CHAPTER III 
BANKS INCREASE THE COUNTRY’S CAPITAL 
Inflationist notions in the colonies. — Their revival with the appearance of modern 
commercial banks. — Their general confutation after the first few decades. — The 
doctrine that bank-note inflation lowers the interest rate. — Douglass’s doctrine of 
appreciation and interest. 
No such mild considerations as those dealt with in the preceding 
chapter occupied the attention of colonial writers. To them the 
all-important advantage to be derived from banks was nothing 
less than a direct enrichment of the community through an in- 
crease in the amount of media of payment. They saw, for the 
most part, no essential distinction between the founding of a 
bank for the issue of paper money, and emission by the govern- 
ment itself; and, barring administrative considerations, they in- 
tended their analysis of the economic influence of the one to 
apply equally to the other. 
The colonial arguments for an increase in the volume of cur- 
rency ranged all the way from the naive inflationist view that a 
larger currency would be in itself an enrichment of the commu- 
nity, or that it would make the colony wealthier by increasing 
values, to the more reasonable opinion that the lack of an ade- 
quate currency retarded trade. Plenty of money, wrote the Rev- 
erend John Woodbridge in 1682, “multiplies Trading; Increaseth 
Manufacture, and Provisions; for domestic use, and foreign Re- 
turns; abateth Interest.” ! No less sanguine was the Reverend 
John Wise, who wrote that an abundance of bills of credit, 
whether public or private, “will beget and bring forth whatsoever 
you shall please to fancy. For do but Fancy or wish a Noble 
Fort in any of your Frontiers; set the Bills to work and up it 
goes in a Trice.” The growth of Harvard, waging successful 
1 «Severals Relating to the Fund” (1682), A. M. Davis, Reprints, i, 113. Wood- 
bridge had been inspired by William Potter, the author of an early English pamphlet 
called The Kev to Wealth. (See Reprints, i, 3.)