BOOK the funds which are deftined for the maintenance II. of industry, it must make a very confiderable addition to the quantity of that industry, and, confequently, to the value of the annual produce of land and labour. AN operation of this kind has, within thefe five-and-twenty or thirty years, been performed in Scotland, by the erection of new banking companies in almost every confiderable town, and even in fome country villages. The effects of it have been precifely thofe above described. The bufinefs of the country is almost entirely carried on by means of the paper of those different banking companies, with which purchases and payments of all kinds are commonly made. Silver very seldom appears except in the change of a twenty fhillings bank note, and gold ftill feldomer. But though the conduct of all those different companies has not been unexceptionable, and has accordingly required an act of parliament to regulate it; the contrary, notwithstanding, has evidently derived great benefit from their trade. I have heard it afferted, that the trade of the city of Glasgow doubled in about fifteen years after the firft erection of the banks there; and that the trade of Scotland has more than quadrupled fince the firft erection of the two public banks at Edinburgh, of which the one, called The Bank of Scotland, was established by act of parliament in 1695; the other, called The Royal Bank, by royal charter in 1727. Whether the trade, either of Scotland in general, or of the city of Glafgow in particular, II. has really increafed in fo great a proportion, CHA P. during fo fhort a period, I do not pretend to know. If either of them has increased in this proportion, it seems to be an effect too great to be accounted for by the fole operation of this caufe. That the trade and induftry of Scotland, however, have increased very confiderably during this period, and that the banks have contributed a good deal to this increase, cannot be doubted. THE value of the filver money which circulated in Scotland before the Union, in 1707, and which, immediately after it, was brought into the bank of Scotland in order to be re-coined, amounted to 411,1177. 10s. 9d. fterling. No account has been got of the gold coin; but it appears from the ancient accounts of the mint of Scotland, that the value of the gold annually coined fomewhat exceeded that of the filver *. There were a good many people too upon this occafion, who, from a diffidence of repayment, did not bring their filver into the bank of Scotland and there was, befides, fome English coin, which was not called in. The whole value of the gold and filver, therefore, which circulated in Scotland before the Union, cannot be estimated at less than a million fterling. It seems to have conftituted almoft the whole circulation of that country; for though the circulation of the bank of Scotland, which had then no rival, was confiderable, it seems to have made but a very small part of the whole. In the prefent times the See Ruddiman's Preface to Anderfon's Diplomata, &c. Scotia.. whole BOOK whole circulation of Scotland cannot be estimated II. at less than two millions, of which that part which confifts in gold and filver, most probably, does not amount to half a million. But though the circulating gold and filver of Scotland have fuffered fo great a diminution during this period, its real riches and profperity do not appear to have fuffered any. Its agriculture, manufactures, and trade, on the contrary, the annual produce of its land and labour, have evidently been augmented. IT is chiefly by discounting bills of exchange, that is, by advancing money upon them before they are due, that the greater part of banks and bankers iffue their promiffory notes. They deduct always, upon whatever fum they advance, the legal intereft till the bill fhall become due. The payment of the bill, when it becomes due. replaces to the bank the value of what had been advanced, together with a clear profit of the intereft. The banker who advances to the merchant whose bill he discounts, not gold and filver, but his own promiffory notes, has the advantage of being able to discount to a greater amount by the whole value of his promiffory notes, which he finds by experience, are commonly in circulation. He is thereby enabled to make his clear gain of intereft on fo much a larger fum. THE Commerce of Scotland, which at present is not very great, was ftill more inconfiderable when the two first banking companies were eftablished; and those companies would have had but little trade, had they confined their business to They CHAP. to the discounting of bills of exchange. 1 WHOEVER has a credit of this kind with one of those companies, and borrows a thousand pounds upon it, for example, may repay this fum piece-meal, by twenty and thirty pounds at a time, the company discounting a proportionable part of the intereft of the great fum from the day on which each of those small fums is paid in, till the whole be in this manner repaid. All merchants, therefore, and almost all men of business, find it convenient to keep fuch cash accounts with them, and are thereby interefted to promote the trade of those companies, by readily receiving their notes in all payments, and II. BOOK and by encouraging all thofe with whom they I!. have any influence to do the fame. The banks, when their cuftomers apply to them for money, generally advance it to them in their own promiffory notes. These the merchants pay away to the manufacturers for goods, the manufacturers to the farmers for materials and provifions, the farmers to their landlords for rent, the landlords repay them to the merchants for the conveniencies and luxuries with which they fupply them, and the merchants again return them to the banks in order to balance their cash accounts, or to replace what they may have borrowed of them; and thus almost the whole money business of the country is tranfacted by means of them. Hence the great trade of thofe companies. By means of thofe cafh accounts every mer chant can, without imprudence, carry on a greater trade than he otherwife could do. If there are two merchants, one in London, and the other in Edinburgh, who employ equal stocks in the fame branch of trade, the Edinburgh merchant can, without imprudence, carry on a greater trade, and give employment to a greater number of people than the London merchant. The London merchant must always keep by him a confiderable fum of money, either in his own coffers, or in thofe of his banker, who gives him no interest for it, in order to answer the demands continually coming upon him for payment of the goods which he purchases upon credit. Let the ordinary amount of this fum be fuppofed five hundred |