1 II. hundred pounds. The value of the goods in CHA P. his warehouse must always be lefs by five hundred pounds than it would have been, had he not been obliged to keep fuch a fum unemployed. Let us fuppofe that he generally disposes of his whole stock upon hand, or of goods to the value of his whole ftock upon hand, once in the year. By being obliged to keep fo great a fum unemployed, he must fell in a year five hundred pounds worth lefs goods than he might otherwise have done. His annual profits must be less by all that he could have made by the fale of five hundred pounds worth more goods; and the number of people employed in preparing his goods for the market, must be lefs by all thofe that five hundred pounds more ftock could have employed. The merchant in Edinburgh, on the other hand, keeps no money unemployed for answering fuch occasional demands. When they actually come upon him, he fatisfies them from his cash account with the bank, and gradually replaces the fum borrowed with the money or paper which comes in from the occafional fales of his goods. With the fame ftock, therefore, he: can, without imprudence, have at all times in his warehouse a larger quantity of goods than the London merchant; and can thereby both make a greater profit himself, and give conftant employment to a greater number of industrious people who prepare thofe goods for the market. Hence the great benefit which the country has derived from this trade, THE BOOK THE facility of discounting bills of exchange, it may be thought indeed, gives the English merchants a conveniency equivalent to the cafh accounts of the Scotch merchants. But the Scotch merchants, it must be remembered, can discount their bills of exchange as easily as the English merchants; and have, besides, the additional conveniency of their cash accounts. THE whole paper money of every kind which can easily circulate in any country never can exceed the value of the gold and filver, of which it fupplies the place, or which (the commerce being fuppofed the fame) would circulate there, if there was no paper money. If twenty fhilling notes, for example, are the loweft paper money current in Scotland, the whole of that currency which can easily circulate there cannot exceed the fum of gold and filver which would be neceffary for tranfacting the annual exchanges of twenty fhillings value and upwards ufually tranfacted within that country. Should the circulating paper at any time exceed that fum, as the excefs could neither be fent abroad nor be employed in the circulation of the country, it must immediately return upon the banks to be exchanged for gold and filver. Many people would immediately perceive that they had more of this paper than was neceffary for tranfacting their business at home, and as they could not fend it abroad, they would immediately demand payment of it from the banks. When this fuperfluous paper was converted into gold and filver, they could eafily find a ufe for it by fending it abroad; abroad; but they could find none while it re- CHA P. OVER and above the expences. which are common to every branch of trade; fuch as the expence of houfe-rent, the wages of fervants, clerks, accountants, &c.; the expences peculiar to a bank confist chiefly in two articles: First, in the expence of keeping at all times in its coffers, for answering the occafional demands of the holders of its notes, a large fum of money, of which it lofes the intereft: And, fecondly, in the expence of replenishing those coffers as faft as they are emptied by answering fuch occafional demands. A BANKING Company, which iffues more paper than can be employed in the circulation of the country, and of which the excefs is continually returning upon them for payment, ought to increase the quantity of gold and filver, which they keep at all times in their coffers, not only in proportion to this exceffive increase of their circulation, but in a much greater proportion; their notes returning upon them much fafter than in proportion to the excefs of their quantity. Such a company, therefore, ought to increase the first article of their expence, not only VOL. I. G g in II. BOOK in proportion to this forced increase of their business, but in a much greater proportion. JI. THE Coffers of fuch a company too, though they ought to be filled much fuller, yet must empty themselves much fafter than if their bufinefs was confined within more reasonable bounds, and must require, not only a more violent, but a more conftant and uninterrupted exertion of expence in order to replenish them. The coin too, which is thus continually drawn in fuch large quantities from their coffers, cannot be employed in the circulation of the country. It comes in place of a paper which is over and above what can be employed in that circulation, and is therefore over and above what can be employed in it too. But as that coin will not be allowed to lie idle, it must, in one shape or another, be fent abroad, in order to find that profitable employment which it cannot find at home; and this continual exportation of gold and filver, by enhancing the difficulty, muft neceffarily enhance ftill further the expence of the bank, in finding new gold and filver in order to replenish those coffers, which empty themselves fo very rapidly. Such a company, therefore, muft, in proportion, to this forced increafe of their business, increase the second article of their expence ftill more than the first. LET us fuppofe that all the paper of a particular bank, which the circulation of the country can easily absorb and employ, amounts exactly to forty thousand pounds; and that for answering occafional 11. occafional demands, this bank is obliged to keep с HA P. at all times in its coffers ten thousand pounds in gold and filver. Should this bank attempt to circulate forty-four thousand pounds, the four thousand pounds which are over and above what the circulation can eafily abforb and employ, will return upon it almoft as faft as they are iffued. For anfwering occafional demands, therefore, this bank ought to keep at all times in its coffers, not eleven thoufand pounds only, but fourteen thousand pounds. It will thus gain nothing by the intereft of the four thousand pounds exceffive circulation; and it will lofe the whole expence of continually collecting four thousand pounds in gold and filver, which will be continually going out of its coffers as fast as they are brought into them. HAD every particular banking company always understood and attended to its own particular intereft, the circulation never could have been overstocked with paper money. But every particular banking company has not always understood or attended to its own particular interest, and the circulation has frequently been overftocked with paper money. BY iffuing too great a quantity of paper, of which the excefs was continually returning, in order to be exchanged for gold and filver, the bank of England was for many years together obliged to coin gold to the extent of between eight hundred thousand pounds and a million a year; or at an average, about eight hundred and fifty thousand pounds. For this great coin Gg 2 age |