Rist on Tooke In 1938, Charles Rist’s History of Monetary and Credit Theory from John Law to the Present Day (translated by Jane Degras, New York: Augustus M. Kelly Publishers: 1966) in which he reviews Tooke’s contributions to economics. Rist (1874-1955) was a French economist, who was of the Banking School as opposed to the Currency School. [Under the gold standard, banking philosophies generally fell into either the banking school or the currency school. The banking school “holds that as long as a bank maintains the convertibility of its bank notes into specie (gold), for which it should keep ‘adequate’ reserves, it is impossible for it to over issue its bank notes against sound commercial paper with fixed short term (90 days or less) maturities.” Its position is also called the “Banking Principle” or “Principle of Fullerton.” To the banking school, bank
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An advance from the bank enables the borrower to spend to-day an income which he will in fact receive only later, but he will not spend that income since it will be used to repay the advance” (p. 198). Thus, “[b]ank-notes are claims on a defined quantity of gold. Paper money is a means of payment whose purchasing power over goods (or gold) is fixed on the market according to variations in supply and demand. It is a legal claim, and it is only the law which gives it the power to settle debts” (p. 199). [Legal-tender paper money settles a debt by passing that debt to another. However, being an obligation of the issuer, it can never extinguish debt. On the other hand, gold coin is no one’s obligation and can, therefore, extinguish debt.] Not only does convertibility limit the quantity of notes issued [and checkbook money], it also “gives notes legal and economic qualities which paper money does not possess, and which are independent of quantity” (p.
An advance from the bank enables the borrower to spend to-day an income which he will in fact receive only later, but he will not spend that income since it will be used to repay the advance” (p. 198). Thus, “[b]ank-notes are claims on a defined quantity of gold. Paper money is a means of payment whose purchasing power over goods (or gold) is fixed on the market according to variations in supply and demand. It is a legal claim, and it is only the law which gives it the power to settle debts” (p. 199). [Legal-tender paper money settles a debt by passing that debt to another. However, being an obligation of the issuer, it can never extinguish debt. On the other hand, gold coin is no one’s obligation and can, therefore, extinguish debt.] Not only does convertibility limit the quantity of notes issued [and checkbook money], it also “gives notes legal and economic qualities which paper money does not possess, and which are independent of quantity” (p.