Thanks to Mason Gaffney for his request that I provide further information on Lauchlin Currie's monetary economics in the pre-General Theory years. In particular he asks what were his favoured alternatives to commercial loans, given that these had been declining as a proportion of all bank assets (to about 10 percent by 1930), and that anyway they were, paradoxically, the least liquid of bank assets (in the sense of their marketability). As Mason indicates, the key thing was to maintain the flow of purchasing power, and one of Currie's main conclusions in his January 1931 PhD thesis was that "it is evident that the commercial loan theory of banking is incompatible with the view that the chief function of the banking system is to supply purchasing power, and that a central bank should control this supply in the interests not only of commercial borrowers but also of the interests of the community in general." Thus he was relatively relaxed about bank security loans, and in general thought that banks' loanable funds had in the late 1920s flowed into channels where they could most profitably be used by industry in a prospering economy. Inter alia he argued that security loans were not responsible for the rise in interest rates (instead he blamed the Fed); and nor was the rise in stock prices nearly as irrational or unselective as many believed. Banks' holdings of government bonds also helped to keep them fully loaned up - essential if the Fed was to exercise effective control over the supply of purchasing power. Thus Currie also urged a broadening in the range of assets eligible for rediscount in times of stress, while not ignoring "the safety factor": "The Federal Reserve Act should be amended so as to make the question of eligibility turn on the safety factor, it being within the discretion of the board to define the degree of safety required. This would make the member banks' notes, secured by marketable securities as well as good commercial loans, eligible for rediscount." He also found that "there is no question that security loans and investments have had a better record of safety than commercial loans." I am sympathetic to Mason's concerns over rising land and asset prices being used as collateral for new loans, thus feeding a potentially unsustainable asset price boom. But Currie seems to have thought this "merely one of many factors contributing to the business cycle and not an independent cause". The volume and composition of loans "can furnish little guidance to central banking authorities [relative to other available indicators of the state of the economy] in the determination of their policies." The relevance of all this to the textbook debate is that the AD-AS apparatus and/or the General Theory was not needed to explain the Great Depression. Aggregate demand is the flow of total expenditures and the question is whether and why the expansion of the means of payment (cash plus demand deposits) is adequate, after allowing for changes in velocity, to purchase the full employment level of output at relatively stable prices. Economists such as Currie understood by 1930 that fiscal policy needs to be coordinated with monetary policy to achieve this goal, especially if the private sector would not or could not spend into circulation all of the available cash and bank reserves. In those circumstances the supply of money would fall and would need to be boosted, (i) via full exercise of the central bank's lender-of-last-resort duties, and if that is not enough (ii) via increased government spending financed by the creation of new money and/or the activation of existing idle balances. (Fiscal policy can only work through its impact on money.) But yes, as Mason indicates, before the General Theory and even after, this kind of fiscal intervention was widely regarded as both economically and politically dangerous, and it was even common to label New Dealers like Currie (as well as Keynes himself) as communists bent on debauching the currency. On the way that the first edition of Samuelson's Economics was thus treated, see W Solberg and R Tomilson, "Academic McCarthyism and Keynesian Economics", HOPE, 29:1 (1999). Roger Sandilands