£3 BANKING THEORIES IN UNITED STATES

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its coin should leave the creation of paper money “to the sport
and caprice of petty corporations,” became the despair of many.
Analogy between the banker and the counterfeiter was frequently
drawn.? Amasa Walker regarded the variations in prices introduced
 by a mixed currency as the chief cause of bankruptcies,
laying it down as a “fixed law” that “the bankruptcies which
take place in any community are just in proportion to the expansibility
 and contractibility of its currency.” :
Meanwhile the theory, developed in England, that convertible
bank notes admit of no overissue, was not without its American
adherents. Smith, the starting-point for the English and American
 discussion alike, had denied that paper money can depreciate
the currency as a whole, contending that it can but become depreciated
 itself with respect to gold and silver coins. As for convertible
 bank notes, they can never increase the total circulation.

The whole paper money of every kind which can easily circulate in any
country never can exceed the value of the gold and silver, of which it supplies
the place, or which (the commerce being supposed the same) would circulate
there, if there was no paper. . . . Should the circulating paper at any time
exceed that sum, as the excess could neither be sent abroad nor be employed
in the circulation of the country, it must immediately return upon the banks
to be exchanged for gold and silver.
The latter would be exported, promptly restoring the currency to
its original quantity.

1 Baldwin, 0p. cit., p. 64.
2 Davies, Bank Torpedo (1810), p. 17; Committee of Philadelphians, Report
(1829), Free Trade Advocate, i, 313; etc. Ricardo was occasionally cited as authority
for this view. (See T. Cooper, Lectures, p. 144; Fisk, Banking Bubble Burst, p. 41;
etc.)
3 Amasa Walker, The Nature and Use of Money and Mixed Currency (1357), D- 33.
Cp. Gouge, Short History of Paper Money (1333), p- 33
4 Wealth of Nations, book II, chap. 2 (vol. i, pp. 283, 284). Franklin, in an essay
dated 1774, of which George Whatley was joint author, combated as erroneous
“the idea of the too great extension of credit, by the circulation of paper for money.”
_.. For “were it not certain, that paper could command the equivalent of its agreedfor
 value,” it would not be used. The paper is as useful as coin, ‘‘since the issuers or
coiners of that paper are understood to have some equivalent to answer for what the
paper is valued at, and no metal or coin can do more than find its value.” How
much or how little of Smith’s doctrine was implied, is not evident. Sparks, Works
of Franklin, ii, 417.