SUMMARY 
IOI 
automatically regulated by the requirements of business generally 
meant thereby that the currency is thus made to vary in amount 
exactly as it would were it entirely metallic! There were a few, 
however, who saw that the ebb and flow of modern commerce 
call for a more elastic currency. In this respect, they held, a 
mixed currency of bank notes and specie is better than one com- 
posed of specie alone. Yet the verdict of an overwhelming ma- 
jority was that the ideal norm is that of a metallic currency, and 
that neither their convertibility, nor the manner in which they 
are issued, prevents a currency of which bank notes compose a 
part from deviating from this standard. In part the prevalence 
of this view may be attributed to the fact that accommodation 
loans figured largely in American banking practice, and in part to 
the obstacles in the way of the prompt redemption of bank notes. 
Even Gallatin, a sane and friendly critic of banking, was inclined 
to think that the use of bank notes, because of their fluctuating 
character, is attended by a net disadvantage. 
On the currency side, then, banking was credited by most of 
the writers with offering an economical substitute for coins of the 
precious metals, and to this advantage a half-dozen writers added 
that of introducing a desirable elasticity into the media of pay- 
ment. Against this was placed the disadvantage of a fluctuating 
monetary standard. 
With respect to those aspects of banking that have to do with 
the provision of general media of payment, the most important 
and most wholesome influence was exerted by the doctrine that 
bank-note inflation merely raises prices. With respect to banking 
as the source of loans to business men, the influence of the quan- 
tity theory was to hamper the development of sound principles. 
Even to the end of the period but few freed themselves from the 
notion, illogically derived from the quantity theory, that banks 
can lend to their customers only so much effective purchasing 
! The doctrine that a currency composed of both paper and specie should at all 
times correspond in quantity to one wholly metallic is often denominated the cur- 
rency principle. (E. g., see Palgrave’s Dictionary, i, 472.) But not all the disciples 
of the banking principle would have dissented; the two schools differed mainly in 
their opinion as to the need of regulation to achieve the desired end.