BANKS DRIVE SPECIE OUT SI

Many of these early disputants, Paine being the principal exception,
 made no distinction between bank paper and government
paper money in discussing the export of specie. Nor did they
usually refer to the price phenomena underlying specie movements.
 One of the essayists at Philadelphia did explain the part
played by prices in causing gold to leave the country upon an
inflation of the currency with bank paper,! and a critic of a contemporary
 proposal in Maryland for the emission of bills of
credit by the state gave a very creditable statement of the theory
of gold movements since associated with the names of Hume and
Ricardo.’
Hamilton, in his Report on a National Bank, dealt with the
objection that banks ‘tend to banish gold and silver out of the
country’ as ‘the last, and heaviest charge against them.” The
current reply, “that it is immaterial what serves the purpose of
money, whether paper, or gold and silver; that the effect of both
upon industry is the same; and that the intrinsic wealth of a
nation is to be measured, not by the abundance of the precious
metals contained in it, but by the quantity of the productions of
its labor and industry,” he found inadequate. The precious
metals are too important a species of wealth to permit of treating
the country’s supply of them as a matter of such indifference.
But the objection, he thought, admits of a more conclusive answer,
 controverting the fact itself. Banks augment the active
capital of a country, animating and expanding its industry; with
the result that more commodities are produced for export and an
inflow of gold and silver is induced? Hamilton avoided the error,
into which many of the early writers fell, of confusing temporary
and permanent movements of specie. With respect to the former,
he granted that banks facilitate the export of gold, but this he

! Witherspoon, Essay on Money (1786), pp. 43, 44. John Witherspoon was a
Scotch clergyman who emigrated to America in 1768 to assume the presidency of
Princeton College. He was an ardent colonial patriot and by his counsels played a
conspicuous part in the struggle for independence.
? Hanson, Remarks on the Proposed Plan of an Emission of Paper, etc. (1787),
pp. 22, 23.
3 A similar opinion was expressed by William Barton, “True Interest of the
United States’ American Museum (1787), ii, 32.