The H.C. Carey School of U.S. Currency Doctors: A "Subtle Principle" and its Progeny

Henry C. Carey led a school of post-Civil War U.S. currency doctors prescribing an “elastic currency,” expanding and contracting according to commercial needs. The problem for the Careyites was reconciling elasticity, which implied inconvertibility with gold, with the related aim of decentralized financial power. Careyite currency doctors included, among others, Wallace P. Groom, editor of the New York Mercantile Journal, and Henry Carey Baird, Carey’s own nephew and inheritor of his mantle. Their prescribed reform of the banking system featured a financial innovation that would remove superfluous currency from circulation while supplying what was needed. The innovation was an “interconvertible bond,” a debt instrument of the U.S. Treasury that was to be issued upon demand and redeemable for currency at the option of the holder. Its function was supposed to be like the mechanical governor of a steam engine, operating by a “subtle principle” that obviated human governing power and discretion. The Carey school’s prescription and its rationale remained salient up to the advent of the Federal Reserve System.