CHAPTER XVII

SUGGESTIONS FOR MODERATING THE CYCLE

Loan policy. — Surplus reserves at New York. — Abolition of the payment of
interest at New York. — The call-loan evil at New York.

OxrY Robert Hare, the chemist who occasionally, and with no
little ability, made economic writing a diversion,! ventured to
defend the cycle, questioning whether ‘the ultimate, or average
accumulation of national wealth” was not greater in consequence
of these alternating periods of activity and depression. ‘Such
fluctuations rouse men to extraordinary exertion, and by a reaction
 after each subsiding wave, cause business to revive with a
renovated and accumulated force. It is in consequence of the
stimulus and reaction which accompany or follow great catastrophes,
 such as are produced by floods or fires, that after a few
years, communities which have been subjected to them will appear
 to have made advances even greater than might have been
anticipated, had no such deteriorating accident occurred.” ?
Other writers, however, entertained no doubts as to the evil of
the cycle, and earnestly sought measures for eliminating, or at
least moderating it.
The proposal most frequently made was the obvious one —
do away with the banks of circulation to which so many ascribed
the instability of business conditions; or regulate their note issue
so as to prevent fluctuations? Gouge, Raguet, and Amasa

1 See Chapter VIII.
2 Hare, “Do Banks Increase Loanable Capital?” Hunt's Merchants’ Magazine
{June, 1852), xxvi, 705.
3 H. C. Carey, on the other hand, thought that a laissez-faire policy with respect
to banking, permitting everyone to engage in it without legislative restriction, was
the proper specific. He maintained this thesis at length in The Credit System in
France, Great Britain, and the United States (1838) and in numerous later writings.
See also, House of Representatives, Committee of Ways and Means, Report of
March 5, 1838, p. 3, and “Moral of the Crisis,” Democratic Review (Oct., 1837),
1.:110.