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                 Gradually the goldsmiths began to lend the money out on behalf of the depositor, and promissory notes were issued for money deposited as a loan to the Poster Write some letters make a word write some words make a sentence goldsmith. The goldsmith paid interest on these deposits. Since the promissory notes were payable on demand, and the advances to the goldsmith’s customers were repayable over a longer time period, this was an early form of fractional reserve banking. The promissory notes developed into an assignable instrument which could circulate as a safe and convenient form of money backed by the goldsmith’s promise to pay, allowing goldsmiths to advance loans with little risk of default. Thus, the goldsmiths of London became the forerunners of banking by creating new money based on credit.

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