mmmmmmm THE UNIVERSITY OF ILLINOIS LIBRARY AN INQUIRY INTO THE Real Difference between a5lual Money ^ CONSISTING OF Gold and Silver, AND Paper Money of various Defcriptions. ALSO, AN EXAMINATION INTO The Constitutions of Banks ; AND The Impoflibility of their combining the Two Chara6lers of Bank and Exchequer, BY MAGEXS DORRIEN MAGENS, ESQ. LONDON : PRINTED FOR J. ASPERNE, AT THE UIBLE, CKOWN, AND CONSTITUTION COHNHII.L, B/ T. Maiden, Stictbour«i:-Lane, LODilI d-9tr«ct, 1804. AN INQUIRY INTO THE Real Difference between aSlual Money AND Paper Money. [Price Two Shillings and Sixpefice.} PUBUSUeO SYTI/B^SAME AUTHOR, THOUGHTS UPON A NEW COINAGE OF SILVER, more especially as it relates to an ALTERATION IN THE DIVISION OF THE POUND TROY, CONTENTS. CHAP. I. A Definition of -what circulates as Money, with a Defcription of certain Bills of Exchange^ — — — Page i CHAP. II. Bills and Notes further confidered, — Page 14 CHAP. III. Of Notes of Hand, Banks, ^c. — Page 24 CHAP. IV. The SuhjcEl continued, — — Page 40 CHAP. V. Comparifon of the Banks of England and Avflerdam. — Conclufion. — Page 62 ADVERTISEMENT. J^INCE the Reftriaion of the Bank Pay- ments in Coin, a Variety of Ideas have been brought before the PubHc, in different Pub- lications, as to the pra6licabiHty of continu- ing a large Paper Currency in Circulation, with a comparatively fmall proportion of Specie ; or even, in fome Cafes, with none ; and leading to an Opinion that Gold and Sil- ver are nearly unneceflary; while other Pamphlets fpeak more doubtfully upon the Subjeft ; and others, again, maintain an op- pofite Opinion, and cenfure the prefent ex- tenfive Circulation of Paper, as tending to depreciate general Credit, and caufe an ex- travagant rife in the Value of all Commo- dities. From the prevalence of fuch different Opinions, therefore, it is the defign of the following Sheets, to examine how far Paper is adequate to perform the Operations of Money, by confidering their relative Ufes in feveral different Points of View. 1 As 2 vantages, which renders the poflefiion of them defirable to the inhabitants of all countries, folely for their intrinfic worth. Paper money of itfelf, as to materials, &c. is of no value whatever ; but, in proportion only as it reprefents a larger or a fmaller command of money, by entitling its pofleflbr to more or lefs gold and filver, is its value afcertained : for it may in fome cafes (fuch as with the bank receipts in Holland) be worth more than the current money ; or, as in England, in the ftiape of an exchequer bill, bearing intereft : whereas, if confidence in the fecurity of exchanging the paper, as purported to be done on the face of it, or otherwife, in a way equally agreeable to the holder, is withheld, it may become lefs, and only command a part of the money it is pro- fefled to circulate for. From hence it ap- pears, Firft, that real money, viz. gold and filver, commands univerfally, the produds and commodities of every country, from its own fpecific qualities, and intrinfic value ; fo that a ftranger, in any quarter of the globe, in pofleflion of either of the two metals, is fecure of procuring every thing that is pro- duced there, whether for purpofes of necef- 1 fity, s fity, or luxar)'. And fecondly, it Is alfo evi- dent, that paper money, though not afford- ing thofe advantages, as to intrinfic value, which is derived from aftual money, has yet circumftances attendant upon it, which ren- der it, in many cafes, more beneficial, both to the public and to the ftate ; and of greater convenience to the commercial world in general : but the principle of perfeft con* fidence is requifite to give it its full advan- tages, which can, of courfe, extend no fur- ther than where the parties ifiuing the paper are fully known ; for the ftranger, with his bank bill, or bill of exchange, of another country, will not procure what he requires, until, by the intervention of a third perfon, or fome other means, he makes known, and procures confidence, as to the real value of the fecurity. This difference being acknowledged to exift between the two forts of money, an in- clination naturally arifes in the mind, to in- quire into the particular advantages apper- taining to each ; where the benefits prepon- derate in favour of either ; and how far they may be both made ufe of, in promoting the wealth and credit of a nation. B 2 The • The application of gold and filver to pro- cure the neceflaries or conveniencies of life, Ls fimple, and univerfally intelligible, when the tranfa61ion occurs between two perfons in the fame place ; the thing required being made over upon the payment of a certain quantum of either of them equivalent to its reputed value : but when thefe two perfons making a bargain together, refide in different countries, and under different governments, it is then, that the paper becomes a more con- venient mode of payment ; though the con- tra6l is made for a certain fum of money. Thus Mr, Bull, of London, fends Mr, Gre- nouille, of Paris, cutlery ware, &c. to the amount of loool. fterling, which, of courfe, he covenants to pay ; and had he no other means, muft confequently fend over gold or filver, of weight and finenefs equivalent to the acknowledged weight and finenefs of lOOol. fterling in England; but, unwilling to encounter this trouble and rifk, he inquires at the Exchange at Paris, if any Englifhman is indebted to any merchant there lOOol, fterling ; and he finds a Monjieur Raijin, a wine merchant, who has fent wines to Mr, Port, in London, to the above amount : he therefore therefore fays to him, " If you will give me an order upon Mr, Port, who owes you lOOoL to pay it to Mr, Bull, I w'ill give you the money here ; by which means I {hall dif- charge my debt due to him in London, and you will receive the money owing to you ;" liquidating thereby, the accounts between the four perfons by this tranfaftion ; while otherwife, with great expence and rifk, the money muft have been fent from Paris to London, and returned from London to Paris ; and this convenience arifes from the confidence placed by the parties in each other, for the fulfilment of the payment by Mr. Port when called upon to make it, rendering this paper bona fide money to all intents and purpofes, as far as the parties are known, and are fatisfied with the fecurity of the perfons pledged, and undoubtedly yielding a much greater facility in the payment for property tranfmitted from one country to another, than can ever be effefted by the adual tranfport of real money : though the fphere o^ accom- modation is fo limited, as not to entitle it to an extenfive circulation, as will appear in the further progrefs of this order, or bill, drawn by Mr. Raijin upon Mr. Port ; for, B ,3 oil on its receipt by Mr. Bull, he finds it will be a month at Itall before it becomes due, (if the gold itfelf had been fent, it would have re- quired fome time for tie conveying it :) where- as he wants his money immediately ; in con- fequence, he goes to Mr. Puffi the broker, to get it difcounted for him, who accordingly tenders it to various perfons ; but they de- cline giving cafli for it, being unacquainted with the folidity of the parties. At laft, however, Mr. Plumbs the banker, knowing the names on the bill to be folvent, and re- fpeftable, furnifhes the money; proving in- difputably, that this paper, though afting as money in the fphere where the perfons ac- knowledging themfelves bound to difcharge it are known, is yet only equivalent to fpecie in faft, under fuch cireumflances ; though it is better than money, to the extent of the tranfa6lion, becaufe it afforded greater convenience, with perfeft fecurity, to the range of circulation required. But probably, had the wifh been to have made this note more generally current, the want of con- fidence in the parties, who might be un- known to many through whofe hands it would pafs, would require them to obtain pther perfons to guarantee the payment, and make make them willing to receive it for moneys This additional aflillance being given, the circle of currency may be extended much wider ; but then it is the confidence placed in the endorfer, and not in the aftual parties to the bill, that gives it this further power of operating as money ; fo that, to caufe it to pafs out of its original deftination, it is ne- ceffary to make it a frefh inftrument, by the affifling fecurity of the names of perfons known at the place where it is to be current; and even then it muft be very confined ; becaufe, though it may be duly efteemed in London, yet in Liverpool, or Manchefter, it may be confidered doubtful ; and at Amfter- dam, or Hamburgh, totally difcredited ; clearly demonflrating, that, in a general point of view, this piece of paper can never pafs univerfally, as fpecie would do, for loool. though, when limited to its particular diftrift, it becomes fully equivalent to it, with advantages of convenience, and accom- modation, which makes it coveted in every tranfaftion of a fimilar nature to the above. Let us, however, fuppofe that a country we trade with, fends us of its produce to th^ value of ioo,oool. while we only fupply it with 8o,oool. in that cafe, for the 20,000). B 4 the the difference between thefe fums, no paper of the above defcripnon can be obtained, and gold or filver mufl be fent to the amount, to that country, (the balance of trade being fo much in its favour.) Thus England is annually obliged to fend bullion to China ; and if it could not be procured for this pur- pofe, her fhips muft return unladen, becaufe they do not take a fufficient quantity of our merchandize in return, and, of courfe, bills cannot be remitted. As far, therefore, as concerns this de- fcription of paper money, i. is manifeil, that for comrnon and reciprocal commercial deaU ings, it i^ more defirable than aBual Jpecie ; but it goes no further, and will not compare with money upon an extenfive fcale. It is further to be remarked, that bills of exchange paid in London, will be discharged by bank notes, (of which hereafter,) while thofe paid in Paris, muft be difcharged by gold or filver. Why fo ? Becaufe there is confidence in England, in the eftabliftmient of the Bank ; and in France, there is no con- fidence in any circulating reprefentative of money whatever. But, to proceed : there is another defcrip-. tion of bills of exchange, negociated upon the the Exchange, as in the former cafe, and in every refpeft, to appearance, fimilar : the concealed difference, however, exifting, of no value having been given for them. The tranfaction arifes thus : two Mer- chants (the one, we will fay, in Amfterdam, the other in London • conceiving a confidera- ble advantage may be derived from purchaf- ing a large portion of a commodity at market, without fufficicnt capital for the purpofe, agree that A, at Amfterdam, who is to make the purchafe, and obtain the neceffary money, fhall draw upon B, in London, who accepts the bills, fuppofe to the amount of io,ocol. knowing, at the time he does it, that he has not money to difcharge them, w^hen they be- come due, but by re-drawing upon A at Am- fterdam previous to that period arrivirg, which he accordingly does ; and A accepts them alfo, knowing that he cannot pay them, unlefs the commodity he fpeculated upon can be fold, and the money paid in time, which may occur; and thus the tranfaftion ends: but let the reverfe happen, (much more fre- quently the cafe,) and which it is here intend- ed to obfervc upon ; and mark the progrefs ! the goods are either fallen in value, or are not convertible 10 convertible into cafh in time to provide for thefe bills, and A is under the neceffity of drawing a fecond fet of bills, and B of re- drawing as before, which, from his credit, he is enabled t o do ; but by degrees availing themfelves too often, and to too great an amount, of this eafy mode of railing money, they are induced, for various purpofes alfo, and often without any real value at bottom, to carry on a fimilar mode of creating money, fo that the world (that is their circle) feeing fo much of it, lofe all confidence in paper with thofe names upon it, and it dwindles filently into difrepute, and is not eafdy difcountable or negociable; while the parties expeding thefe bills to afford them ample fupphes for the various engagements they have made, are difappointed, and endeavour to fave them- felves from finking, by calling in what money they have laid out ; but they find it difperfed, lent on precarious fecurities in the hope of great profits, in Weft India eftates, fpeculative canals, or diverfe other fchemes ; and having no refources left, are under the neceffity of making the beft compofition in their power with their creditors. Such 11 Such bills as thefe, of which there are by far too many, do not ftand by any means upon the fame ground as the former; and, inftead of being better than money, are abufes of cre- dit, and as thoroughly a deception upon the pubHc, as iffuing bafe coin for fpecie would be ; the bill itielf bearing thefe words, " for value received," or, "value in account;" which is a pohtive deception. After the above explanation of this fort of paper, itwould bewaile of time to make any comparifon of it with adual money; but, in or- der to extend the ideas a little to the traft of Country, paper of this defcription maybe made toencompafs, let us not confine the tranfaftion to one houfe in London, and onehoufe in Am- flerdam, as leaguing together, butletusfuppofc (and numerous inftances might be produced)a houfe in London, another in Hamburgh, ano- ther in Cadiz, another in Amfterdam, another in America, or where not, entering into cove*- nant together to draw upon each other as convenience fuits, for jobbing in the ex-- change ; or fometimes combining together to monopolize an article, fuch as camphor, cochineal, or particular drugs, for their mutual benefit ; here, the credit, as may be fuppofed of 12 of the different houfes taken individually, and their great capital when taken in a mafs, may- give fuch confidence through a wide range, and appear fo fatisfaftory to a large clafs of people, that their paper to a very great amount may be brought into circulation with apparent eafe, though far from commanding the fame efteem as paper of the firft defcrip- tion, or of anfwering its beneficial purpofes ; becaufe it has no folidity ; for it is built upon an imaginary foundation, the hopes of repay- ment confifting alone, in a fpeculation of a material alteration in the local value of mo- ney, or an unufual and exceffive price of a commodity fo greedily monopolized ; for which, as it often occurs, fubfl:itutes are intro- duced, the fabric totters, and, as has been fully afcertained of late, the parties fink into difgrace and oblivion, except in the recollec- tion of thofe whofe faith induced them to put confidence in their paper : thefe, moreover, are commonly the very perfons who are confl:ant- ly complaining of an infuflBciency of circulat- ing medium, not difcerning the want of credit in their paper ; while perfons trading upon dif- ferent principles, find no want of circulation. The loo millions of commodities imported and 13 and exported through our cuftom-houfeSj^are not delayed upon the quays for want of it ; neither do the merchants of fuitable capital find it neceflary to difcount every piece of paper in their pofleflion, to provide for the payments : well conftituted houfes know the mifchief of fuch arrangements ; and though every one may occafionally foreftal their re- ceipts, yet they have too much judgment to depend upon a conflant fupply of capital from fuch fources : fuch a foundation is laid in too fhifting materials, to give any confidence in the fabric Handing the fevere fhock of a ftorm. * See annual Accounts presented to the House of Lords, of the real Value of Imports and Exports. CHAP- 14 CHAPTER IL BILLS AND NOTES FURTHER CONSIDERED. PROCEEDING in the examination of the different bills and notes in daily ufe, we find one fpecies fabricated very frequently by parties in intimacy with each other, called accominodation, ortiftitious bills, where the perfon accepts a bill without ever meaning to pay it ; but leaves it with his friend the draw- er to get difcounted, and furnifh him thereby with a fum of money as capital for the time being. Had it fuited him, he, perhaps, would have provided him with the money, inftead of his name to borrow it upon y but his all being employed for his own ufes, he pre- fumes upon his credit, to enable his friend to obtain it from another channel, where his own name fingly might prove infufficient. Bills of this kind, when made for the purpofe of affifting a young houfe with money, pof- feffed of extenfive means of bufinefs, but fmall capital, may be confidered as ufeful,but can never enter into competition with a6lual money ; while, in another point of view, they are highly mrfchievous; the deception of value 16 value received, being upon the face of the bill, where 7io value is reprefented. Mr. Thornton, however, does not appear to fee them in that light. In his Inquiry into the Nature and Effefts of the Paper Credit of Great Britian, page 30, he fays, " fo far, moreover, as bills and notes conftitute what is called the circulating medium of paper cur- rency of the country, and prevent the ufe of guineas, the fiftitious and the real bill are upon an equality." But furely, taking into confideration, that the fiftitious bill may be created to any extent, and the regular bill only to the amount of the goods fold, or pro- perty transferred, and that the firft creates artificial capital for undue fpeculation, while the latter only caufes a fpeedy return to the trader, by converting thefe bills into cafh for the future concerns of his bufinefs, we muft feel confiderable difficulty in putting them upon the fame footing ; and it feems as if he himfelf felt the difference, by denying the certainty of notes being given in confequence of a real fale, as reprefenting real property. For he proceeds, " it may be obferved, that the notes given in confequence of a real fale ©f goods, cannot be confidered as, on that ac- 16 count, certainly reprefenting any actual pro- perry. Suppofe A fells lool. worth of goods to B at fix months credit, and takes a bill at fix months for it, and that B, within a month after, fells the fame goods at a like credit to C, taking a like bill, and fo on ; there may then at the end of fix months be fix bills of lool. each exifting at the fame time, and every one of them may poflibly have been difcounted: of all thefe bills, then, one only reprefcnts any aftual property." That fuch a tranfa6lion may take place is clear, and fix bills for lool. eachbe given for only lOol. of aftual goods ; but obferve how thefe goods carry aftual value through the whole of the fix bills. A fells his goods to B, and receives the note in payment ; the goods in B's hands reprefent the money, and are a fecurity to A for payment. B fells the goods alfo to C, and the goods in C's hands are a fecurity to B, to whom he gives his note for its difcharge: the queftion then is, How is A fecured ? Ex- actly as before ; that is, the goods fold by him to B are realized, and B holds value juft as before for the note given to A in aftual mo- ney, if he difcounts C's note ; or in the note itfelf, if he holds it, equally reprefented by the goods. 17 goods. But let us demonflrate this further, by making C inlolvent ; the goods fold him by B, proLeft him from lofs, and he recovers from the eilate of C, and can pay A ; but if there had been no actual goods fold to C, there would have been no eff'eds belonging to C's edate to fave B in the firft inflance, and all parties mull fuifer : whereas now, if thefe goods had pafied through the fix differ- ent fales alluded to, they would have prote6l- ed the whole, becaufe each man's bill is repre- fented by aftual value, having the money in hand, if he difcounts as foon as he parts with the goods ; or retaining the note in his own hands, if more convenient to him : either way the cafe is the fame ; or, in other words, the note is a receipt for the goods delivered, and a guarantee for the regular payment of them, when the lapfe of time ftipulated has expired, they being bona fide at the time of drawing the note in the poireffion of the perfon en- gaging to pay it : this perfon, therefore, with this lool. worth of goods, is entitled, in the way of trade, to receive it again, when he parts with them ; and fo on, toties quotiesy every fair proceeding fecuring the former creditor. Satisfied, therefore, as far as opinion goes, that a transfer of lool. property does fecure C each 18 each of the parties taking the fix bills for the lool. each ; it may alfo be prefumed, that the fa6l: of fiftitious bills being infecure, and a de- ception, cannot eafily be controverted. It is reafonable to fuppofe the Legiflature required the words value received to be infcribed on the face of a bill to render it a legal inftru- ment, and to guard againft thofe of the above- mentioned defcription ; for the fame reafon as it puts its own ftamp on the coin, to war- rant its circulation, and to diftmguifti it from what is bafe. Sometimes, in difcharge of their debts, per- fons give their promilTory notes ; but in fuch cafes it is fcarcely more than a declaration of paying at a given time, and adds but little to the convenience of the public. Notes iffued payable on demand, are, of courfe, diftin6l from thefe: they form the leading topic for confideration, in afcertaining how far, and in what proportion, they aflifl the wealth of a nation, and how they are circumftanced in the comparifon with aftual money. . At the time of the great failure of the country banks in the year 1793, the diftrefs occafioned the creation of a new kind <^ commercial paper, heretofore unknown, un- der the name of commercial exchequer bills. 19 bills, by which, upon the required fecurities being given, the Government became refpon- fible for ihe debts of individuals, by pledging to repay, at a fixed period, the bills iffued for their relief; and the plan was further extend- ed in 1795, for the benefit of the Grenada merchants. Examining thefe bills as relating to the fubje6l of inquiry, we find little varia- tion in them from the common exchequer bill; and, but for the peculiarity of the pur- pofe for which they were ifTued, it would have been unneceffary to have remarked upon them ; but as it corroborates the reafon- ing upon the mifchief of an extended circula- tion of paper, we could not pafs them over unnoticed ; and it was with no fmall degree of furprife to many perfons, that the plan was ever liltened to by that eminently great man, under whofe adminiftration they were granted ; he, who, in his fpeeches in Parlia- ment, had fo frequently enlarged upon the correftnefs of mercantile principle through- out the whole of Adam Smiths Writings, and whohad, with great jullice, quoted him as the guide of our fteps. To many perfons, I re- peat, it was matter of aftonilhment that, in this particular, he fhould forfake his direftor, C 2 and 20 and iinpofe a fcheme upon the mercantile world fraught with novehy and mifchief. * The merchant, Hke other prudent perfons, forefees florms, and prepares to guard againft them with all the ability he pofleffes ; but if his beft-digefled plans^ and long-ellablifhed traffic, are frequently thwarted by extraordi- nary and unufual means, his confidence in eftablifhed principles wavers, and he is led, from hopes of fupport, to aim at great profits, becoming fpeculator rather than merchant ; a charafter which unfortunately prevails gene- rally at this moment, and for the reafons ad- duced. But, fay the Government, What is that to us ? The trade of the country increafes, which is all we care about ; individuals muft look to themfelves. May not fuch a mode of reafoning * The final settlement for the Grenada bills granted in 1795, is fixed for Oct. 1S05; though, in the mean time. Go- vernment, in some instances, have dispensed with the origin- al secnrity, and have been under the necessity of issuing se- veral extents to large amounts, where the parties have totally failed in their engagements. Is it wisdom in a nation, may it not therefore be fairly asked, thus to throw Commerce out of its usual channel, and discourage the capitalist, whose credit alone creates that bond which fixes the mercantile supe- riority attached to this country, and which by similar means to the above is destroyed? Upon this principle it is conceiv- ed, the late application for similar bills has been totally re- jected by the wise Councils of these times. 21 reafoningbe liable to great fallacy? Trade will not admit of forcing ; it is the confumption which encourages it ; and manufaduring twice the quantity requifite, or exporting confidera- bly more than the wants of the Continent re- quire, may give a fallacious appearance of profperity, and is brought about by fuddenand unexpected fupplies of money, fimilar to the commercial exchequer bills, or the unreafon- able difcounts immediately after February, 1797 ; but conclufions drawn from fuch pre- mifes are all falfe, as the prelent moment of diftrefs for fpecie, and the laft few years, fully prove. If Government wifh to encourage trade, let them leave it to itfelf, and not injure any part of it, by partial and ill-underflood fchemes. From the confideration of the fubje6l thus far, as to what may corre6lly be called com- mercial paper, or fuch as is mod generally ufed in mercantile tranfaftions, w^here the places of refidence are, for the mod part, dif- tant from each other, and frequently the prin- ciples of government different, and which do not apply to one country in particular, but to all generally, it appears, that paper cannot be faid to confer the fame command as gold or filver, C3 In 22 In the firfl inftance, the common bill of exchange claims a fuperiority from its con» venienccj and maintains it avowedly in the confined circle in which it can a6l ; but the limitation of its fphere can only give it a local confideration ; and for the intended objeft of univerfal commerce, it can never operate as the grand luminary, but more properly refem- bles the light of the moon, which receives all its brilliancy from the fun-beams which illu- mine its furface; for as, in the latter cafe, without the fun, the moon would give no light, fo, without aftual money, bills of ex- change mull be unknown; the only eftimated intrinlic value throughout the world being gold and filver, and every fubflitute for them, merely reprefentative. In the other cafes ad^ duced, of different kinds of bills, they are found adapted to particular purpofes, and in- tended to command as much of the two pre- cious metals above-named, as poffible, from motives of advantage to the drawers ; for as thefe obfervations apply to the whole com- mercial world, we fhall find that, with the exception of thefe kingdoms and America, all bills are paid in adual coin, unless parti- cularly exprelfed to be otherwife paid ; or as in Portugal, where it is half fpecie, half pa- per, 23 per. Bank notes are peculiar to thefe king- doms : there is no paper in credit (at par) of that denomination to be found in Holland, France, or Germany; the bill of exchange is really paid in gold or filver, and every com- mercial tranfa6lion is carried on with real money. If this exception in favour of Great Britain and Ireland, denotes the confidence placed in their national banks, if I may apply fo improper an epithet to thofe called Bank of England, Bank of Scotland, and Bank of Ireland, (being independent companies,) let them guard with fcrupulous attention fuch great advantages, and proteft, with unremit- ting watchfulnefs, fuch a valuable attribute to the United Kingdom. CHAP- 24 CHAPTER III. OF NOTES OF HAND, BANKS, ScC. T7R0M the ufual couiTe of bill tranfaQions -^ more immediately relating to merchants, let us now conGder the hourly circulating paper, which pafTes from iiand to hand, commanding labour, manufa61ure, and pro- duce of every kind, with the fame power as aftual money. In the outfet, we have al- ready mentioned it as intrinfically of no value; but pofleffing fuch powers, its con- fequence muft be derived from fome effeftual fource : let us therefore irquire from whence this fource arifes, and to what extent it can be commanded; how far it can fupply the place of gold and filver, or what proportion of them is required to fecure the greateft wealth and profperity to a nation, with per- fed confidence. In every country there exifts a currency in money for the common purpofes of traffic and convenience, generally confiding of gold for the larger payments, and filver for the fmaller ones, comprifed in various coins, according to the cuftoms of particular ftates, or at the will of the fovereign : thefe coins may 25 may confifl of dollars, livres, guineas, ducats, or money under any other denomination ; while alfo, in Great Britain and Ireland, notes payable on demand are in general cur- rency and circulation ; meaning thereby, that every commodity is eftimated at fo many dollars, livres, &c. 8cc. according to the coin in circulation in each country ; and that all ideas of value and price are eftimated and fixed by it : as for mitance, fuch a part of a dollar, or a livre, will command a pound of bread ; and ib many dollars, or fo many livres, will purchafe a coat, or any other thing required ; while every bargain and fale is regulated by the quantum ot tiie coin of the country that it will exchange for, paff- ing from hand to hand, without increafe or diminution of its value, and allowed, by ge- neral confent, to reprefent a given portion of property, and for which it will always be taken or received. In this light, the Bank note of Great Britain, payable on demand, reprefents coin (though not manufadured by Government) equally with the gold andfilver; and palfin^ for fo many pounds ilerling, without increafe or diminution, is alfo al- lowed, by common confent, to command the fame quantity of commodities as the a6lu^I 26 aftual fpecie would do ; (the public confult- ing their convenience, and having in view the certainty of commanding the adual quan- tity of money exprefled on the face of the note whenever they pleafe.) This currency appears to be the only one that can properly be fo called ; no fpecies of money or paper, with any condition whatever, of any kind or defcription, can be really fo denominated; the lead variation from the fpecific rate of value of the generally accredited piece of metal, by which the judgment of value is formed, alters the entire cafe ; and whether more or lefs valuable, it requires calculation to which fo many are unequal, and they become a prey to the crafty ; fo that nothing of a different defcription can become cur- rency, becaufe it will not circulate univer- fally, as the value is undefined. Mr. Thorn- ton, (page 40,) confiders bills of exchange as a part of the circulating medium of Eng- land, though not fo declared, he fays, in the opinion of Dr., Smith, in his ftatements on the fubjeft of paper credit, and in a note, ftates Mr. Boyd to have fallen into the fame error, where, in faying, " by the words, " means of circulation," " circulating me- ilium," and " currency," I underftand always ready 27 ready money, whether confiding of Bank notes or fpecie, in contradiftion to bills of exchange, navy bills, exchequer bills, or any negociable paper, which form no part of the circulating medium, as I have always under- ftood that term." Mr. Thornton then pro- ceeds to remark, that it was neceflary to clear away much confufion, which has arifen from the want of a fufhciently full acquaintance with the different kinds of paper credit, and, in particular, to remove, by a confiderable detail, the prevailing errors refpefting the nature of bills, before it could be poffible to reafon properly upon the effefts of paper credit. 1 he detail enrered into, comprifes the following paragrapli : " But they (bills) not only fpare the ufe of ready money ; they alio occupy its place in many cafes. Let us imagine a farmer in the country to difcharge a debt of lol. to a neighbouring grocer, by giving to him a bill for that fum, drawn on his corn-fatlor in London, for grain fold in the Metropolis, and the grocer to tranfmit the bill, he having previoully endorfed it, to a neighbouring fugar-baker, in difcharge of a like debt, and the fugar-baker to fend it, when again endorfed, to a Weft India mer- chant in an outport, and the Welt India mer- chant 28 chant to deliver it to his country banker, who alio endorfes it, and fends it into further cir- culation. The bill, in this cafe, will have effefted five payments exaftly, as if it were a lo). note payable to bearer on demand. *«********■»* A multitude of bills pafs between trader and trader in the country, in the manner which has been defcribed, and they evidently form, in the Jirideft fenfe, a part of the circulating medium of the country." To fe how far this tranfaftion proves the declara- tion which militates againfl; the ideas of Dr. Smith and Mr. Boyd, it may be proper, as much flrefs is laid upon this pofition, to ana- lyze the operation, The farmer gives this bill for lol. upon his corn-fa6lor to his neighbour a grocer, who tranfmits it to his fugar- baker in payment. If it is a bill at Jighti the only proceeding is to get the money for it direftly ; as it is not ufual to omit re^ ceiving the calh for fuch a bill immediately, becaufe the perfon it is upon, though pof- fefled of effefts to pay the bill then, may not be in the fame fituation a week or two afterwards ; and the perfon omitting to apply for the money, takes the rifk upon himfelf ;* much * See Thornton's Chapter on Banks. 29 much lefs, therefore, would he fend a bill of this kind, due in London, to a merchant at Liverpool, which, after all, not being ac- cepted, is no more than a note of hand pay- able in London ; fo that it muft be drawn fome days after date, or light, in which cafe, how would it circulate ? It is of fo much lefs value than lol. as the interefl upon it is for the time it has to run ! Who will take it in payment ? Will the Weft India merchant? No ! He will only give credit in his books the day the money is aftually paid ; and if he takes it to his banker, he will not receive it as cafh, but will dedu6l the difcount for the number of days before it becomes pay- able. Let fuch a note be taken to buy corn or catde at the next market or fair, and fee if the bill in fuch cafe will pafs as cafh : with- out hefitation, we may furely fay that it will not ; for if drawn at fight, it differs little from a note of hand, and mufl be claflcd under paper of that defcription ; if drawn at a given time, it is not the fame in currency as money ; therefore, as far as this goes, it does not feem to overturn the authority of other writers, who are of opinion that bills of exchange are not a part of currency ; and as the other arguments, adduced by various authors, 30 authors, fail to imprefs a conviftion of the fact, ihe original idea of their not being fo confidered fcems clearly to preponderate. Currency then, conhiling of the coin itfelf, by which every commodity is valued, or a circulating note, purportmg to command at pleafure, the quantity of this coin, as ex- prelfed on the face of it; the inquiry of courfe will be made, how thefe notes, or pieces of paper, become fo valuable, and who are the perfons to coin and iffue them ? They cannot be iffut d by every body think- ing it a convenient way to raife money ! Such notes, if taken at all, would only pafs through one or two hands, and be returned again : the credit, or, perhaps, even the name of the iffuer, would be known to fo few perfons, that any one into whofe hands they might accidentally fall, would forthwith realize them in money, for fear the party might become unable to pay them. The fphere in which fimilar notes to the above can circulate, even if attempted to be iffued, mufl: be fo confined, as to defeat the inten- tion. We next find a partnerfhip of 4, 5 or 6 perfons, exerting their influence and credit to coin notes to pafs as currency, and, in proportion to their influence, conne6tioi\s, 1 and 31 and credit, do thefe notes circulate in the dif- tri£t where they are in repute, and form, jointly with every note iflbed by other per- Ibns in different parts of the kingdom, a cur- rency, performing all the operations attaina- ble by a6lual gold and hlver. Paper of this defcription being peculiarly in ufe in great Britain and Ireland, the prefent obfervations are meant to apply principally to thefe united kingdoms ; leaving the currency among other nations to confift, as it always has done, for the mod part, of aftual money. The notes above-mentioned affording local convenience, are yet very much limited, as few of them will pals beyond the diflrift where they are iffued, and none of them in London, the Bank of England nearly engroffmg all circulating notes there : and though it con- tains numerous banking-houfes of the utmoft refpedability, the circulation of a note in the Metropolis, any other than of the Bank of England, does not take place ; fo that while the country banker is circulating his paper for feveral thoufand pounds, as coined money, the full fupply of notes by the Bank of Eng- land renders the pradice to the London banker, as currency there unknown. Opu- lence and credit, therefore, are not alone fuf- hcient 32 ficient for this purpofe ; there muft be local circumiiaiices, and tacit acquiefcence alfo, to enable the ilFue ; for if, as in London, perfons were difpofed to call nothing money, but coin, or Bank of England notes, none could be cir* culated ; or, if the nation were inclined to agree that nothing but coin Ihould circulate, no note whatever would pafs. Mr. Thornton (page 54) obferves, " There is a further ob- jettion to the fame remark of Dr. Smith, (as mentioned in page 53.) It would lead an un- . informed perfon to conceive, that the trade of the country, and of this country in particu- lar, circumftanced as it now is, might be carried on altogether by guineas, if bank notes of all kinds were by any means annihilated.' To form fome opinion upon fuch a material point, let us afk how it is in other countries ? Are there any bank notes there ? is there any circulating medium there ? Do not Holland and Hamburgh, in proportion to their popu- lation and extent, carry on as much trade as Great Britain ; and have they any fubfli- tute for money ? If it fliould prove that they have not, and that other countries, with few exceptions, have not, may we not ^aufe, before we maintain the neajjity oi circulating paper ; though w^e may approve it in many cafes, for various 33 various reafons, and find great advantage from its convenience. In Holland, or Ham- burgh, if you take your bill of exchange for payment, (hould you not keep an account at the Bank, the coin is always ready for you ; no note, no bill, but aftual fpecie. What, if you have an account at the bank? The amount is transferred from the account of the perfon paying the bill to yours ; and the aftual money lies there at your difpofal, as compleatly as if under your own lock and key. No notes circulate there; a receipt alone is given, acknowledging the depofit, to be re-delivered at your option ; which will not pay for commodities from hand to hand, but can only accompliOi a payment by being made over in the bank books to another per- fon; by which alone, the tranfport of the money is faved. It will be remarked, How can fuch arguments be ufed ? Was it not no- torious that there was not a ducat in the bank when the French entered Holland? Perfe6lly true ; but what was the confequence ? Is it not equally notorious, that bank money was at a difcount, and continued fo until every guilder was replaced by the city of Amfter- dam in aftual fpecie ? The Bank of Amfter- dam (and Hamburgh is upon the fame plan) D furnifhes 34 furnifhes no additional circulating medium ; it is only a warehoufe ; and the commiflion paid for every transfer, &c. may be confider- ed as warehoufe-rent ; fo that no receipt or paper is iffued of any kind, but has its corref- ponding value aftually lying in the vaults of the Stadt Houfe at Amfterdam, unlefs, as it has been feen, can be done in times of diftrefs, which a6ling paramount to all other ob- jefts, induced the direftors to difpofe of it in fuch a manner, as might fave it from the enemy, they conceived ready to wreft it from them; exaftly as an individual, whofe houfe is threatened with an attack from banditti, would haflily remove the whole of his valuables: all which muft be admitted to be rational policy : but the burgher of Am- fterdam, knowing this in common with others, calculates the rifk of the money not return- ing, and occafions of courfe, as it lately did, the bank money to be at a difcount. An ef- feft, however, univerfally allowed to be fo detrimental to their commerce, was not per- mitted to exift a moment longer than the ne- ceffity required ; and the a6lual fpecie was re- placed the moment fulhcient light dawned upon them to prevent the alarm of feizure from unbounded power : with this meafure confi" 35 confidence in the bank money returned as before. It may be fair, however, to doubt if the credit of the Bank of Amfterdam refts upon the fame folid foundation in the pubHc mind as before, or if it ever will. * Having ftated who the perfons are that iffue notes, it now becomes a confideration D 2 for * In February, 1795, there was a publication from autho- rity, of the state of the Bank of Amsterdam, by which it ap- peared, that the bank held securities in bonds upon the East India Company, and the different states of the Republic, for money advanced ; and it said further, that the city of Amster- dam was responsible for the whole, not only as guarantee but as an actual debtor to the bank. It is very well known that, until the peace of Amiens, the foreign exchanges with Holland were all calculated in currency, and bank money was at a discount; but, at the beginning of 1802, about the time of the ratification of the treaty of peace, the sound sense, and mercantile knowledge of tlie Dutch, induced them to make every effort to re-establish the credit of their bank; and the city of Amsterdam as guarantee, decreed a tax upon the property and income of the citizens, for tlie sole pur})ose of supplying the bank with bullion, and restoring it to the, credit which it formerly maintained in foreign countries; and* in effect, from the time appointed, which was in the follow- ing summer, all foreign bills of exchange were paid in bank money, which bore an agio of four and five per cent, as be- fore the shutting. The remark which arises upon this is, that the Dutch, knowing the necessity of supporting their credit as a commercial people, lost no time, anrf spared no ex- pence, to put their national bank upon its former footing; and in their decree, they declare that no circumstance what- ever, < an excuse the removal of the bullion so paid in. 36 for what they iflue them, what value they re- ceive in return, and what benefit attaches to the circulation. The objeft of every one engaging in a circulation of this kind, is to get as many of them to pafs current as pofli- ble ; but will he, in confequence, give every body who afl^s him a note for that purpofe ? It would be abfurd to fuppofe it : he muft then have fomething given him to induce him to make out the note. We will fuppofe a gen- tleman receives 500I. from his tenant in the country, which he conliders as a larger fum than he wifhes to keep in his houfe ; he there- fore takes the whole, or a part of it, to this perfon, or to a bank, and fays, being friendly to the parties, and inclined to encou- rage the inftitution, " I do not like to keep fo much money at home ; let me have your notes for it from time to time, as I may require it, and I will lodge it with you." The notes are given, the money remains. Another perfon, a manufadurer, comes to this fame eftablifh- ment, and fays, " I have large out-goings in my bufinefs, which require a great deal of ready money to buy the rawmaterials, and to pay the workmen ; while at the fame time, I have a great many perfons dealing with me, who are in fome degree dependent upon me ; if 37 if you will accommodate me with a loan of one, two or three thoufand pounds of your notes, I will take care to encourage and keep them in circulation among my connexions as much as I can, and will give you my build- ings as a fecurity for the repayment of the money." The notes are lent. A farmer comes, and makes a fimilar application, and upon the fame grounds, his great daily ex- pences, his extenfive connexions in helping to circulate the notes, and the badnefs of the prefent markets for realizing his ftock; he therefore begs a loan, and gives in his pro- duce, or other things, as fecurity, and obtains an iflue of the notes. A grazier alfo applies, and, by fimilar engagements, a large circula- tion of notes enfues. This coinage becomes currency, and commands the fame powers as the fame quantities of gold and filver would do. It is matter of great convenience to the diftriX, the notes are regularly paid when brought back to the bank, every body is fatif- fied, and every body is pleafed. A line of canal is projeXed to pafs through this part of the country ; it is confidered advantageous, the fubfcription fills, the bank itfelf takes a few (hares, their friends take many more; the flated periods for payment come round, the fliares 38 (hares are pledged, the notes are received. for it, and the buhnefs of the bankers increafes rapidly. In this ftate of profperity let us review their fituation : the firm confifts of four per- fons ; the afting partner honeft and induf- trious, but with inconfiderable property ; the tradefman with a fair capital, principally engaged in his particular bufinefs ; the ma- nufafturer, of extenfive concerns, and with money, but very much employed in his works ; and a neighbouring country gentle- man of landed eftate ; or more frequently the attorney of the place : the firm fo con- flituted, is undoubted in fecurity, and of great refpedability. This defcription of partnerfhip, or others nearly fimilar, efta- biifhed in every large town, and many fmaller ones, it is, that now fupplies the currency in the country. In London, the whole is fur- nifhed by the Bank of England, which iffues its notes in proportion to the quantity the circulation will bear. A fubfcription of pro- prietors originally gave rife to this inftitution, and a large fum has been fubfcribed at dif- ferent times, till it has increafed to its pre- fent magnitude. From its firft eftablifhment, it has always paid ample dividends ; and upon the 39 the report of its condition in 1797, it was made evident, that it pofTefTed immenfe property, in addition to the fubfcriptions received, which have been lent to Government. Its ifTue of notes being from fixteen to eighteen millions flerhng, what fecurities does it obtaift in exchange for them ? It makes out notes for the individuals who lodge their money there, as they would do at a private banker s, it fends them into circulation for all the bul- lion it buys, for the purpofes of coining, or otherwife; it gives notes to bankers and merchants who difcount bills, with it; it pays with notes for the purchafe of ex- chequer bills, and Government floating pa- per, as alfo for the advances made to the nation upon the land and malt taxes, and other loans furnifhed from time to time upon Parliamentary grants ; and for renewals of its charter. Sec. This is the paper which it is con- ceived, in conjunftion with what gold and fil- ver coin there is in the kingdom, forms the aclual circulation of the country, pafling from hand to hand, at a known and invariable va- lue, never lefs, never more ; but always the fame, and without flu6luation. CHAP- 40 CHAPTER IV. THE SUBJECT CONTINUED. HAVING traced the reafons for ifluing notes, the perfons who undertake to do it, and the confiderations given for them, we proceed to the examination how far they are better or worfe for the wealth and profperity of a nation, than if gold and filver alone circulated ; or whether a due proportion of each may not be current together to ge- neral advantage ; and if fo, how the propor- tions of each can be beft adapted to the great end of national wealth. How far it may be poflible to point out fach particulars muft be judged of by others. One thing, however, is felf-evident, which is, that the prefent mode of proceed- ing does not anfwer the purpofe; as the Bank, and a very large proportion of the country banks, have been unable to fulfil their engagements by paying their notes, as promifed by the note itfelf. No objeftions, or even reflexions, are here meant to be made upon the Bank refl:ri6lion ; it might have been a neceflary meafure, and probably a wife one, as things were circum- 2 (lanced ; 41 llanced ; the intention is merely to ftate the fa^l, in proof of the infufficiency of the means to fpeedily redeem fuch confider- able fums as are iffued under the a6lual fyf- tem : yet, did the Banks never iflue a note without having its correfponding value in gold and filver in their vaults, how could they even afford the expence of the paper and flamps, unlefs they became fimilar to the Amflerdam Bank, and received a com- mifTion for every tranfaftion ? Refledions upon this point are certainly of material im- portance to the profperity of a nation ; and upon a due regulation of it, much of the internal (Irength and vigour of the kingdom may be fupported in the day of alarm, or adverfity, to which nations, as well as in- dividuals, are liable ; vrhile, on the contrary^ erroneous fyftems of great extent, will, at fuch a critical period, haRen, with double preci- pitation, that evil which the government of the country may be exerting its utmoft efforts to avert. Suppofe (for a common knowledge of the hiftory of nations juftifies the fuppo- fition, though we hope in thefe kingdoms nothing bat a bare poffibility exifts) that a ferious rebellion raged in feme part of the {late, or that an invading army made a con- E fidcrable 42 fiderable impreflion upon your territory, how would the notes of the bankers, as firft de- fcribed, be paid? Could the farmer or grazier realize their (locks, (which, perhaps, might be carried off by the rebels,) to find cafh for the banker to difcharge the notes circulated through them ? or could the ma- nufafturer, whofe buildings might be burned, be able to furnifh a fufficient fupply ? Or how could the fums expended in making canals, or finking mines, be returned to fill their coffers at fuch a moment? At fuch times, the country banker finds his fecurities not worth half their former value : he at- tempts to fell them, but no one will buy : his notes pour in upon him, and he becomes ruined. God defend us from fo ferious a danger ; but as human forefight can- not guard againft every poffible calamity which in a feries of years may befal a ftate, it muff be fuppofed that ftorms may arife in a courfe of time, to agitate every part of the veflel. In moments like thefe, perfons are eager to lay hold of real value ; and gold and fil- ver maintaining its ftated pre-eminence, under all cireumffances, in every country, men will feize it, if .to be had ; and will fecure it for 3 themfelves. 43 themfelves, to provide againll calamity Every body hoarded, and fent away all they, could colle6t, in the lall dillrefTes in France ; and every body will do the fame in every country, under fimilar circumllances. It will be faid then, How can any Bank be fecure ? Nothing fo eafy, if the aim is confined to reafonable advantages from inftitutions of this kind : but when an attempt is made to convert every fuppofed mine, Or canal, into money, by ifi'uing paper upon the fecurity of their (hares, the queftion is allowed to be judicioully put. Benefits vafl:ly beyond the means afforded, have always, and in every age, been expeded from banks ; and was the prefent circulating paper to be compared with gold, it might fairly be faid, that at lad the philofopher's ftone had been difcovered ; and the ingenuity of the prefent day might laugh at the former purfuits of chemical fpeculators, who took fuch abiurd methods of difcovering tlie va- luable acquifition. A misfortune peculiar to all national banks, has arifen from the expectation of rendering them an exchequer as well as a bank ; while the nature of the two eflablifhments is fo in- compatible, as to prove uniformly fatal to the E 2 former, 44 former, where prefTed to an extent, proving the impoflibihty of their flourifhing under an arbitrary government. Refpefting our own, the Bank of England, its long eflablifhment, and flourifhing flate, its undoubted opulence, and accumulated wealth, as fhewn, by the report of a committee in the Houfe of Com- mons, together with the particular advan- tages it derives from its charter, and being the agent of Government, to receive the money for the national loans, and to pay its dividends, it is rendered paramount to flan- der, as to its fufficiency and credit; there- fore, no hefitation need exifl in fairly can- vafling its conftitution. From the univerfally high reputation the Bank of England has maintained for up- wards of a century, and the funds it has ac- cumulated during that time, the object is to confider how far, as an inftitution, it is found- ed upon principles bidding defiance to every event to undermine its confequence, or de- ft roy its credit. If what has been faid upon the fubjeft is founded, it is fufficiently evident, that the other banks we have invefligated, are not upon that folid foundation requifile for infuring abfolute confidence, perhaps, at any time ; but certainly not in times of rebellion. 45 or an invading enemy. Proceeding in the inquiry to the conftitution of the one bank in queftion, we find, that the fum of ii,686,8ool. has been lent to the State, and is irredeemable, except at the will of Govern- ment after a given period. To obtain a fum for the purpofes of lend- ing out at intereft, it is to be fuppofed, that the depofit of money lodged there, as at a private banker's, is confiderable, as there are often large fums on account in different departments of the Government itfelf, ufing it as a banking houfe. The total Credits in the year 1696 were £2,10\,\S1 12 The total Bebets were - - . - 1,975,872 10 Balance in favour of the Bank - - 125,310 2 The Bank Capital at that Time was only 1,200,000 The Cash, Pawns, &c. &c. only - - 266,610 16 The reft, money advanced on Parliamentary fe- curities, and intereft due. From hence, by fmall beginnings at firft, compared with the pre- fent times, has the prodigious circulation taken place, now cxifting ; the Bank notes being, in amount, from feventccn to eighteen millions. Let us then inquire a little, whether the con- ftitution was properly framed at its com- mencement : 46 mencement ; or if, at any renewal of its charter, meafures have been taken to pre- clude the probability of what happened in 1797, viz. fo great a drain of fpecie, as to require the acquiefcence of all ranks of people to difpenfe with it. Like a country bank, it has its monied men, who depofit cafh, and take notes as they want them ; but it had its fpeculator too, the Minifter, who, though no fpeculatOi m mines, nor buyer of canal fhares, adventured unavoidably in the moft diffufe and extenfive political fpeculations, bringing with them their attendant expences ; all which, in ftates, are acknowledged matters ,of courfe and neceffity : but fee the con- fequence to the Bank, and obferve how trifling all commercial accommodation was compared with it. Mark that it is this fource which principally dries up every other flream, from the breadth and depth of its channel ; and not the comparatively fmall rivulet of difcounted notes and bills. Were advances to Govern- ment out of the que{tion,how completely might the Bank bid defiance to events for injuring their credit, or delaying one moment the full difcharge in fpecie, of every demand upon them ! Unfortunately, however, the profpeft of great gains from lending large fums to Government, 47 Government, on the one hand, and the con- venience of borrowing it on the other, car- ried the amount to an excefs which influenced all its proceedings, and muft render its fitua- tion critical, as the political fituation of the kingdom is more or lefs profperous, while fuch a fyftem is purfued. To prove this, let us refer to the feveral printed papers of the Bank credits, 25th February, 1797, when we (hall find the above reafoning eftablifhed by faas. The Totals were - - - _ Advanced on Government Securities £17,597,293 10,ti7 2,503 From which deduct 5 per Cent. Stock (),92-t,790 1,795,800 A Loan to the East India Company 5,128,990 700,000 Deduct sundry Articles - - - 4,1.28,990 252,910 4,17C,0BO iJeduct supposed quantity oi" Casii and Dullion in the Bank on that day - - - 1,272,000 And there remains iit the utmost - - -^;)01-,080 lor theacconnuodati'tnofthemerrcintileworlu. . How trifling tliis fum v;hcn compared with its other advances, c\cn upon this statement ; and 48 and how eafy would it be, if merely a mer- cantile bank, to maintain an overflow of caOi ! At this period we find the bank having ' put ii,686,8ool. out of their power, advanc- ing 16,325,2931. with only 1,272,0001. in bullion and cafh to anfwer it : rendering it morally impoflible to provide for the claims made upon it, as it proved: and though every man was fatisfied, and chearfully agreed not to exaft thofe demands his being a hold- er of a bank note entitled him to, yet, had the circumftance been ever fo urgent, or his neceflities ever fo great, neceffity would have compelled him to fubmit to the general de- cifion. This delay of payment on the part of the Bank, occafioned no doubt of its foli- dity ; it only made known, that it had put out of its power the command of that money it hcid bona Jlde lent for too long a period, to anfwer the demands of its creditors; and thefe particulars have been abftraded, to {hew that a bank thus circumftanced, has not a Conftitution fitting to render it the empo- rium of Bririfli commerce, and a finance ex- chequer alfo. The fmallnefs of the fums lent, independent of thofe to Government, (hould flop all clamours about want of circu- latingmedium,&c, &c. A moderate additional increafe 49 increafe of loan would yield ample accommo- dation to the trading community ; and yet how fully able would the Bank be to advance a very great fum, if the debt from Govern- ment was not exifting ! And here it may be proper to inquire, why, except upon an un- expefted prefs, Minifters fliould wifh for ad- vances from the Bank ; and why, if the Bank do not lend more money to the merchants, the general circulation could not be gold ? It is faid, the exchange is againll you, and all the fpecie would go out of the country. Examine this : let all go that may, it will re- turn fpeedily, twofold. For what purpofe vv^ill it go? — For nothing? Not likely! For what then ? — To pay for commodities, or to fell for a profit? probably for both purpofes. What follows? A million goes for fale, a million to pay debts: confequently your ex- ports are two millions more than they would otherwife have been. The million fold mufl be repaid, and if for Englifh account, with the prorit too ; the million fent to pay debts, has difcharged what would otherwife have been done by a million fent in bills for goods bought : therefore our traffic being equal with the country in queflion, that is to fay, they fending us five millions of goods in the year, F and 50 and we fending tliem the fame quantity ; they will now at the end of the year be in our debt one miUion, viz. the one fent in fpecie, which they muft return ; and having no ba- lance of goods to fend, they muft pay it in money; as nobody can draw upon London, no money being owing to them there, which of courfe turns the exchange. But what were the aftual proceedings? The fecret committee, in November follov/ing, viz. 1797, ftate, that the Bank had above five times the quantity of coin and bulhon they had when they ftopped their payments in fpecie, which it is pretty generally fuppofed has been increafing fince ; no material iffue of fpecie having been made, except upon the refolutions of the Houfe of Commons, allow- ing of three millions being fent to the Empe- ror, &c. Suppofe then an excefs of fix njil- lions above the quantity exifting February, 1797, in their coffers, how has it been pro- cured? The nature of the Bank bufmefs does not allow of their fending out goods, and procuring a return, in the regular way of commerce. No ! they bought it : that is, they gave bank notes for it (of no ufe in fo- reign commerce) to the importer, by which they encouraged the introduftion of large quantities 51 quantities of bullion, which foon turned the exchange againd us ; becaufe they imported fome millions of gold and filver from foreign countries, while they had nothing to fend back for it; and while this bullion is thus (hut up, it might as well be in the mine ; fuch a quantity being aftually loft to the world, as fully as if at the bottom of the fea. Where- as, if the Bank chells were opened, and thefe five, fix, feven or eight millions fent into cir- culation, your value exported would in fuch an additional degree exceed your imports, that foreigners muft return it to difcharge their debts to us ; as there neceftarily muft be an infufficiency of bills to repay our demands upon them. Suppofe then, the Government were not to borrow any money whatever from the Bank, the capital excepted, how would it ftand, and what muft the Bank do ? Their whole advances to the commercial worfd in 1797 were ftiort of three millions, with 700,000!. to the Eaft India Company. The thing is felf-evident ; they muft encourage trade, and furnifti as much money as they poftibly could, with fecurity, to the mercantile world, or otherwife their profits would be infufticient for their dividends. At the fame time, their F 2 iftucs 52 iffues being confined to real commercial pa- per, they never could be fo loaded as to fear any cafualty ; while, from being bankers and agents to the Government alfo, their means would be ample, and their gains fuf- ficiently confiderable ; and by fuch condu6l, paper and fpecie would be equally valuable. By no means the cafe at prefent, and for this plain reafon, viz. that the quantity of gold or filver promifed to be paid for a ten pound Bank note, is not to be procured for it ; put- ting the reftriction quite out of confideration ; for take this note to buy bullion, and, in- ftead of the fpecific quantity of gold and filver in weight and finenefs which it repre- fents, it will only purchafe a diminiflied quantity. Therefore, in plain terms, the one pound Bank note does not exchange for twenty (hillings fterling money, but only for eighteen (hillings, as the price of filver now is five (hillings and ninepence per ounce. Let us, therefore, confider the Bank's aftual fituation as to its creditors, and obferve how the money appertaining to it has been divided among the proprietors as profit, while, in faft, the difference in the value of the notes ifiued, and the price of fpecie, was only depofited with them by the public, to enable it to pro- cure 53 cure the latter, when the (late of the country fliould require payment in gold. The Padia- inent, let us fuppofe, takes off the reftriclion, when the original covenant of paying to bear- er again takes efFeft; the Bank affets are un- doubtedly abundant, but the fpecie is re- quired, for which purpofe the bullion mud be bought and coined ; but it cannot be bought for the ftandard price of 3I. 17s. lOfd. per ounce for gold, or 5s. 2d. per ounce for filver; * for an increafed price mud be given ; and in this proceeding there is nothing but what is according to all ufages of trade, and truly equitable between the parties. Neither if it had been properly confidered, is it any lofs to the Bank ; be- caufe upon thefe notes iffued, they have already received more than their value ; as they iffued them for a larger fum than what they were declared to reprefent would pur- chafe, and it would be unfair to make the holder fuiTcr this lofs, becaufe, as matter of ac- commodation, he confentcd for a time to re- ceive it for more than itis worth; ten pounds, in a Bank note, being of infufficient power to purch.ale the llcrling money reprefented, the * Price of gold, April. ISO}-, 4-1. Is. per ounce. Price of silver, diiiD, 5s. 9v(l. to 5s. sd. per ounce. 54 the bullion being above flandard price ; and to command the Hated quantity, hemuft have ad- ded probably another one pound note, to pro- cure it in ftandard fil ver ; but, to obtain this ad- ditional fum, and put him in the fituation the Bank promifed he fhould be, when he took the note, he naturally comes to the direftors with this obfervation ; and the moment the reftriftion is withdrawn, there can be no doubt but the money of full weight and fine- nefs will be paid : and though the obtaining this bullion may appear to be attended with confiderable lofs, yet, as the difference of value has been received by the ifluing the notes, it is not the fa6t. The Bank certainly have chofen to divide furplus profits, which, perhaps, their general trade might allow of; and are, no doubt, fully aware, that, as they iffued their notes at a time when bullion was above ftandard price, fo they are obliged, and willing, to receive thofe notes again, pay- ing for them with ftandard coin ; juft as with the dollars ; if they buy one for 4s. 9d. and ilfue it for 5s. that 3d. the difference, cannot be called profit, becaufe they are pledged to pay 5s. for it again when called upon. This pofition, undoubtedly correft, muft 2 tend 55 tend greatly towards convincing every re- flecting mind of the infufficiency of ren- dering paper equal to fpecie beyond a given point ; and that, a very narrow one ; for if unfounded circulation (by unfounded^ I mean a circulation illued without ready means of fulhlling the terms of agreement upon the face of the note) is once permitted, every flep brings us nearer to the errors of the noted calculator Law, in France, and fooner or later muft produce equally ruinous confequences. In apprehenfions of this kind, perfons are apt to fay, we are often threaten- ed with what never happens ; as if a cala- mity of fuch magnitude took place almoft immediately. No I the difeafe is gradual ; but the longer it lafls, the more decidedly fatal it is apt to be in the end : the firft fymptoms are often of long duration ; fuch as inconvenience, partial diflruft, half con- fidence, apprehenfion of parting with fecu- rities, difpoiition to hoard, invefting money in foreign countries, and various other marks, which it is hoped every one does not fee at the prefent moment : though, confidering Ireland by far worfe than England is, a man mufl fhut his eyes, if he difcovers no caufe for 56 for alarm there.* Should the above fail to carry conviction as to the difference between paper and money, let us fuppofe, for a mo- ment, that all the Bank notes were done away, and gold and filver in circulation in place of them ; let the facl be, that, from the price of gold, a guirea of 21s. will circulate abroad for as much as 23s. will do in a bill drawn upon our Exchange, and what would be the immediate confequence ? Should we not be eager to fend a guinea over to dif- charge a debt of 23s. and would it not be generally done, till the guinea and bill were brought to a par, fo that the one would dif- charge as much debt as the other ? f Un- quefbonably it would : but as this cannot be effefted with bank notes, the advantage of fpecie in any country, towards promoting its wealth and prolperity, in preference to a large circulation of paper, is undoubted; and * It is to be lamented, that steps are not taken to provide a currency of small piefces of silver money, (easily practica- ble :) the dollar is of too much value for the poor, and little better for convenience than the seven shilling pieces ; while gold is much cheaper than silver, being only 3s. l^-d. per ounce above standard, and silver is 7d. per ounce above standard; or a diOertinoe of aliout 7 percent, in the pro- portional value in favour of gold. f The exchange has risen lately. 57 and I cannot help being one of thofe nullaken perfons, in Mr. Thornton's opinion, who fancy that the commerce of this country can- not be carried on without guineas. In continuing the comparifon between mo- ney and paper, did we allow ourfelves to launch into matters of exchanges and credit, it would require more time and patience, on the part of the reader, than he would be in- clined to give it, from the numerous trafts already publiflied on thofe fubje6ls : but let us confider how liable, as we conceive, thcfe banks are to be put to difficulties in the day of trial; let us look one (lep further, where we find in the London banks, a liability not to be fliakenby any florms, and fo conflitut- cd, as to brave the rudeft tempefts. We fmd fome, indeed, differently conflituted ; but the London bankers, properly fo called, can be divided only into two clafTes ; both making their profits from the depofits lodg- ed with them, though rather in a different way, proceeding from the wants of the per- fons with whom tliey tranfaft bufmefs. The one defcription is a bank principally fup- ported by noblemen and country gentlemen of landed cilates, whofe rents being periodi- cally paid, arc lodged wuh the banker, and G drawn 58 drawn for as wanted : to perfons of this clafs, common prudence in employing their money fo as to command it upon the (horteft notice, renders their profits regular, and their com- mand of money complete for every demand. The other defcription of a London banker is the one who keeps the accounts of merchants and traders, whofe wants they fupply by dif- counting their bills at fliort dates, and thus produce their profits. So conflituted, let us obferve how fecurely they carry on their bufmefs : they have no demands that can be made haflily upon them by any flranger, be- caufe they ifliie no notes by which they make a promife to pay the bearer a fum of money ; neither do they accept any bills without mo- ney in hand, except connected with * coun- try banks ; which, in fome meafure, alters the conflitution of the London banker, and forms the difference before obferved ; as he is more or lefs liable to a run from country notes made payable in London, or from the bills drawn upon him, and accepted. But in times of alarm or calamity, the perfons alone with w^hom the London banker has been for years, * The Bankers who are responsible for country bankers- vary from the above, as in part their concerns must blend ■