse.
A paper ticket on which the warehouse guarantees to hand over, on demand,
the particular product mentioned on the receipt.
For example, the Rothbard bank will pay to the bearer of this ticket on demand $10 in gold coin
Banking, or Treasury Paper Money, or whatever.
For deposit banks, this is called a note or bank note.
Historically, the bank note is an overwhelmingly dominant form of warehouse receipt.
Another form of deposit receipt, however, emerged in the banks of Renaissance Italy.
When a merchant was large-scale and very well-known, he and the bank found it more convenient for
And the warehouse receipt to be invisible, that is to remain as an open book account
on the books of the bank. Then, if he paid large sums to another merchant, he did not
have to bother transferring actual bank notes. He would just write out a transfer order to
his bank to shift some of his open book account to that of the other merchant. Thus, Signor
Medici might write out a transfer order to the RISI bank to transfer 100,000 Lira of
his open book account at the bank to Signor Bardi. This transfer order has come to be
known as a check and the open book deposit account at the bank is a demand deposit or
checking account. Note the form of the contemporary transfer order known as a check. I, Maria
Diane Rothbard direct the Bank of America to pay to the account of service merchandise $100.
It should be noted that the bank note and the open book demand deposit are economically and legally equivalent.
Each is an alternative form of warehouse receipt and each takes its place in the total money supply as a surrogate or substitute for cash.
However, the cheque itself is not the equivalent of the bank note, even though both are paper
tickets.
The bank note itself is the warehouse receipt, and therefore the surrogate, or substitute
for cash, and a constituent of the supply of money in the society.
The cheque is not the warehouse receipt itself, but an order to transfer the receipt, which
is an intangible open book account on the books of the bank.
If the receipt holder chooses to keep his receipts in the form of a note or demand deposit
or shifts from one to another, it should make no difference to the bank or to the total
supply of money, whether the bank is practicing 100% or fractional reserve banking.
But even though the bank note and the demand deposit are economically equivalent, the two
Forms will not be equally marketable or acceptable on the market.
The reason is that while a merchant or another bank must always trust the bank in question
in order to accept its note, for a check to be accepted, the receiver must trust not only
the bank but also the person who signs the check.
In general, it is far easier for a bank to develop a reputation and trust in the market
Economy, then for an individual depositor to develop an equivalent brand name. Hence,
wherever banking has been free and relatively unregulated by government, checking accounts
have been largely confined to wealthy merchants and businessmen who have themselves developed
a widespread reputation. In the days of uncontrolled banking, checking deposits were held by the
Medici's or the Rockefeller's or their equivalent, not by the average person in the economy.
If banking were to return to relative freedom, it is doubtful if checking accounts would
continue to dominate the economy.
For wealthy businessmen, however, checking accounts may yield many advantages.
Checks will not have to be accumulated in fixed denominations but can be made out for
are precise and a large single amount, and unlike a loss of banknotes in an accident
or theft, a loss of cheque forms will not entail an actual decline in one's assets.