42 BANKING THEORIES IN UNITED STATES
American banking theory in the decades following 1820." It was
repeated in almost all of the writings of the period, and not a few
writers thought that it indicated the sole benefit to be derived
from the institution of banking.”
Raguet made a slight correction of Smith’s position by explaining
that the issue of bank notes is followed by the exportation of
an amount of specie somewhat less than the quantity by which
the note issues exceed the reserves held against them, because the
world’s total supply of currency has been added to, assigning a
larger volume to each country.’ A more significant correction,
first suggested by Raguet, apparently, was that which recognized
the similarity between bank notes and bank deposits. “The right
to draw a check upon a bank, payable on demand, is as much a
part of the currency as a bank note,” * Raguet insisted, in a report
of 1821 as chairman of the committee on banks in the Senate
of Pennsylvania. It should follow, then, that the extension of
bank credit in the form of deposits economizes gold and silver in
a manner exactly similar to that in which note issue does so. And
this is the conclusion that Raguet later drew.? Gallatin followed
him, as did Tucker.®
Another modification of Smith’s principle rested on the influence
that banks have upon the amount of money, whether metallic
or paper, necessary to perform the payments of a country. Smith
1 See, for example, Barnard, Speeches (1838), p. 168; Hildreth, History of Banking
(1837), p. 120, and Banks, Banking and Paper Currencies (1840), p. 128; Wayland,
Elements of Political Economy (1839), D- 292.
2 Gallatin, Considerations on the Currency and Banking (1831), p. 19; Putnam,
Tracts on . . . Political Economy (1834), pp. 9, 10.
3 Raguet, Currency and Banking (1839), p. 77. The American Quarterly Review
(1827), xv, 500, contained an earlier statement of this. The advantage gained by
the substitution of a paper currency was usually computed as equal to the interest, at
current rates, on the quantity of metallic money dispensed with. Gallatin and other
writers attempted to give estimates of this.
4 The Examiner and Journal of Political Economy (18353), ii, 340. The discussion
of the question whether bank deposits subject to payment on demand form a part
of the currency is reviewed in Chapter XI.
5 Free Trade Advocate (July 4, 1820), ii, 4.
6 Gallatin, Considerations on the Currency and Banking of the United Slates
(1831), pp- 19, 20; Tucker, Theory of Money and Banks Investigated (1839), p. 176.
See also. “The Public Distress.” American Quarterly Review (June, 1834), xv, 508.
