BORROWERS AND LENDERS

89

Here is recognition of the service of banks in advantageously
distributing the purchasing power of a country, free of the fallacy
of regarding bank notes as substantial capital.! Nor are banks
treated as mere intermediaries.
In 1834, Hare virtually republished his early pamphlet under
the title, Proofs that Credit as Money . . . is to a Great Extent
Preferable to Coin. In the preface of this later work, he offered an
explanation of the failure of his novel line of analysis to have
greater influence upon other writers. He believed that “the
sentiments with which the opinions in question were originally
associated [public borrowing to build a large navy], were too independent,
 to be relished by either of the prevailing parties;
and hence, although approved by some distinguished men, they
had only a limited circulation.” Yet this reiteration of his earlier
views on banks and credit, divorced from all questions of navy
and public policy, seems to have received no greater attention.
Hare again urged his doctrines in 1852, in an article devoted to
the specific purpose of refuting the opinion of Gouge, typical of
the period, that “Banks do not increase the amount of loanable
capital in a country,” and that, “All that banking can do is to
take the loanable capital out of the hands of its owners and place
it in the hands of irresponsible corporations.” 2 Hare thought
that Gouge neglected to observe that ‘the establishment of a
bank creates a credit which otherwise would not exist; and that
the bank credit thus created, in the form of notes and bookcredits
 transferable by checks, is in utility superior to hard
money.” * No mere passing on of the money received from
stockholders and depositors is involved.

I Hare is less sound in his views with reference to government certificates of indebtedness.
 This results partly from his object — to induce the government to
borrow in order to build a large navy. Op. cit., pp. 74-83.
* Hare, “Do Banks Increase Loanable Capital?” Hunt's Merchants’ Magazine
(June, 1852), xxvi, 702. The quoted words are those of Gouge, Short History of
Paper Money and Banking in the United States (1833), p. 45.
3 0p.cit.,p. 703.
In 1854 a contributor to Hunt's Merchants’ Magazine dealt with Hare’s thesis,
although he did not refer to Hare. “Now we may admit,” he argued, after explaining
 how bank inflation redistributes purchasing power, ‘that under the excitement
of extended paper issues, many speculative projects have been commenced, and that,