Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

52 Money, Bank Credit, and Economic Cycleswho, whether farmers or not, did business through banks andmade payments out of their deposits and bank accounts. Relativelywealthy people were few, and most of the bank’s customerswere retailers and indigenous craftspeople, linen merchants,textile workers, tailors, silversmiths and a tinker. Also,debts were often paid in gold and raw silver, following theancient Egyptian tradition. Grain, oil and cattle dealers, aswell as a butcher and many innkeepers were documented asclients of the bank. The Ptolemaic government bank, privatebanks, and temples alike kept custody of different kinds ofdeposits. According to Rostovtzeff, bankers accepted bothdemand deposits and interest-paying time deposits. The latterwere, in theory, invested incredit operations of various sorts—loans on collateral security,pledges, and mortgages, and a special very populartype—bottomry loans. 24Private banks kept custody of their clients’ deposits whileat the same time placing their own money in the governmentbank.The main innovation of Egyptian banking was centralization:the creation of a government central bank in Alexandria,with branches in the most important towns and cities, so thatprivate banks, when available, played a secondary role in thecountry’s economy. According to Rostovtzeff, this bank heldcustody of tax revenues and also took in private funds anddeposits from ordinary clients, investing remaining funds inbenefit of the state. Thus, it is almost certain that a fractionalreservesystem was used and that the bank’s huge profits wereappropriated by the Ptolemies. Zeno’s letters provide ampleinformation on how banks received money from their clientsand kept it on deposit. They also tell us that Apollonius, thedirector of the central bank in Alexandria, made personaldeposits in different branches of the royal bank. All of thesesources show how frequently individuals used the bank for24 Michael Rostovtzeff, The Social and Economic History of the HellenisticWorld (Oxford: Oxford University Press, 1957), vol. 2, p. 1279.