104 BANKING THEORIES IN UNITED STATES
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Granting that those who thought that banks can, for a considerable
 period at least, raise prices by inflating the currency,
were inconsistent when they denied banks the ability to lend more
efiective purchasing power than they received from depositors, is
the same to be said of those who held that the export of specie
promptly checks the tendency of bank notes to alter the volume
of media of payment and prices? Their self-contradiction was no
less real, if, perhaps, a little less obvious. They conceded that
banks, while they may not enlarge the currency, supplant a part
of its metallic portion by their own issues. Now, unless the individuals
 who receive the bank notes simply hand over the specie
that is displaced and exported, a readjustment of relative purchasing
 power has occurred. But, obviously, these individuals do
nothing of the sort. The specie that is exported represents the
relinquishing of command over the nation’s wealth, not by these
individuals, but by the community at large, as ultimate consumer
of the foreign products that are accepted, in the stead of domestic
products, by virtue of the price changes resulting from the inflation
 of the currency through the issue of bank notes. Gold movements
 may restore the preéxisting number of units of media of
payment, but the banks’ borrowers now hold a larger proportion
of them.
Again, if all the leading countries in the world were to enlarge
their media of payment pari passu, practically no gold movements
 would follow. The laws governing the international distribution
 of currency would merely indicate a higher level for each
country. A few writers discussed this case, and asserted that “no
result of any moment would ensue, except an universal rise of
prices.” 1 In believing that banks would still serve but as intermediaries
 between borrowers and lenders, they made the same

that sudden contraction, perhaps precipitating numerous business failures, becomes
necessary. Whatever benefits resulted from the preceding expansion are then liable
to be offset. At best no nice quantitative determination of the influence of bank
loans upon a country’s wealth is possible. Our thesis probably has its clearest significance
 in explaining the advantages of having a well-regulated commercial
banking system as compared with having none at all.
1 Eleazar Lord, Principles of Currency and Banking (1829), p- 18. Cp. Raguet,
Currency and Banking (1839), pp- 83, 84.