SUBSTITUTE FOR METALLIC CURRENCY 43

and his followers erred, thought Rae, in failing to take into account
 “the superior efficiency of the money which the banker
puts into circulation, whether paper or gold, as compared with
that which exists where the art of banking is unknown.” ! Where
banks exist, business men are relieved of the necessity of keeping
large amounts of cash on hand by the facility of depositing them
until need for their use arises, and by the ease of borrowing should
any exceptional demands have to be met. The greater activity of
the currency renders a smaller quantity of it necessary.
The point as phrased by Rae is virtually another of the major
advantages of banks, to which we have soon to turn; namely, that
banks enliven idle surpluses of capital. The “superior efficiency ”’
of bank currency was alluded to by others, however, in a somewhat
 different sense. An earlier writer had remarked that bank
notes, in common, apparently, with government paper money,
facilitate exchanges and render them more rapid; “and if, according
 to the ingenious speculations of a late writer on the subject,
the quantity, or amount of the circulating medium must be in
inverse proportion to the rapidity with which it moves, and effects
exchanges, a far greater sum in coins will be necessary for the
purpose than in paper money.” 2
Vethake, also, referred to the fact that bank notes, because of
“the greater facility of transporting or remitting them from one
place to another,” dispense with more than an equal amount of
coin? And Gallatin found that banks “lessen the amount of
currency wanted for commercial transactions by increasing the
rapidity of its circulation by that concentration of payments and
by those exchange operations which, both on the spot and between
 places, substitute a transfer or exchange of debts and credits

! Rae, Sociological Theory of Capital (1834), p. 322. See also pp. 301, 323.
? Porter, ‘“ Review of Cardozo’s Notes on Political Economy,” North American
Review (1827), xxiv, 184. Hamilton had maintained that, by furnishing “a more
convenient and more expeditious medium of payment” than heavy coins, banks
quicken circulation and thus afford what “to the purposes of business, may be
called greater plenty of money.” Report on a National Bank (1790), American
State Papers, Finance, i, 68. Raymond, Thoughts on Political Economy (1820),
PP. 301, 302, regarded this as of particular importance. But neither tied the point
up with a greater displacement of costly currency.
3 Vethake, Principles of Political Economy (1838), pp. 147, 166.