BORROWERS AND LENDERS 83 
tion of a bank, in his opinion, “is an open, express privilege of 
taking more interest for their money than other people have a 
right to take.” ! 
This notion was common. Daniel Raymond subscribed to it, 
urging that 
every dollar of paper money put in circulation above their [the banks’] actual 
specie capital, depreciates the value of the currency in proportion, so that 
the public derives no benefit from a bank lending its notes to twice the 
amount of its capital, which it would not derive from its charging twelve 
per cent interest on its actual capital, without issuing notes, except the 
greater conveniency of a paper over a metallic medium.2. . . There is no more 
reason why a man, or a body of men, should be permitted to demand of the 
public, interest for their reputation of being rich, than there would be in 
permitting a man to demand interest for the reputation of being wise, or 
learned, or brave.’ 
Several of the later writers chose to regard bank notes issued 
in excess of reserves as a loan made by the community to the 
bank. Thus one wrote: “Every dollar of paper carried by the 
people represents a loan to some bank, varying in amount accord- 
ing to the ratio on which that bill is issued. Thus if a bank circu- 
lates two dollars of paper to one of specie [in its reserve], every 
individual who receives that two dollars indirectly lends to the 
bank a credit of one dollar, on which the bank earns its interest.” * 
The bank thus receives ‘“double interest.” 
These writers who used the quantity theory to controvert the 
belief that banks can create capital refuted one of the crudest 
fallacies of banking theory. But they in turn fell into error in 
attaching no further significance to an increase of the quantity of 
media of payment than a more or less proportionate depreciation 
Sullivan (1744-1808) was the member of an eminent family and led a distinguished 
life in Boston as lawyer, magistrate, statesman, and scholar. 
! Sullivan, op. cit., p. 57. 
* Raymond, Elements of Political Economy (1823), ii, 145. Like statements may 
be found in Davies, Bank Torpedo (1810), p. 18; Fisk, Banking Bubble Burst (1837), 
p. 49; Gouge, Short History of Paper Money, etc. (1833), pp. 68, 69. 
8 Raymond, op. cit., ii, 144. 
* Thomas B. Hall, Gold and the Currency (1855), p. 15; L. McKnight, “Free 
Banking,” De Bow’s Review (June, 1852), xii, 611; also xiv, 156; Hooper, Specie 
Currency (1855), p. 3; A. P. Peabody, North American Review (1858), Ixxxvi, 178.