112 BANKING THEORIES IN UNITED STATES
circulation.! Vethake thought similarly.? Gallatin, on the other
hand, preferred to regard bills of exchange and promissory notes
as substitutes for currency. In his opinion,
the essential distinction is, that the bills of exchange are only a promise to
pay in currency, and that the failure of the drawers, drawees, and indorsers,
does not, in the slightest degree, affect the value of the currency itself, or
impair that permanent standard of value by which the performance of all
contracts is regulated.’
Gouge, after endorsing this view with respect to ledger accounts,
bills of exchange, and promissory notes, added:
An increase of these three kinds of commercial medium may have the
same effect on prices as an increase of money. Where the spirit of specula-
tion is excited, men, after having exhausted their cash means, strain their
credit. Cash and credit are then competitors in the market, and raise prices
on one another.4
Raguet, Tucker, and Carroll followed Gallatin.’
a
ET ie Lea
No less significant than the problem whether bank deposits
should be classed as currency was that of determining whether
they were in any measure created by the banks themselves. We
have seen that the overwhelming majority of the writers conceived
of the lending operations of banks as confined in essence to the
advance of capital left with them by stockholders and depositors.
That such a view would tend to be more readily accepted by
those who regarded all deposits as representing money brought
to the bank by its patrons is evident, but the two points are by no
means the same. The one involved the problem of the ability of
banks to create bank notes and deposits; the other involved the
problem of the significance of such a creation, if its possibility be
granted. Some of those who assigned to banks only an inter-
mediary function believed also that international gold move-
1 Thomas R. Dew, Great Question of the Day (1840), p. 6; and Essay on the
Interest of Money (1834), p- 16.
2 Vethake, Principles of Political Economy (1838), pp. 148, 149. See also, Mid-
dleton, The Government and the Currency (1850), pp- 88-91.
3 Gallatin, Considerations, etc. (1831), p. 29.
4 Gouge, Short History of Paper Money, etc. (833), pp- 19, 20.
5 Raguet, Currency and Banking (1839), pp. 173-177; Tucker, Theory of Money
and Banks (1839), p. 142; Carroll, “The Banking and Credit Systems.” Hunl’s
Merchants’ Magazine (September, 1858), xxxix, 311.
