73
admitted, of an excessive quantity of notes being issued, would be
avoided if one were but to allow “business itself to become pro-
ductive of the means of its transaction — of money; and again,
to cause the diminution of business to produce its absorption.”
This can obtain only when bank notes are used; metallic money
and government paper money do not automatically adjust them-
selves in this way to the necessities of trade, because it is not
through trade itself that they are brought into existence. But
when bank notes are issued, as they should be, in the discount of
short commercial paper arising out of actual transactions, they
expand with the latter, and each note so issued returns to the
bank at the maturity of the bill discounted, continuing in circu-
lation only in the event that it is still needed, as evidenced by the
offer of a new bill for discount.
Condy Raguet,® whose writings, though able, contain a variety
of views that slights but few, was one of those who insisted that
banks were of no utility other than that derived from their sub-
stitution of an inexpensive for a costly currency, and from their
service as intermediaries between borrowers and lenders. Yet
with the same breath he paid tribute to the elasticity of their
media of payment. The discounting of short real paper he re-
garded as the ‘legitimate operations of banking,” whereby the
quantity of currency is made to vary with the needs of trade.
“Thus would the elasticity of the banking principle accommo-
AN ELASTIC CURRENCY
until 1814, later paying us another brief visit. During his stay in America he be-
came implicated in Aaron Burr’s conspiracy of 1806.
I Bollman, op. cit., pp. 11-13.
Raguet (1784-1842) was one of the most interesting of all the writers on bank-
ing. He became a successful merchant in Philadelphia, then served as colonel in the
War of 1812, after which he studied law and was sent as consul to Brazil. He later
represented his district in the Pennsylvania legislature, and his reports as chairman
of its committee on banking show a remarkable insight into some of the more diffi-
cult problems of banking theory. His versatile interests led him to become an ardent
free-trader, and he published a series of economic journals devoted primarily to the
doctrines of free trade and of banking reform. The fact that each seems to have
been a financial failure makes them none the less valuable to us. In 1839, three
years before his death, he published a small volume on Currency and Banking, con-
taining a systematic exposition of his views, for the most part made familiar to us
in earlier writings. It was reprinted in England in the same year and translated into
French in 1840.
