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has really increased in fo great a proportion, dur- c HA P. ing fo fhort a period, I do not pretend to know. If either of them has increased in this proportion, it feems 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 411,117l. 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 Scotlan: 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 lefs than a million fterling. It feems 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 present times the

* See Ruddiman's Preface to Anderson's Diplomata, &c. Scotia.


BOOK whole circulation of Scotland cannot be estimated


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 whofe 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 firft banking companies were eftablished; and thofe companies would have had but little trade, had they confined their business



to the discounting of bills of exchange. They CHA P. invented, therefore, another method of iffuing their promiffory notes; by granting, what they called, cash accounts, that is by giving credit to the extent of a certain fum (two or three thoufand pounds, for example), to any individual who could procure two perfons of undoubted credit and good landed eftate to become furety for him, that whatever money should be advanced to him, within the fum for which the credit had been given, fhould be repaid upon demand, together with the legal intereft. Credits of this kind are, I believe, commonly granted by banks and bankers in all different parts of the world. But the eafy terms upon which the Scotch banking companies accept of re-payment are, fo far as I know, peculiar to them, and have, perhaps, been the principal caufe, both of the great trade of thofe companies, and of the benefit which the country has received from it.

Whoever has a credit of this kind with one of thofe 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 proportion. able part of the intereft of the great fum from the day on which each of thofe finall fums is paid in, till the whole be in this manner repaid. All merchants, therefore, and almost all men of bufinefs, find it convenient to keep fuch cash accounts with them, and are thereby interested to promote the trade of those companies, by readily receiving their notes in all payments,



BOOK and by encouraging all thofe with whom they II. have any influence to do the fame. The banks,

when their customers apply to them for money, generally advance it to them in their own promiflory notes. Thefe the merchants pay away to the manufacturers for goods, the manufacturers to the farmers for materials and provi fions, 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 cafh accounts, or to replace what they may have borrowed of them; and thus almoft the whole money business of the country is tranfacted by means of them. Hence the great trade of those companies.

By means of thofe cafh accounts every merchant 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 those of his banker, who gives him no intereft 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 supposed five hundred



hundred pounds. The value of the goods in CHAP. his warehouse must always be less 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 dif pofes of his whole ftock 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 muft fell in a year five hundred pounds worth lefs goods than he might otherwife have done. His annual profits must be lefs 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 less by all thofe that five hundred pounds more stock could have employed. The merchant in Edinburgh, on the other hand, keeps no money unemployed for anfwering fuch occafional 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 occa fional 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.


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