PRINCIPLES OF NOTE ISSUE I41
views, he recognized that deposits must also be taken into con-
sideration, and would have the banks make loans and discounts
only to the extent that they had received money in payment of
capital stock and on time deposits.! Amasa Walker contributed
the best known American argument for the currency principle in
his Nature and Uses of Money and Mixed Currency (1857), which
was largely made up of articles first published in Hunt's Merchants’
Magazine on the very eve of the panic of 1857. He urged vigor-
ously the defects of a “mixed currency,” — that is, one involving
an element of credit, being composed in part of bank notes in
excess of reserves, — and would gradually prohibit “all bills not
absolutely based upon an equal amount of specie in the banks.” 2
Colwell, who saw clearly the need of an elastic currency and
wanted an inconvertible one for that reason, thought that banks
should not incur demand liabilities to pay specie in excess of their
immediate means of doing so. ‘Bank notes payable on demand
should never be issued beyond the amount of specie actually in
the bank.” 3
The English Bank Charter Act of 1844, which authorized a
limited issue of bank notes against government securities and
required the deposit of an equivalent in gold for each additional
note issued, received frequent comment in America, but surpris-
ingly little support. The purpose of the act was to retain to a
limited and fixed extent the advantage that paper money confers
of releasing specie from monetary use by furnishing an inexpen-
sive substitute, and yet to avoid the evil of an unstable monetary
standard. C. G. Memminger, later to become the Secretary of the
Treasury of the Southern Confederacy, favored the adoption of
the principle in the legislature of South Carolina,* but objectors
! Carroll, “The Gold of California and Paper Money,” Hunt's Merchants’
Magazine (1856), xxxv, 160-172; Mr. Lowell vs. Mr. Hooper, Hunt's Merchants’
Magazine (April, 1860), xlii, 584.
* Nature and Uses of Money and Mixed Currency (1857), p. 52. Walker proposed
to avoid too sudden a transition by abolishing the smaller notes first, then gradu-
ally increasing the minimum denomination until the total circulation did not exceed
the specie in reserves. This suggestion was fairly common.
> Colwell, Ways and Means of Payment (1859), p. 495. Cp. pp. 11, 12, 368.
* Speech of C. G. Memminger in the House of Representatives of South Carolina,
etc. (Dec., 1857). A special committee of the General Assembly of South Carolina
