AN ELASTIC CURRENCY 
71 
notes issued in discounting short and real commercial paper can 
have no disastrous elasticity. Bank notes when so issued, it was 
commonly stated, cause the currency to vary in quantity exactly 
as it would were it entirely metallic, and any divergence from this 
was regarded as harmful! Not a few were skeptical of achieving 
the ideal of a currency composed partly of bank notes that would 
at all times conform in quantity to what would obtain were the 
currency of precious metals alone. These, accordingly, proposed 
a return to purely metallic money, or urged that bank notes be 
issued only against an equivalent amount of coin. The dominant 
theory was that “in every respect the law of money is the same, 
whether it exist in the shape of metal or in the shape of paper.” 2 
No less indicative of failure to apprehend the province of a 
properly elastic bank currency were the views of those who urged 
the issue of a fixed amount of government paper. The notion, to 
which Adam Smith had subscribed, that the volume of currency 
which every country needs bears a more or less definite proportion 
to the magnitude of its annual trade, or to its population, was 
widely accepted. One fifth of the annual product of industry 
seems to have been a fairly popular standard,® while a committee 
of the Rhode Island legislature compromised on one eighteenth 
of the annual product, being the mean between one fifth and one 
thirtieth, the two extremes suggested. Charles Carroll regarded 
one twenty-fifth of the aggregate property of the country as the 
correct proportion and thought that this ratio was “so well de- 
termined by natural laws, that if I would estimate the whole 
amount of property of the United States, I would rather know 
the sum of the currency, and multiply it by 25, than to have the 
most elaborate statistics otherwise prepared.” 3 
{ Appleton, Remarks on Currency and Banking (1841), p. 16; Lord, Principles 
of Currency and Banking (1859), p. 29. 
? Barnard, Speeches (1838), pp. 168, 169. 
3 See Mississippi Governor's message accompanying the bank commissioner’s 
report (1838), 25th Congress, Second Session, Senate Document, No. 471, p. 74; 
also 26th Congress, First Session, House Document, No. 172, p. 476. 
{ Rhode Island, Report of Commitiee on Currency (1826). 
5 Carroll, “New Views of the Currency Question,” Bankers’ Magazine (1859), 
gill, 820.