One of the most important roles a bank plays is in serving as intermediaries to transfer savings from some people to others who need to borrow. Modern banks do more than simply transfer cash. It creates credits, which in effect add to the money supply through what is called “fractional” reserve banking. Goldsmith’s have for centuries had to have some safe place to store the precious metal that they used to make jewelry and other items. Once they had established a vault, or other secure storage place, other people often stored their own gold with the goldsmith, rather than take on the cost of creating their own secure storage facility. Goldsmiths gave out receipts entitling the owners to reclaim their gold whenever they wished to. Since the receipts were redeemable in gold, they were in effect, “as good as gold” and circulated as if they were money, buying goods and services as they were passed on from one person to the next. From experience, goldsmiths learned that they seldom had to r...