32 BANKING THEORIES IN UNITED STATES

It was supposed that the mere establishment of Banks would of itself
create capital, and that a bare promise lo pay money was money itself, and
that a nominal rise of the price of land and commodities, ever attendant
upon a plenty of money, was a real increase of substantial wealth.
Even Cooper, who was at best but a half-hearted supporter of
banking, pointed out that banks can lend their notes to three
times the amount of coin on hand, and added: “This is a creation
of new capital equal to two thirds of the loans.” * Elsewhere he
asserted that notes issued in excess of specie reserves
are in fact fresh capital thrown into the market, and occasion interest and
profit to fall. . . .» If the labor and skill of the country has not full employment
 for want of capital, and the circulating medium of metallic money is
fully employed, then an addition of paper money will have no effect on the
circulating coin, but will be absorbed by new means of employing capital
productively, [with the same] stimulating and productive effect, as so much
additional capital brought into operation.

Not all were so scrupulous as to assume a deficiency of media
of payment when urging that large issues of bank notes were
desirable. Thus, during the period of suspension of specie payments
 attending the War of 1812, one writer maintained that an
abundant currency brings prosperity and a low rate of interest.
He opposed making bank notes convertible, on the ground that
the amount of notes issued had to be limited under such circumstances
 in accordance with the movements of specie out of the
country. He quoted the opinions of Englishmen who held the
Restriction Act, permitting a large note circulation, to be a great
hoon to their country.? The pamphlet is typical of several that

1 Report, Jan. 29, 1820, in Gouge, Short History of Paper Money and Banking
in the United States (1833), part II, p. 56. See also the crude views of A. B.
Johnson (a prominent banker of the period) in his Inquiry into the Nature of . . .
Banking Institutions (1813), pp. 16-18, 49.
2 Cooper, Lectures on Political Economy (1826), p- 43.
287bid., p. £33. Cp. p- 138. 4 Jbid., p. 146
5 Suggestions on the President's Message (Anon., 1815), pp. 4, 8-10. Cp. Report
of Select Committee on Banks (Michigan, 1830), in United States House of Representatives,
 26th Congress, First Session, Document No. 172, p. 1305. More entertaining
 than instructive is the opinion of another naive inflationist of 1829. “I
thank God,” he assures his readers, “that I am no political economist. I know
nothing of those visionaries, Adam Smith, Say, Ricardo, McCulloch, etc., and
what is more, I want to know nothing of them.” Additional bank notes, he asserts,
augment wealth in exactly the same degree as new gold from the mines. And how