72 BANKING THEORIES IN UNITED STATES
SLIT ITI
Lib) by i i
clus
Just as the champions of banking generally neglected the power
of bank notes to conform to the fluctuations of the volume of
trade, so its critics, with few exceptions, failed to recognize such
a possibility. Decry the pernicious variations of bank notes they
did, time and again, but they seemed wholly unaware that any
other aspect of the matter was to be considered. Gouge was the
principal exception. Unfortunately for the claim that banks
expand and contract their issues to suit the wants of the commun-
ity, he contended, they are compelled to contract when the de-
mand for money is greatest, and are best able to expand when it is
least. Not the needs of the public, but their own profit and safety
guide them, as well as such untoward events as the outbreak of
war, or whatever else may cause specie to flow out of the country.!
Let us turn now to the few who did claim for banks the merit
of providing an elastic medium of payment. Bollman, writing in
1810, offers the first instance> The needs of a country for circu-
lating medium, he observed, vary with the extent to which credit
is used, and with the rapidity with which property is transferred.
A currency of gold and silver lacks the “inherent quality of adapt-
ing itself to the exigencies of the times.” 3 The possibility, frankly
1 Gouge, Short History of Paper Money and Banking in the United States (1833),
p. 62. Colwell, who held in its most extreme form the doctrine that bank credit
should improve upon a purely metallic currency through its elasticity, criticized
convertibility on the basis of the perverse elasticity that Gouge emphasized. But
Colwell’s solution was the issue of inconvertible bank notes. Ways and Means of
Payment (1859), pp. 12, 169, and passim.
I have found only two other critics of banking who dealt with the claim that
elasticity is one of the desirable qualities of bank currency. Editor, Democratic
Review (1837), i, 114; Fisk, Banking Bubble Burst (1837), p- 24-
2 Probably no great significance is to be attached to the following words of
Franklin: “It is impossible for government to circumscribe or fix the extent of paper
credit, which must of course, fluctuate. . .. Any seeming temporary evil arising must
naturally work its own cure.” Franklin (in collaboration with Whatley), “The
Principles of Trade” (1774), Works of Franklin, ii, 308. Cp. Ibid., p. 417.
3 Eric Bollman, Plan of an Improved System of the Money Concerns of the Union
(1810), p. 9.
Bollman (1769-1821) was a physician and apparently no little of an adven-
turer. Born in Germany, he became successively a resident of France, England,
Austria, and the United States. He came to this country toward the close of the
eighteenth century, upon his release from an Austrian prison into which he had been
thrown for an attempt to free Lafayette from just such a plight. He remained here
