238 JJ A 



Bank, an addition to its happiness. If such beneficial con- 

 v ' sequences result from a circulating medium, it will be 

 admitted, that the society \ , an abun- 



dance of it, or the means of augmenting it, by a pro- 

 cess that encourages its production, must be wealthy 

 and prosperous; and such is the society of Britain. 

 Our industry, our skill and ingenuity, could not be 

 fully exerted, nor the productions of the arts, manu- 

 factures, and commerce of the community generally 

 diffused, without the intervention of a circulating 

 medium, which representing every species of proper- 

 ty, combines the individual exertions of men, and 

 links, in one great chain, their separate efforts for the 

 common happiness of all. The facility of transact- 

 ing the exchange of one commodity for another, by 

 means of a generally acknowledged representative of 

 ^ value, is exemplified by the following case : An 



agriculturist in the north of Scotland, may exchange 

 the produce of his labour with that of a Yorkshire 

 manufacturer, by selling a quarter of wheat at home 

 for a bank note, and purchasing cloth with it, from 

 a neighbouring haberdasher. The value of the wheat, 

 or what is the same thing, a symbol of its value, may 

 be thus conveyed in a letter, whereas, the delivery of 

 the commodity itself might incur an expense equal to 

 its original price. In this case, we find an illustra- 

 tion of the general principle on which commerce de- 

 pends, as well as a convincing instance of the vast 

 utility of a circulating medium. 



Before the discovery of the use of money, as an 

 instrument for ascertaining the comparative value of 

 commodities, the exchange of the produce of one 

 country with that of another, must have taken place, 

 by the delivery of the commodities themselves ; and 

 even after an imaginary value was attached to the 

 precious metals, their conveyance from one quarter of 

 the world to another, must have been attended with 

 great inconveniency, risk, and danger. But when 

 commerce became more general, in consequence of 

 the progress of civilization, and embraced the pro- 

 ductions of countries remotely situated, a substitute 

 for money, that could be easily carried, or if lost, 

 speedily recovered, produced effects, that united the 

 arts and ingenuity of nations the most distant. Bills 

 of exchange, which were introduced into Europe to- 

 wards the close of the 1 2th century, have according- 

 ly effected every purpose that could have been accom- 

 plished by an abundance of gold and silver; and they 

 now the only means of payment among commer- 

 cial men, excepting in cases, where the precious metals, 

 from particular circumstances, are an article of profit- 

 able merchandize. To explain the principle on which 

 depends the importance of a bill of exchange, it is 

 only necessary to recur to daily experience. A trader 

 in London, for example, can pay a cargo of wheat to 

 a merchant in Russia, by transmitting to him a bank 

 of England bill, which would pass in that country for 

 value, from the well' founded conviction that it may 

 be ultimately resolved into gold, or into any commo- 

 dity that gold could purchase. The utility of banks, 

 therefore, arises from their affording a circulating 

 medium .representing property, the quantity of which 

 is only limited by the necessity that occasions it, or 

 in other words, by the demand induced, by the di- 

 versified operations of commerce. As this substitute 



NK. 



for money can be fabricated at little expense, it may P.n.V. 

 be deemed an artificial and inexhaustible mine for ' " v~~ 

 supplying the deficiency of the pr r al- 



together supplanting them as a circulating medium. 

 As gold and Silver, however, have so long represented 

 property, the habits of mankind have attached an 

 idea of value to them, which is almost universal ; and 

 it is only among polished nations that bank bills are 

 cu/rent; but to civilized society, they are of the' 

 highest importance, and the invention of the banking 

 system introduced a new aera in the annals of com- 

 merce. 



The establishment of banking companies in almost Advan- 

 every capital city, or populous town in En; jres pe- 



produced the happiest effects, by affording the means """* to 

 of promoting and extending agriculture, manufactures, * 

 and commerce ; but no \ m been 



carried to ? uch an extent as in Scotland, in proportion 

 to the industry, riches, and population of the coun- 

 try. In Scotland, banks are prop lishmeots 

 for deposit, credit, and discount. They embrace a 

 wide field, comprehending the borrowing and lcr..', 

 of money, buying and selling bills of exchange, dis- 

 counting the promissory notes of individuals, and cir- 

 culating their own. They advance money without 

 any other security than a bond signed by two or three 

 solvent men ; and this constitutes what is called a 

 cash account, which is merely a power to an indi- 

 vidual or a company to draw out a 8p< n at 

 the rate of 5 per cent, to be again replaced by in- 

 stalment, for which the same rate of interest is allow- 

 ed. On this account, a man may operate for life, oc- 

 casionally drawing and replacing as His circumstan- 

 ces, or t!.e nature of his business, will admit. Such 

 credits are peculiar to Scotland. In England, a 

 banker pays the drafts of a customer to the extent 

 only of the cash actually deposited in his hands. In 

 this respect, he is -merely the keeper of the money of 

 another, as he does not even allow interest for the 

 sums lodged with him. 



Scotch banks borrow money at 4 or 5 per cent, 

 interest payable on demand, - bles them to 



extend their trade, and to occupy capital that might 

 be otherwise unemployed. They discount drafts on 

 London and other places at distant dates, and promis- 

 sory notes payable any where in Scotland at 3 or ! 

 months to run, deducting only the legal interest. 

 From this branch of the business, they derive consi- 

 derable advantage, as they receive interest for the 

 notes they issue ; but the public are also benefited, 

 for those who convert their bills into currency thus 

 obtain command of their capital, and are again enabled 

 to go to market. But the principal source of emo- 

 lument to all banks arises from circulation, that is to 

 say, from the number of their notes constantly re- 

 maining in the hands of the public. For every month 

 that a one pound note is kept in circulation, the bank 

 gains one penny sterling, because it received the full 

 value of that note at the moment it was issued, and 

 that value bears interest at the rate of 5 per cent. 

 Buying and selling bills of exchange 6a , or 



elsewhere at a distance, form another source of profit 

 Icotch banks ; for they buy drafts in London at 

 L'O or 30 days premium, and sell at 40 or 50 days. 



The expense of agency, no doubt, reduces the pro- 



