His theoretical error consists in his treating money at one moment as capital _par excellence_, at another as a mere medium of exchange having no value. He forgets that money is desired not merely for purposes of exchange, but also as a store of value, as the proper instrument for hoarding and saving; and although the exchange notes may replace it in one respect, they fail in another. We may increase the circulating media at pleasure, but we cannot multiply our capital. Money may be replaced by goods, but this will not add a single franc to the capital which already exists in society, of which money itself is a part. Nor will it lessen the superior value of present as compared with future goods—a superiority which gives rise to the phenomenon of interest. The only result of multiplying the exchange notes without increasing the amount of social capital would be to raise prices as a whole, the price of land, houses, and machinery as well as the price of consumption goods. Capital would be lent as before, and being less plentiful the high rate of interest or rent would tend to maintain the high level of prices, and these would in turn be still further increased—a strange outcome of a reform intended to lower them! Proudhon, having exaggerated the evil effects of gold, now accepts Say’s formula too literally. J. B. Say allowed himself to be led into error by his own formula that “Goods exchange for goods,” and it is interesting to note that the Exchange Bank is the logical, though somewhat paradoxical, outcome of the reaction against the Mercantilist ideas concerning money which can be traced to Adam Smith and the Physiocrats.