Banking theories in the United States before 1860

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Identifikator:: 1755492553

URN:: urn:nbn:de:zbw-retromon-133529

Document type:: Monograph

Author:: Miller, Harry Edward http://d-nb.info/gnd/1055250875

Title:: Banking theories in the United States before 1860

Place of publication:: Cambridge

Publisher:: Harvard University Press

Year of publication:: 1927

Scope:: XI, 240 S.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

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Title:: Part II. The utility of banks as agencies in the distribution of loanable funds

Collection:: Economics Books

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.

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