674 B A 
w ere augmented To as to be fold at a difcount, confidence 
would vaniffi, and thofe notes be no longer a circulating 
medium. 
it is impoffible to underfiand the principles upon which 
the bank of England is edabliffied, the nature of its pub¬ 
lic and private intereff, and more particularly to appreci¬ 
ate the real (ituation of the country in refpeft to the paper 
circulation, without entering into fome explanations with 
regard to part occurrences, and the relative (fate of the 
country banks; in which it is material to.obferve, that the 
bank of never did entirely abforb the whole of the national 
and commercial circulations. 1 he amount of the bills dil- 
counted by the bank for commercial pttrpofes nominally is 
not known; but, when the date of their affairs was recent¬ 
ly laid before parliament, the amount could not have been 
large ; at lead it mud have borne a fmall proportion to the 
commerce and (olid circulation of the country ; but, it 
the amount of paper difcounted for fictitious and dock¬ 
jobbing purpofes be deducted, the remainder will bear a 
very fmall proportion indeed to the whole ; and therefore 
the commerce of the country would not receive a fatal 
blow if the bank (hould decline difcounts altogether : nor 
even fhould it fail. The convulfion would no doubt be 
great, the difficulty and didrefs incalculable, but the coun¬ 
try would not'be ruined. The exidence of the bank de¬ 
fends on that of the country ; but the exidence of the coun¬ 
try by no means depends on that of the bank. 
Very few foreigners have underdood the principles on 
which the bank of England is edabliihed ; they have al¬ 
ways confidered their notes as government paper, and the 
experience they have had of the practice of governments 
in every country, induced them to fuppofe, that, when gold 
was lately refilled on the prefentation of the notes, the 
bank and the country were equally on the brink of ruin. 
They could not didinguidi between paper ifiiied for the 
foie- purpofe of circulation, limited in its amount, and un¬ 
der the authority and refpondbility of a corporate body, 
abfolutely independent,—and that paper which govern¬ 
ment could ifftie ad libitum , bearing an-intered, which ren¬ 
dered it an object for jierfons to purchafe as a productive 
invedment of their capitals : they were very much afto- 
iiiflied to find the total amount of notes in circulation to 
be fo fmall, compared with the commerce and wealth of 
the country ; and equally fo, tliat after all bank notes con¬ 
tinued to circulate at par. Thofe opinions, however, did 
not prevail at home, for the knowledge of the fources from 
whence thole notes idlied, namely, depofits of bullion, 
loans to government, and commercial difcounts, together 
with the confidence repofed in the directors, from the open 
manner in which they met and even courted public invef- 
tigation, at the late alarming crifis of their Hopping pay¬ 
ment. From long experience, the directors or the bank 
mud underdand correCtly the amount to which their notes 
can circulate without depreciation or difcount; and, altho’ 
they aCted very wifely at the awful moment to iflue a lar¬ 
ger fum than ufual, yet the event has proved, that they 
havq conducted themfelves with equal judgment, by not 
extending their iffues beyond what the currency of the 
country requires, and can fupport. Thus public confi¬ 
dence was redored to a degree much beyond what could 
have been expected ; but the flur mud indelibly remain, 
for it never can be effaced. 
As the circulation of the bank of England, although 
the mod important, is not the entire circulating.medium 
of the country, it becomes neceffary to take tome notice 
of the country banks, in order to form a correCt opinion of 
the whole. The edablifliment of mod country banks is 
of modern date; yet there has been no material (hock, 
with regard to circulation, from the time of the rebellion, 
until that which happened by the failure of the Air bank, 
in 1772. This failure was accompanied with others of 
great extent at the fame time in Holland ; but, as it was 
evidently partial and not general, the bank of England 
added very wifely, as well as liberally, by affording a fup¬ 
port to thofe houfes whofe ioliditv was unquedionable, 
N K. 
leaving others which were rotten to fall; and, as they were 
fvvept away, confidence was gradually redored. The next 
check to commercial credit arofe from the failure of a cir¬ 
culation edablifiied between Lancadtire and London, well 
known in the courts of law by the cafe of Gibfon v. John- 
fon, which has been fo often tried ; but, although the a- 
mount was large, it moved in fo narrow a line, that it pro- 
-duced no general effect on the country. What happened 
by the failure of fo many private banks in the beginning 
of 1793 was, however, very different: far beyond any thing 
which preceded, or has followed it, in magnitude; it per¬ 
vaded, more or lefs, every part or place in both lflands, 
and affeCted every defcription of property. 
During the interval between the failure of the Air bank 
and the didrefs of 1793, a very material change had taken 
place in regard to the general circulation. Banks had been 
edablifiied in almod every town, and even in villages, 
throughout the country ; and, in the larger towns rival ef- 
tablidimenfs were formed. Thefe produced a mod im¬ 
portant, and, Vvhilft it was fee lire, a beneficial, change to 
the country, by increafing its circulation : but unfortunate¬ 
ly the principles on which thofe banks were modly eda- 
blifhed were infecitre, in their being compelled todnved 
or employ the depofit left in their hands, and thereby ren¬ 
dering themfelves incapable of facing a hidden dorm, or, 
as it is called, anfwering a run upon them, which, from 
natural events, mud, in a courfe of time, arife. A bank¬ 
er in London never allows intered to his cudomers, and 
can afford to referve a proportion of his depofits, to enable 
him to anfwer hidden demands, or a run on his lioufe; as 
he thereby fudains no real l'ofs, but only diminifiies the 
amount of his profit. The country banker is in a very 
diderent fituation, for he allows intered on depofits, and 
therefore he cannot afford to fuffer even a fmall him to re¬ 
main dormant and unproductive; for every 100I. which 
he differs to remain in that predicament, is a lofs of the 
intered which he pays to his cudomer,'and which intered 
he mud get reimburfed, by inveding the money, before he 
can realile any profit for hinifelf. Thus it will appear, 
that wliild the circulation was greatly increafed, and its 
beneficial efteids enjoyed, by the commerce, manufactures, 
agriculture, &c. of the country, it was founded on the 
mod infecure principle, and liable to almod indantaneous 
convulfion, by unforefeen and even trifling circumdances, 
This might be promoted, more or lefs, by the practice of 
particular edablifliments; for if country banks, whofe 
principals are men of large unquedionable property, fhould 
fail, the contagion will immediately fpread, and the confe- 
quences are incalculable. Thus, for indance, in the be¬ 
ginning of the year 1793, and of 1797, the banks of New-' 
cable (Topped payment, wliild thofe of Exeter and the w f ed 
of England dood tlieir ground. The partners in the banks 
of Newcadle were far more opulent, but their private for¬ 
tunes, being inveded, could not be realifed in time to an¬ 
fwer a run on their banks. Their notes allowed intered 
to commence fome months after date, and were then pay¬ 
able on demand ; by which means they had not an hour 
to prepare for their difeharge; Tiie banks at Exeter, on 
the contrary, iffued notes payable twenty days after fight t 
with intered to commence from the date of the note, and 
to ceafe on the day of acceptance. There can be no doubt 
but the practice of the banks at Newcadle is more lucra¬ 
tive, but it mud for ever be liable to a return of what lias 
happened ; wliild the tw enty days referved at Exeter fur- 
nidies ample time to communicate witli London, and to 
receive every degree of abidance which may be required. 
Another circumdance contributed very materially to 
produce the didrefs of 1793, which was the hidden and 
unexpended declaration of war. That event is ufually 
preceded by fome indication which enables the commer¬ 
cial and monied men to make preparation. On tliisocca- 
fion, however, the fhort notice rendered the lead degree 
of general preparation impoffible. The foreign market 
was by this means (hut, or rendered more difficult of ac- 
cefs to the merchant j of courfe he could not purchafe 
3 from 
