Demand Deposits (10) - Fungible Money

What applies to oil and wheat also applies to a demand deposit in a bank. Although the money is fungible, ownership does not transfer to the bank. Rather the depositors own a share of all the money in the bank. This is true regardless of the form of money. If gold is deposited in the bank, the depositor changes ownership of a particular piece of gold, for a defined share of all the gold in the bank. He can always get his gold back, because the amount he has put in has been added to the total amount in the bank. Each depositor’s share of the total amount of gold is equivalent to the amount that they put in.

The same applies if the money is notes and coins or electronic money. All the money on demand deposit at the bank is jointly owned by the depositors. Each one owns a share of the total, which is equivalent to the amount they deposited. If money depreciated in value, the loss is shared by all depositors. The important point is that none of the money in demand deposits is owned by the bank.