Bank-notes and coins are not the most important form of money in developed economies. In the UK about 90%, by value, of all transactions are settled by means of cheques. But cheques themselves are not money, they are merely orders to bankers to transfer money from one person to another. The money so transferred consists of bank deposits. If there is no money in the form of a bank deposit then any cheques drawn on that account will be worthless.
Cheques were used as early as the second half of the seventeenth century, but they did not come into general use until the second half of the nineteenth century. The Bank Charter Act of 1844 put strict limitations on the note issue at a time when the output of goods and services was expanding rapidly. The need for an expansion of the money supply to keep pace with increasing output greatly stimulated the use of bank deposits.
This most developed form of money (i.e. bank deposit) consists of entries in the banks' ledgers, or more likely nowadays, of records on computer tapes. The greater part, in value terms, of the payments made each day are carried out by adjustment made to the totals in different bank deposits. A payment from one person to another merely requires that the banker reduces the amount in one deposit and increases it in another. Transferring money, therefore, has become little more than a kind of bookkeeping exercise, the money itself does not consist of some physical tangible commodity.
