198 BANKING THEORIES IN UNITED STATES

lutely necessary to keep up a due proportion between the medium
of trade and the amount of trade,”’! agreed with Dew. Price
changes are caused by the conditions of supply and demand with
respect to particular commodities, by catastrophes, “silly tales,”
and what not.? A bank currency simply adjusts itself to these
changing conditions. Another writer, reviewing Walker’s Nature
and Uses of Money and Mixed Currency, urged that paper money
‘‘is not a measure or standard of value; neither does it influence
prices any further than so much credit. It is a substitute for gold
and silver, as a check, or a draft, or a bill of exchange, or a negotiable
 note is.” * Walker, this critic argued, “assumes that the
banks create and regulate the business of the country, when, in
fact, the business exists, and the banks come in to afford facilities
for transacting it.”” ¢ Variations in the volume of bank notes are
as much a consequence of conditions of commerce and industry
as are changes in the magnitude of car loadings.
Willard Phillips, the author and editor, likewise denied the
possibility of overissuing convertible bank notes, and then carried
the attack further. Banks are first to take measures against an
impending pressure.

They serve as barometers to show the state of the commercial atmosphere.
And since business will have its floods and ebbs, and the spirit of enterprise
and production must necessarily be checked, for a time, the more promptly
an approaching crisis can be seen and provided against, as far as practicable,
the less the community will suffer.5

Dew seemed ready to grant that banks, if they play a passive
part, on the whole, in the expansion of their credits, should be
held responsible for the extent to which they permit inflation to
go. “I have no doubt,” he wrote, ‘that a well-managed banking
system upon proper principles, under the influence of the laws of
trade, might become the best possible check on wild speculation.
. Because banks, by their more extended relations, and a more
1 Hildreth, Banks, Banking, and Paper Currencies (1840), p. 157.
2 Idem, Letter to Marcus Morton (1840), pp. 4 ff.
3 George Ward, “Causes that Produced the Crisis of 1857,” Hunt's Merchants’
Magazine (Jan., 1859), xl, 20.
8.70id., p- 23.
5 Phillips, Manual of Political Economy (1828), p. 255.