Financial Legislation in Principle and in History n 



present form for two centuries, the popular theory is still that of 

 the money changer on the Rialto ; and yet the economist is per- 

 petually met with the question whether there is any practical ap- 

 plication of economic theory. 



While the banker, himself has accepted some of the false con- 

 clusions of nominalistic reasoning - , he has rejected others, and is 

 gradually emancipating himself from the rest. Under the direc- 

 tion of arbitrary legislation, he opens his profit and loss account 

 on notes separately from that on deposits ; he looks upon his notes 

 as issued, not for loans, but for bonds, in this country, in the face 

 of the obvious fact that he buys his bonds with his capital; and 

 in foreign countries, where the deposit business is little developed, 

 he looks upon deposits as a special warehousing business, al- 

 though he takes the right view there of his notes. And he is only 

 now, after years of false conservatism and confused timidity, 

 receiving his education on the similarity of the note to the deposit, 

 through the efforts of a few statesmen like the Hon. Charles N. 

 Fowler of New Jersey. 



As usual in any campaign of education, it has been necessary 

 to educate the banker up to this point by inventing the new and 

 again inaccurate phrase, "an asset currency." This phrase has 

 taught the bankers of the United States that bank notes are 

 merely issued in exchange for individual notes, in precisely the 

 same sense as deposits are exchanged for individual notes, a 

 point that was fully explained by Dunbar and McLeod thirty or 

 forty years ago. It remains to educate the banker and the public 

 as to the peculiar guaranty that this exchange amounts to. 



In legislation on the subject of banking we must expect to find 

 some progress, and, as already intimated, we do find it. Dis- 

 tinctly, the discussions of- the nineteenth century have led to 

 clearer ideas and to some improvements in legislation. The in- 

 fluence of professors of political economy and of closet students 

 of finance has been, of course, quite indirect. Even what college 

 students have learned on this subject in the last twenty-five years 

 has not been clearly retained by them when in the later hurly- 

 burly of life ; and under the pressure of the practical need of the 

 moment they have often lost the general bearings of what they 



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