Four western states-Illinois, Missouri, Kentucky, and Tennessee-went to the length of establishing state owned inconvertible paper. The measures were only adopted after keen controversy. Many writers advocated more ambitious schemes of a federal inconvertible paper money. None came to a vote in Congress, but the House asked Secretary of Treasury Crawford to report on the desirability of such a plan. Crawford's rather reluctant rejection buried the idea. His own paper scheme, though finally rejected by him, drew sharp comment, which incidentally provided some keen analysis of monetary problems and business fluctuations. The basic argument of the monetary expansionists was a need to relieve an alleged scarcity of money, thereby eliminating the depression by aiding debtors and raising prices. The more sophisticated inflationists added their contention that the rate of interest depended inversely on the quantity of money, and that expansion would therefore lead to a beneficial lowering of the rate of interest, and hence to restored prosperity. The "sound money" opponents of such schemes formed a majority of leadingopinion. Their major argument was that depreciation would ensue from any inconvertible paper schemes. But in the process of forming their opposition, much higher-level analysis was elaborated. Many hard money writers formulated a monetary explanation of the business cycle -seeing the cause of depression in an expansion of bank credit and money supply, a subsequent rise in prices, specie drain abroad, and finally contraction and depression. Monetary expansion would only renew this process and prolong the contraction necessary to liquidate unsound banks and reverse the specie drain. The only cure for the depression, they concluded, was a rigid enforcement of specie payment. Sound money writers conceded that monetary contraction would bring temporary disturbances, but declared that any legislative intervention would only aggravate the situation.
