BAN 



BAN 



e'liange of a twenty rtiilling bank note, anJ gold feldomcr. 

 But though the condiicl ot all thefe different companies has 

 not heen unexceptionable, and has accordingly required an 

 adl of parliament to regulate it ; tlie country, notwithftand- 

 ing, has derived great benefit from their trade. It has been 

 alTerted, fays this writer, that the trade of the city of Glaf- 

 gow doubled in about fi'^teen years after the firil ereftion of 

 the banks there ; and that the trade of Scotland has more 

 than quadrupled fince the firtl erettion of the two public 

 banks at Edinburgh. Whether this Hatement be Ibiclly juil 

 or not, it is certain, that the trade and induftry of Scotland 

 have increafed very confiderably during this period, and it 

 mull be allowed, as an unquellionable fact, that the banks have 

 greatly contributed to this increafe. The whole value of 

 the gold and filvcr, which circulated in Scotland before the 

 union, cannot be eftimatcd at lefs than a million ftcrling. 

 In the preftnt times, fays Dr. Smith, the whole circulation of 

 Scotlandcannot beeilimated at kfsthan tuo millions, of which 

 that part which confills in gold and fdvcr, moft probably, 

 does not amount to half a million. But though the circulat- 

 ing gold and filver of Scotland have fufifered fo great a 

 diminution during this period, its real riches and profperity 

 do not appear to have fufFered any. In agriculture, manu- 

 factures, and trade, on the contraiy, the annual produce of 

 its land and labour has evidently been augmented. It is 

 chiefly by difcounling bills of exchange, that is, by advanc- 

 ing money upon them before they arc due, that the greater 

 number of banks and bankers iffue their promiffory notes ; 

 dedufting always, upon the 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 

 cf what had been advanced, together with a clear profit of 

 the intereft. The banker, who advanaes to the merchant 

 whofe bill he difcounts, not gold and filver, but his own 

 promiffory notes, has the ad-antage of being able to dif- 

 count to a greater amount by the whole value of his promif- 

 fory notes, which he finds by experience are commonly in cir- 

 culation. He is thereby enabled to make his clear gain of 

 intereft into a much larger fum. The commerce of Scotland 

 was much lefs confiderable than it is now, when the two 

 firft bankrng companies were eftabliilied, and thofe compa- 

 nies would lia%-e had but little trade, if their bufinefs had 

 been reftrifted to the difcounting of bills of exchange. They 

 invented, therefore, another method of iffuing their promif- 

 fory notes; by granting, what they called "cadi accounts," 

 that is, by giving credit to the extent of a certain fum 

 (e.g. 2 or 3000 pounds), to any individual who could pro- 

 cure two perfons of undoubted credit and good landed ellate 

 to become fccurity for him, that whatever money fliould 

 be advanced to him within the fum for which the credit 

 had been given, (hould be repaid upon demand, together 

 with the legal intereft. Credits of a fimilar kind are 

 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 repayment are, fays 

 Dr. Smith, peculiar to them, and have, perhaps, been the 

 principal caafe, both of the great trade of thefe companies, 

 and of the benefits which the country has received from it. 

 Whoever has a credit of this kind with one of thefe com- 

 panies, and borrows e. g. a thoufand pounds upon it, may 

 repay this fum by piece-meal, by 20I. and 30I. at a time ; 

 the company difcounting a proportionable part of the in- 

 tereft of the great fum from the day on which each of thofe 

 fmall funis is paid in, till the whole be in this manner re- 

 paid. All merchants, therefore, and almoft all men of bufi- 

 nefs, find it convenient to keep fuch cafh accounts with 

 them, and are thereby intereftcd to promote the trade of thofe 



companies, by readily receiving their notes in all payments, 

 and liy encoui-agiiig all thofe with whom they have any in- 

 fluence to do the fame. Tlie hanks, when their cuftomeru 

 apply to them for money, generally advance it ta them in 

 their own promiffory note. Thefe the merchants pay 

 away to the maiiufaftnrers for goods, the manufaiturers to 

 the farmers for materials and provifions, the farmers to their 

 landlords for rent, the landlords repay them to the mer- 

 chants for the conveniences and luxuries with which they 

 _fupp!y them, and the mcrchai'ts again return them to the 

 bunks in order to balance their cafh accounts, or to replace 

 what they may have borrowed of them ; and thus almoft the 

 whole money bufinefs of the country is tranfadled by means 

 of them. Hence the great trade of thofe companies. 



By means of tlufe cafti account.':, every merchant can, 

 without imprudence, carry on a greater trade tlian he other- 

 wife could do. If there arc two merchants, one in London, 

 and the other in Edinburgh, who employ equal ftocks in 

 the fame branch of trade, the Edinburgh merchant can, 

 without in'prudence, caviy on a greater trade, and give i'm- 

 ployir.ent to a greater nurriber of people, than the Londorj 

 merchant. The London merchant m,uft always keep by 

 him a confiderable fum of money, cither in his own coffers, 

 or thofe of his banker, who gives him no intcrf ft for it, in 

 order to anfwer the demands continually coming upon him 

 for payment of the goods which he pnrchafes upon credit. 

 Let the ordinal"}- amount of this fum be fuppofed 500I. The 

 value of the goods in his warehoufe muft always be lefs by 

 50CI. than it would have been, had he not been obliged to 

 keep fuch a fum unemployed. Let us fuppofe that he gene- 

 rally difpofes 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 500I. w-orth lefs goods than he might 

 otherwife have done. His annual profits muft be lefs by all 

 that he could have made by the fale of 500I. worth more 

 goods ; and the number of people employed in preparing 

 his goods for market, muft be lefs by all thofe that 500!. 

 move ftock could have employed. The merchant in Edin- 

 burgh, on the other hand, keeps no m.oney unemployed for 

 anfwering fuch occafioiial demands. When they aftually 

 come upon hiip, he fatisfies them from his cadi account with 

 the bank, and gradually replaces the fum borrowed with the 

 money or paper which comes in from the occaiional fales of 

 his goods. With the fame ftock, therefore, he can without 

 imprudence, have at all times in his warehoufe a larger 

 quantity of goods than the London merchant ; and can 

 thereby both make a greater profit himfelf, and give 

 conftant employment to a greater number of induftrious 

 people who prepare thofe goods for the market. Hence 

 the great benefit which the country has derived from this 

 traSe. 



The late multiplication of banking companies in both 

 parts of the united kingdom, an event by which many peo- 

 ple have been much alarmed, infteadof dimi.-iilhing, increafes 

 the fecuritv of the public. It obliges all of them to be 

 more circumfpeft in their conduft, and, by not extending 

 their currency beyond its due proportion to their caiTi, to 

 guard themfclves againft thofe mahclous runs, which the 

 rivalfhip cf fo many competitors is always ready to briig 

 upon them. It reftrains the circulation of each particular 

 company within a narrower circle, and reduces their circu- 

 lating notes to a fmaller number. By dividing the whole 

 circulation into a greater number of parts, the failure of any 

 company, an accident which, in the courfe of things, muft. 

 foinetimes happen, becomes of lefs confequence to the pub- 

 lic. This free csmpetition too ^obliges all bankers to be 

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