SUBSTITUTE FOR METALLIC CURRENCY 41

ing it to be exported in exchange for productive goods, does not
seem to have received any attention in America until after the
beginning of the nineteenth century.! From this time on we meet
it continuously, and it was usually made one of the major arguments
 in favor of banks, if not the principal one. Thus McVickar
stated that the gain to a country from the substitution of paper
money as a cheaper “instrument or machine” of exchange, “is
the surplus coin which is sent abroad in productive exchanges.” 2
Condy Raguet made much of this point in his many works? and
indicated the importance that he attached to it when he added
that banks, aside from their deposit operations, are beneficial only
when they occasion the export of specie and issue fiduciary notes
to the amount exported and no more.* Should all the commercial
countries have banks that issue credit currency (that is, notes or
deposits in excess of reserves) pari passu, no exportation of coin
would occur, and the substitution of paper money for metallic
money would lose its sole advantage. Depreciation of the world’s
currency would be the only result.’
This thesis that the saving effected by the release of specie for
export is one of the major advantages resulting from the establishment
 of banks was probably the most generally accepted tenet of

1 The earliest work in which I have found the point is Baldwin, Thoughts on the
Study of Political Economy (1809), p. 63. Douglass suggested a somewhat similar
explanation of the advantage of a paper currency, judiciously issued, in his “Essay”
of 1738. (Davis's Reprints, iii, 224.)
? McVickar, Outlines of Political Economy (1825), p. 77n. McVickar was professor
 of moral philosophy and political economy at Columbia College, and devoted
considerable attention to the dissemination of the doctrines of money and banking
developed in England, together with some notions of his own. The present citation
is to a footnote in an American reprint, edited by McVickar, of an article by McCulloch
 taken from the Encyclopedia Britannica.
3 Beginning with the first, An Inquiry into the Present State of the Circulating
Medium (1815), p. 7.
4 Free Trade Advocate (July 4, 1829), ii, 4; Currency and Banking (1839), pp.
77, 78.
5 Raguet, Currency and Banking (1830), pp. 83, 84. See also, p. 158. After indicating
 so unequivocally that he regarded the economy of the precious metals as the
sole benefit to be derived from the use of bank notes, Raguet inconsistently recognized,
 a few pages further on, the merits of the “elasticity of the banking principle.”
(Ibid., p. 92. See infra, Chapter VII.)