PRINCIPLES OF NOTE ISSUE I3I

years.” ! Yet suggestions for the public or private issue of paper
money backed by land, in all stages of crude naiveté, continued
to recur.
The necessity of maintaining the convertibility of bank notes
was most frequently questioned during the period of suspension
of specie payments by most of the banks outside New England
that began in the fall of 1814. During the years 1815 and 1816
the advocates of an inconvertible currency became quite numerous.
 They sought to show that the premium on metallic money
which existed at the time in terms of the notes of the suspended
banks was to be interpreted, not as a depreciation of the paper
money, but as an appreciation of gold and silver. The English
writers of the Restriction Period, then drawing into its later
stages, undoubtedly exerted a considerable influence in this
discussion.?

! Florida, Committee on Corporations, Report (Feb. 5, 1842), in U. S. House
of Representatives, 29th Congress, 1st Session, Document 226, p. 753.
Arkansas blithely established her own State Bank upon the thesis that, “as a
correct test of an adequate circulating medium, properly proportionate to the demand
 of industry and commerce in every civilized society, we may assume it as a
principle applicable to all stages of society, that the active capital of a country
should bear a fair and reasonable proportion to that which is fixed and permanent;
and whenever real estate is converted into active capital at a fair valuation, and
money can be obtained readily, at a reasonable rate of interest, on secure mortgages
of real estate, that country is making rapid advances in a commercial and agricultural
 point of view; and without banking facilities such cannot be the case.” Report
of the Special Committee on Banks (Oct. 4, 1836), in U. S. House of Representatives,
 35th Congress, 2nd Session, Document 121, p- 173.
How tenacious is the lease on life of some primitive fallacies is illustrated by the
Report to the Senate and House of the State, made November 1, 1810, by the Bank
of the State of South Carolina. After dilating for some forty-six pages on the inadequacies
 of a specie currency in a country subject to an unfavorable balance of
trade, the report urged that the government issue inconvertible paper money on the
basis of real estate as security. “We believe,” these responsible bankers declared,
“that if it were once to be established as a principle of national economy, that such
a currency should in no case be issued, unless on ample security pledged for its repayment,
 the government would no more be induced to depart rashly from such a
principle, than to issue metallic money of a debased and depreciated standard.”
A sufficient safeguard would thus be present, it was thought, against overissue.
(Report, p. 54.)
* The question whether a disparity between paper money and metallic indicated
2 depreciation of the former or an appreciation of the latter was discussed in the
colonies three quarters of a century before the beginning of the English Restriction