64 BANKING THEORIES IN UNITED STATES
notes, shall be placed upon the banks.” Borrowers will never be
lacking “weak enough to believe that they can make profitable
use of the money” at the bank’s terms.!
In harmony with the theory that the notes of banks, since they
enter circulation in response to the requests of the business community
 for loans, cannot be overissued, a number of writers insisted
 that the tendency of higher prices and increased note circulation
 to accompany each other is due to the fact that higher
prices give origin to a larger note issue, rather than to the reverse
relationship. The quantity of currency was made the result, not
the cause, of the price level; and the explanation of price changes,
it was urged, must be found in changes in the conditions of supply
and demand with respect to goods.
Thus Thomas R. Dew, professor of political economy (among
other subjects) and later president of William and Mary College,
took Gouge to task for mistaking what is more often the effect for
the cause, in attributing price changes to the fluctuating quantity
of bank notes. He did concede, however, that the increased note
issue which higher prices initially stimulate, “immediately becomes
 in turn a powerfully operating cause” of still higher prices
and more speculation. Hildreth considered the volume of bank
currency a consequent, rather than cause, of the price level, and
addressed a satirical public letter to the Governor of Massachusetts
 for venturing to suggest otherwise in an address> John A.
Lowell took similar issue with an essay by Samuel Hooper in
which the latter maintained that price movements are determined
 by the liberality with which banks issue their notes.* The
volume of bank notes in circulation, Lowell contended in his
criticism, depends upon the amount of money people keep on
hand for meeting their needs, and he found it “difficult to see
how any action of the banks can induce any man to increase
materially the sum which he chooses, or is obliged, thus to keep
Raymond, Elements of Political Economy (1823), ii, 154.
2 Dew, Essay on Interest (1834), p- 16.
3 Hildreth, Letter to Marcus Morton (1840), pp- 4 fi., and Banks, Banking, and
Paper Currencies (1840), p- 157.
1+ Hooper, An Examination of the Theory of Laws Regulating the Amount of Specie
in Banks (1860).

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