BAN 



fixtK of die whole. If we confider the quick circulation 

 which paper admits of, and the iiicrcafe which an accelerated 

 rate of circulation gives to the efftflive powers of cunciicv, 

 t!.i3 addition of alnioft one-lixtii mull he refardtd as an 

 imnieiifc auginentation of tlie mafs of cfScient ciiirciicv. 

 AViide theillue of bank of England rxtes was moderate and 

 rellrnuicd, the market price of bnliion, particularly of lilver 

 bullion, which is a more certain Ihmdard than gold, bicaiifc 

 it is a more regular article of csmmerce, contiruud very 

 nearly thj fame a; its ellahhihed price in our mint. In tlic 

 fummjr of 1799, however, about tiie fame time with the 

 great increafe of bank paper, a rapid and extraordinary ad- 

 vance t<iok place in tlic market price of bullion. That of 

 filver rofe at once to 5s. 8d. aimoll tep per cent, above t!ie 

 mint price. It continued to rife along with the progrtllive 

 increale of notes; and in i8or, when they excce-ded fixteen 

 millions, it was as high as 6 s. more than 16 percer.t. and 

 even as 63. i d. more than 17 percent, above thf mint price. 

 Thus alfo, while the ifTue of t!ie bank of Eng'and notes 

 was moderate and rellrained, the rate of exchange at Ha.-.-.- 

 biirgh continued in favour of tliis country, being'froni three 

 to five per cent, above par. But in the fumnur of 1799, 

 about the fame time with the great increafe of bank paper, 

 a very rapid fail to k place. It fell at once to 32, above 

 eight per cent, below par; and continued to fall ahuoil re- 

 gularly, though not quite fo regularly as the price of 

 bullion rofe, along with the progrefTive increafe of nntes. 

 At the commencement of 1801, w!ien they exceeded fixteen 

 millions, the exchange with Hamburgh v.-as as low as 29!. 

 I OS. almoil 16 per cent, below par. Lord Kin-T haj iub- 

 joined a.fet of tables, which exhibit the remarkable cor- 

 relpondence between the variations in the quuitity of bank 

 notes, and the variations in the price of bullion and rate of 

 exchange. His lordihip has alfo fliei^n, that the paper 

 currency of the bank of Ireland has been augmented from 

 621,9171. to 2,6^3,354!.; and that its notes at prefent in 

 circulation exceed more than four times the amount of wlnt 

 were in circulation when the acl of rcflriction was pafFed. 

 During the fame period, the price of filver in Dublin has 

 experienced a great advance, having varied from 6s. 6d. to 

 7 s. Iridi currency ; an increafe, whicii, eltimating .the mint 

 price at 5s. yd. is from 14 to 20 per cent. The rate of ex- 

 change between Dublin and London has bee-i alfo remark- 

 ably aifecled; the difference having progrcflively increafed 

 from Sf, t!ie ordinary difference, to 10, 12, 14, and even 16. 

 'I'his proof of the depreciation of bank of Ireland notes has 

 not been confined to the courfe of exchange with London; 

 but is felt in the tranfaifions of Dublin with many of the 

 provincial town?, wiiere thofe notes have not acquired a 

 general circulation; tlie currency Hill confilling e-Lhcr ot 

 fpecie, or of country note;. In confequence ot this, and 

 of the depreciated condition of the Dublin currency, ttere 

 is an adlnal diifcrence of exchange between Dublin and thole 

 towns. This is the cafe, forintlance, in Belfall; when a pay- 

 ment is there made in bank of Ireland notes, an additional 

 fum is paid proportional to the difcount. Hence lord King 

 infers, that the meafure of 1797 has actually had a pernicious 

 innuence upon the fyllera of circulation ; and in llrong terms 

 deprecates its continuance. Mr. Thornton ilates the fol- 

 lowing faCl, that the enumeration of couniry-banis taken in 

 iSoo, differed from that taken in 1797, by the excefs of 

 386 above 353. 



It is not, fays Dr. Smith (ubi infra), by augmenting 

 the capital of the country, but by rendering a greater 

 part of that capital adive and produdlivc than would 

 otherwife be fo, that the moll judicious operations of 

 banking can iucveafe the indullry of the country. That 



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ptirt of his capital which a dealer is obliged to keep by 

 him unemployed, and iu ready money for anfwering occa- 

 fional demands, is fo much dead Itocli, r.liicli, fo long as it 

 remains in this fituation, produces nothing either to him or 

 to his country. Tt'e judicious opcnrtions of banking ena- 

 ble him to convert this dead Hock into aftive aod produc- 

 tive Cock ; into mnterials to work upon, intotooL to work 

 v.ith, and into provifions ar.d fi:b;:r.ciice to work for; into 

 flock which prod'jces fonitthing both to hinfelf and to 

 his country. Tlie gold and filver money which circulates IH 

 any country, and by means of which the proUixc of iti 

 land and labour is annually -circiiiated and didributed to 

 ^ the proper confumcrs, is, in the fame maiu.cr as the ready- 

 money of the dealer, all dead (lock. It is a very valuable 

 part of the cap-tal of the conntr)-, wh^ch produces nothing 

 to the country. The judicious o-perations of banking, by 

 fubltitufing p,;per in the room of a great part of this g-.ld 

 and filver, enable the country to convert a great part of thi» 

 dead ilock into active and prodiiaive Hock ; into ftock 

 which produces fomething to the country. The gold and 

 filver money wiiich circulates in any countiy may very pro- 

 perly be compared to a iiighway, w!:ich while it circulates 

 and carries to market all the grafs and corn of the coniitrv, 

 produces irfelf not a fingle pile of either. The judicious 

 operations of banking, by providing, if I may be allowed 

 lo violent a metaphor, a fort of waggon-way through the 

 air ; enable the country to convert, as it were, a great part 

 of its highways into good pnitures and corn fields, and 

 thereby to increafe very coiifiderably the annual produce of 

 its land and labour. The commerce and indullry of the 

 country, however, it mu!l be acknowledged, though they 

 may be fomewliat augmented, cannot be altogether fo 

 fec'.ire, when thq are thus, as it were, fufpendcd upon tlie 

 Dxdahan wings of paper money, as when they travel about 

 upon the folid ground of gold and filver. Over and above the 

 accidents to wliiclt they are cxpofed from the un.Oiilfulnefs 

 of the cor.duiSors of this paper money, they are liable to 

 feveral others, from which no prudence or flvill of thofe 

 condufiors can guard them. 'Mr. Hume (Effavs, vol. i» 

 Efi". iii. p. 301.) exprtlfes his donbt concerning the benefit 

 of banki and paper credit. That provifions and labour, 

 he fays, (liouh! become dear by the increafe of trade and 

 money, is, in many refpcifls, an ireonvenience, but an incon- 

 venience that is unavoidable, and the elTecl of that public 

 wealth and profpcrity which are the end of all our wiihts. 

 It is compenfated by the advantages, which we derive from 

 tiie poffefiion of thefc precious metals, and the wei<Tht 

 which they give the nation in all foreign wars and negotia- 

 tions. But there aj)pears no reafon, as he conceives, for 

 incrtallng that inconvenience by a counterfeit money, which 

 foreigners will not accept cf i:i any payment, and which 

 any great diforder in the llate will reduce to nothinti. (See 

 Pai-er-Money.) Inquiry into tlic nature and efl'ecis of 

 the Paper Credit of great IJriiain, by Henry Thornton, 

 Efq. M.P. London, 1802. Smith's Nature aiid. Caufes of 

 the Wealth of Nations, vol. i. p. 479 — 484. 



In Sco;land, there are Iiko public banks ereflcd at Edin- 

 burgh ; ofwhitli the one, called "The Bank of Scotland," 

 was eilabl'gtd by ail of parliament in 1695; the other, 

 called " The lioyal Bank," by royal charter in 1727. New 

 banking companies have been alio ereCted within the lall 

 thirty and forty years in aimoll every confiderable town, and 

 even in fome country villages. The biifinefs of the country, 

 fays Dr. Smith (vol. i. p. 442), is almoil entirely carried 

 on by means of the paper of thefe different banking compa. 

 nies, with which purchafes and payments of all kinds, ar* 

 commonly made. Silver very feldom appears except in the 



change 



