Banking theories in the United States before 1860

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Monograph

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

Structure type:: Chapter

Title:: Part III. Bank notes and bank deposits

Collection:: Economics Books

PRINCIPLES OF NOTE ISSUE 145 their notes.! And Smith’s argument that less specie would be expelled from the country if none but large notes were authorized, was inconsistent with his other doctrine that the issue of paper money is advantageous because it displaces a costly currency with an inexpensive one.” It is the fears of depositors, rather than of note-holders, that tend to produce runs;? and of the note- holders, those having the larger denominations present their claims first, as evidenced by the greater rapidity with which large notes return from circulation. Replacing the small notes in circulation with gold and silver coins would accomplish no improvement, since the banks could gain possession of that metal- lic money for their reserves only by contracting their loans, and the country would suffer equally from the withdrawal of a certain quantity of media of payment, whether in the form of notes or of coins.® H. C. Carey disposed of the issue with accustomed ease. Laissez faire is a maxim as applicable in banking as elsewhere. ““One-dollar notes will not be used unless the benefit derived from them exceed the cost of furnishing them, and if it do so, their use 's beneficial to the whole community.’’ ® Colwell, consistently with his minimizing of the importance of specie, gave little weight to the argument that small notes should be prohibited to in- ! Hildreth, Banks, Banking, and Paper Currencies (1840), pp. 183, 184. ? Ibid., p. 187. Smith, it should be said, also stated that commerce and industry are less secure when “suspended upon the Daedalian wings of paper money,” than when they travel upon the solid ground of gold and silver. Wealth of Nations, book II, chap. 2 (vol. i, p. 304). ® Hildreth, op. cit., p. 18s. 4 Ibid., p. 192. ® Ibid., p. 189. Barnard urged a similar point: “If you present a five dollar bill at the counter of a bank for coin, you do little to facilitate the transaction by having five dollars of silver already in your pocket.” Speeches (1838), PP- 15, 26. It must be remembered, however, that the withdrawal of gold from bank reserves requires, prima facie, a contraction of the media of payment in proportion to the number of paper units based upon each unit of reserve, and that decreasing the relative use of fiduciary currency would lessen this tendency to magnify the influence of specie exports. Or, from Barnard’s point of view, a bank would not need to contract its loans to a like extent if its debtors made repayment in larger measure with metallic money. ¢ H. C. Carey, The Credit System, etc. (1838), p. 117; Cp. Letlers to the President 1857), p. 15.

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