Thanks to Roger Sandilands for the material from Currie. We owe a lot to
Currie for his earlier article on "The Decline of the Commercial Loan".
There he showed that the merger movement, and the growth of self-financing
by corporations, shrank the demand for commercial loans from banks and
forced them into the dangerous mortgage market.

How he segued from that into his campaign against what he termed the "real
bills" doctrine remains hard for me to comprehend. Roger, a deep student of
Currie, is the man to explain it, and I would welcome his analysis. Some
points are:

1. The fact that dd's did not rise greatly after 1925 does not belie the
fact that their dependence on real estate collateral rose greatly, since
commercial loans, by Currie, were declining.

2. My initial posting did not, as implied, specify deposit expansion after
1925. It would include a longer period, including W.W. I. The national debt
rose then, and then fell during the 1920's, as Andrew Mellon sought to pay
it down. For this and its "reverse crowding-out" effect I grudgingly give
him credit, but did he foresee that driving investors into the private
sector could be asset-price-inflating, and not just asset-creating? This
loss of government securities, at any rate, may have been another factor
forcing banks to seek other investments, including shoestring financing to
land developers and speculators.

3. How did Currie define the "real-bills" doctrine? As Lloyd Mints
documented so exhaustively (and tiresomely) it has been an epithet of
multiple meanings. So when Currie used it as a club to beat certain Fed
Directors I began to wonder if it were to him an analytical scalpel or an
oratorical bludgeon?  I know my good friend Roger, whom I esteem highly, in
turn esteems Currie highly, and will explain Currie's position ably and
sympathetically. (It takes one Scot fully to understand another?)

4. Currie came under extreme pressure from various red-baiters who
eventually drove him into exile from the U.S.  Whatever their motives and
whatever of his positions offended them, I do not know, although I am sure
Roger can enlighten us. The relevance here is that this political factor
affected and twisted the reception of his ideas in academia, and should be
taken into account.

5. When I wrote above that Roger is the "man" to explain it, it was not a
slip. It was to signalize the fact that almost all participants in this
discussion are male. I find that distressing, but that is not the point
here. The point is that something drives the females away from our dialogue,
and it might be helpful to understand why. 

6. When loans are repaid but not renewed, or replaced with new loans, the
effect is as though the banks simply swallowed up the money. To interpret
this as hoarding or oversaving or a leakage from the circular flow of income
is to blot out the role of deposit contraction, and looks to me like a major
oversight.

Mason Gaffney