INTRODUCTION 
CHARACTERISTICS OF THE PERIOD — RELATIVITY OF ITS 
BANKING THEORIES AND PRACTICES 
THE theories of banking that prevailed in the United States 
before 1820 were, in general, wretchedly primitive. Colonial 
discussions had dealt largely with paper money emitted by the 
government, or by the land banks that we have learned to asso- 
ciate with the period. Such tracts as considered paper money 
redeemable in specie referred almost invariably to post notes. 
Accordingly, what progress was made in the theory of banking 
had little bearing upon more than the most elementary prin- 
ciples of commercial banking of the modern type. 
Not until about 1820 does the knowledge of banking principles 
in this country seem to have reached a degree of development 
comparable to that found in the Wealth of Nations. Smith’s doc- 
trine that the use of paper money effects an economy by releasing 
metallic money for export was, apparently, scarcely known much 
before 1810. A decade later, exports of metallic money were still 
being explained in terms of Smith’s vague overflow of the ““chan- 
nels of circulation,” in apparent obliviousness of the work, at the 
beginning of the century, of Boyd and Thornton and later English 
writers in substituting an explanation in terms of the definite and 
clear-cut mechanism of rising prices, diminishing exports, and in- 
creasing imports.! The notion that a certain fixed quantity of 
currency is necessary to circulate the annual product of each 
country’s industry underlay the views of almost all the writers. 
Those who, in common with Douglass and others of the preceding 
L Precursors of Smith, notably Hume and Harris, had explained the distribution 
of the precious metals in terms of the quantity theory, but Smith had not adopted 
their ideas. Thornton and the other immediate predecessors of Ricardo had brought 
the doctrine anew to the general attention. See Hollander, “Development of the 
Theory of Money from Smith to Ricardo,” Quarterly Journal of Economics, XXv, 
420—470.