The parable of the evolution of private banking comes about with a story about a goldsmith. The goldsmith has the strongest safe in town – so people deposit their gold for safe keeping. People consider the certificates of deposit equivalent to gold. The goldsmith however lends the gold in the vault for a fee. That is real gold. And thus banking acts as a gold multiplier.
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The goldsmith as retail bank
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The parable of the evolution of private banking comes about with a story about a goldsmith. The goldsmith has the strongest safe in town – so people deposit their gold for safe keeping. People consider the certificates of deposit equivalent to gold. The goldsmith however lends the gold in the vault for a fee. That is real gold. And thus banking acts as a gold multiplier.