Mason Gaffney invites me to reconcile Lauchlin Currie's article on "The Decline of the Commercial Loan" (QJE August 1931) with his campaign against the real-bills doctrine (as, for example, in his paper "The Failure of Monetary Policy to Prevent the Great Depression of 1929-32", JPE April 1934, or in his 1934 book. Actually the phrase "real-bills doctrine" was not Currie's but Lloyd Mints's (whom Mason mentions and who was influenced by Currie). Currie himself referred instead to "the commercial loan principle of central banking" (hence identifying it with the Banking School as against the Currency School -- the latter more focused on the quantity of money than the quality of loans). He also referred to it as "the needs-of-trade doctrine", with its focus on short-term, "productive" commercial loans as the proper business of commercial banks. Currie's diagnosis of the onset of the Great Depression was that the Fed had become increasingly preoccupied with "speculative" and "unproductive" credits. These it attacked with monetary instruments (interest rates and open-market operations) that were ineffective against loans by banks and non-banks, but only too effective against the nation's money supply (purchasing power). He defined money as cash plus demand deposits (today's M1) and this was constrained to slower growth than real GDP. However, a gentle rise in the income velocity of money enabled nominal income (Pq) to be taken off the market with MV, with prices steady or falling. As the real economy turned down the Fed continued restrictive measures until the stock market burst. Then the cry was "liquidate, liquidate!" The Fed did too little too late to help the banks out of debt and a downward spiral developed. The Fed was not much interested in the money supply, and there was no series published on it until Currie's article in the QJE Nov 1933 on the income velocity of circulation. Instead the Fed focused on "credit" or loans. Banks and non-banks make loans based on savings deposits as well as demand deposits, and the Fed's volume of "credit" series bore little relation to current output and employment. Another of Currie's significant articles at this time was "The Treatment of Credit in Contemporary Monetary Theory", JPE Feb 1933, exposing the hopeless confusion surrounding the word credit. Incidentally, Currie also insisted that short-term commercial loans were in practice less liquid than marketable securities because banks, especially country banks, were reluctant to call in local loans to farmers etc with urgent seasonal needs. His 1931 Harvard PhD thesis was on "Bank Assets and Banking Theory" where the commercial-loan theory was subject to detailed criticism. I edited a special issue of the _Journal of Economic Studies_ in 2004 that includes chunks of this thesis, as well as many of his hitherto unpublished memoranda to Marriner Eccles and President Roosevelt when he was their close economic adviser at the Fed (1934-39) and in the White House (1939-45). I have electronic copies of much of this that I can send anyone interested. On Mason's other question about why "Currie came under extreme pressure from various red-baiters who eventually drove him into exile from the U.S.", first he was never "in exile". He was recruited as the chief of the first World Bank comprehensive country study mission to Colombia in 1949 [it included Richard Musgrave who died last month] and stayed on at the urging of the Colombian Government. He did not flee the country, and indeed returned to give evidence to a grand jury in the famous case of Owen Lattimore in December 1952. But the atmosphere in the US at that time was poisonous and he chose to stay in Colombia after marrying a Colombian. The US refused to renew his passport in 1955, ostensibly on the grounds that as a naturalised US citizen he had to remain resident in the US (this rule has since been declared unconstitutional). When the "Venona" papers were declassified in 1996 Currie's name cropped up nine times in Soviet wartime cables. It has suited some neoconservatives to regard this as evidence that Currie was a Soviet spy. I deal with this -- and the related case of Currie's friend Harry Dexter White -- in a paper in HOPE, Fall 2000 and (with James Boughton of the IMF) in a paper in _Intelligence and National Security_, Fall 2003, entitled "Politics and the Attack on FDR's Economists: From the Grand Alliance to the Cold War". As for the effect of all this on Currie's postwar reputation and influence -- which Mason also asks about -- I mention in my biography (Duke UP, 1990) that Friedman & Schwartz (1963) ignored his seminal contributions in the 1930s partly on the grounds that, as Friedman said later to Karl Brunner when questioned on this: "Currie? He is a fugitive from justice somewhere in South America". But Friedman later offered an explicit 'mea culpa' for his neglect, in a letter to David Laidler that was mentioned in the latter's article on the origins of the Chicago School (JPE, December 1993 -- which coincided with the date of Currie's death). Roger Sandilands