BAN 



mnre liberal in xhcW dealings with theii" ciiaomcrs, h![ tliti, 

 rivals flioii'd carry them away. In general, if any hraiich of 

 trade, or any diviiion of labonr, be advantageous to the pub- 

 lic, the freer and more general the competition, it will alivays 

 be the move fo. Smith's Wealth of Nations, vol. i. o. 44^^, 

 &c. p. 4.98, &c. 



15an-ks of Depr^it arc fnch as arc inflit\:ted wholly for the 

 benefit of the public. Of thcfe Dr. Smith has j;ivcn the 

 iollowing account : " The currency of a great (late, fiich 

 as France or England, generally confiils ahnoft entirely of 

 its own coin. Should this currency, therefore, be at any 

 tur.e worn, clij)t, or otherwife degraded below its ftandard 

 value, the Hate by a reformation of its coin can elTedually 

 re-ellublifh its cuiTency. I'mt the currency of a fmall Hate, 

 fuch as Genoa or Hamburgh, can feldom'co-.ifill altogether 

 in its own coin, but muil be made up, in a great meafure, 

 of the coins of all the neighbouring ilates with which its 

 inhabitants have a continual intercourfe. Such a ftate, 

 therefore, by reforming its coin, wi 1 not always be able to 

 reform its currency. If foreign bills of exchange are paid 

 in this currency, the uncertain value of any Aim, of what 

 is in its own nature fo uncerlain, muft render the exchange 

 always very much againil fuch a ilate, its currency being, 

 m all foreign Ilates, uecclTarily valued even below what it is 

 worth. 



In order to remedy the inconvenience lo which this dif- 

 ad'.antageous exchange mull have fubjeded their merchants, 

 fuch fmall Ilates, when they began to attend to the intereil 

 of trade, iiave frequently enacted, that foreign bills of ex- 

 change of a certain value fhould be paid, not in common 

 currency, hut by an order upon, or by a transfer in the 

 books ut a certain b.mk, eftabhfhed upon the credit, and 

 under the prctedion of the ftate ; this bank being always 

 obliged to pay, in good and true monev, exaclly according 

 to the llandard of the Hate. The bank of Venice eftablidicd 

 in 1157, that of Genoa in 1 345> ^''^t of Amilerdam in 

 1609, that of Hamburgh in 1619, and the bank of Nu- 

 remberg, feem to have been all originally eftabliflicd with 

 this view, though fome of them may have afterwards been 

 made fubfervicnt to other purpofes. The monev of fuch 

 banks being better than the cominon currency of the 

 country, ncCLffarily bore an agio, which was greater or 

 fmalLr, according as the currency was fuppofed to be n;ore 

 or lels degraded below the ftandard of the ftate. The agio 

 of the bank of Hamburgh, for example, which is faid to 

 be commonly about fourteen per cent, is the fuppofed dif- 

 ference between the good ftandard monev of the ilate, and 

 the dipt, worn, and diminidicd currency, poured into it from 

 all the neighbouring ftates. 



Before 1609, the great quantity of dipt and worn foreign 

 coin which the extenfive trade of Amilerdam brought from 

 all parts of Europe, reduced the value of its currency about 

 nine per cent, below that of good money frcfli from the 

 mint. Such money no fooner appeared tlian it was melted 

 down or carried away, as it always is in fuch circuniftances. 

 The merchants, with plenty of currency, could not always 

 find a fufficient quantity of good money to pay their bills 

 of exchange; and the value of thofe bills, in Ipite ol feveral 

 regulations v.hich were made to prevent it, became in a 

 great meafure uncertain. 



In order to remedy thcfe inconveniences, a bank was 

 eftablifhcd in 1609, under the guarantee of the city. V'his 

 bank received both foreign coin, and the light and worn 

 coin of the country, at its real iiitrinlic value in the good 

 ftandard money of the country, dedufting only fo much as 

 was necefr.n-y for defraying the exper.ce of coinage, and 

 the other neccfrarv cxpcnce of management. For the value 



Vol.. III. 



BAN 



ir which remained after this fmall dedudion was made, it gave 

 a cred:t in its books. This credit was called baiik money, 

 which, as it reprefented money exactly according to the 

 llandard of the mint, was aKvavs of the fame real value, 

 and inlriniically worth more than cuiTcnt money. It wa» 

 at the fame time enacted, that all bills dr.nvn upon or nego- 

 tiated at Amfterdam, of the vzlue of fix hundred guilders 

 and upwards, fhould be paid in bank money, which at once 

 took away all uncertainty in the value of tliofc bills. Every 

 mv-rchant, in confequcncc of tliis regulation, was obliged 

 to keep an account with the bank in ordci* to pay liij fo- 

 reign bills of exchange, which neceflarily occaConcd a cer- 

 tain demand for bank monev. 



Bank money, over and above both its intrinfic fupcriorky 

 to currency, and the additional value which thi^ demand 

 neceflarily give* it, has likewifc fome other advantages. It 

 is fec-.re from fire, robbery, and other accidents ; the city of 

 Amilerdam is bound for it ; it can be paid away by a fimple 

 transfer, without the trouble of counting, or the rilk of 

 tranfporting it from one place to another. In confequcncc 

 of thefe different advantages, it feems from the beginning 

 to havi; borne an agio, and it is generally believed, that a.I 

 the money originallv dcpofited iu the bank was allowed to 

 remain there, nobody caring to demand payment of a debt 

 which he could fell for a premium in the market. By de- 

 manding payment of the bir.k, the owner of a bank credit 

 would lofe thii premium. As a (hilling iiefli from the mint 

 will buy no more goods in the market than one of our 

 common worn ftiiilings, fo the good and true money which 

 might be brought from the coilers of the bank into thole 

 of a private perlon, being mixed and confounded with the 

 common currency of the countr)', would be of no more va- 

 lue than that currency, from which it could no longer br 

 readily dillingiiilhed. While it remained in th.e coffers of 

 the bank, its luperioiity was known and afcertaincd. When 

 it had come into thofe of a private perfon, its fuperiority 

 could not well be afccrtaintd without more trouble than 

 perhaps the diftcrence was worth. By being brought from 

 the coflers of the bank, befides, it loll all the other advan- 

 tages of bank money ; its ftcuritv, its eafy and fafe trans- 

 ferability, its ufe in paving foreign bills of exchange. Over 

 and above all this, it could not be brought from thofe cof- 

 fers, as will appear by and by, without previoully payinjj 

 for the keeping. 



Thofe depollts of coin, or thofe dipofits which the bank 

 was bound to reftore in coin, conllituted the original capit;il 

 of the bank, or the whole value of what was reprefented 

 by what is called bank money. At prefent they are fup- 

 pofed to conftitute but a very fmall part of it. In order to 

 facilitate the trade in bullion, the bank has been for thcfe 

 many years in the prailice of giving credit in its books upon 

 depofits of gold and lilvcr bullion. This credit is generally 

 about lire per cent, below the mint price ol Inch bullion. 

 The bank grants at the fame time what is called a recipice 

 or receipt, entitling the perfon who makes the depofit, or 

 the bearer, to take out the bullion again at any time within 

 fix ir.onths, upon transferring to tlic bank a quanrity cf 

 bank money ecjual to that for which credit had been givca 

 in its books when the depofit was made, and upon payii;g 

 one-fourth per cent, for the keejiing, if the depofit was iu 

 filver ; and one-half per cent it it was in gold ; but at the 

 fame time declaring, that in default of fuch payment, and 

 upon the cxpiiation of this term, the depofit (hould btlor.g 

 to the bank at the price at which it had been received, or 

 for v^hicli credit had been given in the transfer looks. 

 What is thus paid for the keeping of the depofit iray be 

 confidered as a furt of warehoufc rent ; and whv this varc. 

 4 C houfe 



