PAPER 
for; into ftock which produces fomething, both to him- 
felf and his country. The gold and filver money which 
circulates in any country, and by means of which the 
produce of its land and labour is annually circulated and 
diftributed to the proper confumers, is, in the fame man¬ 
ner as the ready money of the dealer, all dead ftock. It 
is a very valuable part of the capital of the country, 
which produces nothing to the country. The judicious 
operations of banking, by fubftituting paper in the room 
of a great part of this gold and filver, enable the country 
to convert a great part of this dead ftock into aftive and 
productive ftock ; into ftock which produces fomething to 
the country. The gold and filver money which circulates 
in any country may very properly be compared to a high¬ 
way, which, U'hile it circulates and carries to market all 
the corn and grain of the country, produces itfelf not a 
fingle pile of either. The judicious operations of bank¬ 
ing, by providing, if it may be allowed fo violent a meta¬ 
phor, a fort of waggon-way through the air, enable the 
country to convert, as it were, a great part of its high¬ 
ways into paftures and corn-fields, and thereby to in- 
creafe very confiderably the annual produce of its land 
and labour. The commerce and induftry of the country, 
however, it muft be acknowledged, though they may be 
fomevvhat augmented, cannot be altogether fo fecure, 
when they are thus, as it were, fufpended upon the 
Daedalian wings of paper-money, as when they travel 
about upon the folid ground of gold and filver. 
Over and above the accidents to which they are ex- 
pofed from the unlkilfulnefs of the conduiftors of pa¬ 
per-money, they are liable to feveral others, from which 
* no prudence orfkill of tholecondudlors can guard them.” 
z. The difadvantages and evils of paper-money, in¬ 
deed, arife from the fame caufes which produce its ad¬ 
vantages and benefits: w.e muft never forget, that the 
foundation of paper-money is credit; that it is, in fa< 51 , 
an obligation to pay on demand a certain fum of metallic 
currency. Credit does not create capital, it only fets that 
portion of capital in operation, which w'ould otberwife be 
inactive : the perfon who gives credit, in reality gives 
part of his capital, which he has not the difpofition or the 
means to employ : and the perfon who receives credit or 
capital, by employing his induftry and fkill along with 
his borrowed capital, is enabled to repay it, and theftipu- 
lated intereft. So long as the credit of the lender is good, 
and the repayment of the borrower punctual or un¬ 
doubted, fo long a paper-currency thus eftablifhed, if not 
pufned too far, muft be beneficial to the lender, the bor¬ 
rower, and the nation at large. But let us fuppofe that, 
from any caufe, confidence in the paper-money of a coun¬ 
try was deftroyed or fhaken, and we (hall immediately 
perceive the difadvantages and evils of this fpecies of cur¬ 
rency, as compared with a metallic currency. Where the 
commercial tranfadlions of a country are entirely carried 
on in a metallic currency, opinion has no room for opera¬ 
tion : no confidence is repofed ; commodities are fold, not 
for what mayor may not be worth the value which they 
reprefent or promife, but for what pofiefies abfolute and 
intrinfic value. No circumftance will point out and ex¬ 
emplify the difference between a paper and a metallic 
currency fo clearly and ftrikingly, as the invafion, or 
dread of invafion, in the countries in which they refpec- 
tiveiy exift. If a country, the currency of which confifted 
principally or entirely of paper, were adlually invaded, 
or threatened with invafion, or even if its internal ftate 
were convulfed or difturbed, or its finances confiderably 
difarranged, its paper-currency would be immediately af- 
fedted : its value would fall, in proportion as the confi¬ 
dence repofed in it was diminifhed: people would prefer 
metallic currency for this llrong and obvious reafon, that 
whoever had polfeflion of the country, whatever change 
took place in its government, or into whatever circum- 
ftances of political or financial embarrafiment and confulion 
it was thrown, the value of the metallic currency would 
M O N E Y. 383 
remain unchanged, whereas the value of the paper-cur¬ 
rency would be fubjedl to conftant variation, and might 
probably be totally deftroyed. 
It is fometimes objefted to a paper-currency, that, by 
exchanging commodities for it, we in faft get nothing 
valuable; whereas, when we fell our commodities for gold 
or filver, we obtain fomething of real and intrinfic value : 
but this obfervation amounts to nothing, provided the 
credit of the paper-currency be good ; it is, indeed, found¬ 
ed on the erroneous idea, that when we fell our com¬ 
modities, we look for any thing elfe in the money which 
we receive, but the certainty that it will be taken from 
us at an undiminilhed value. When a perfon fells a quar¬ 
ter of wheat for five pounds, it muft be a matter of perfedt 
indifference to him, whether he receives five pounds in 
filver, or five pounds in paper, provided he is convinced 
that, in the purchafe of what he may want, the latter will 
go as far as the former: in felling his wheat he is never 
difturbed by the idea, that five pounds in filver have in¬ 
trinfic value, i. e. value as metal, while the five pounds in 
paper polfefs no intrinfic value ; the power each pofiefles 
over commodities is all he regards, and, if that power be 
equal, their value, for all the purpofes he needs them 
for, is equal in his ellimation. 
It has alfo been objected to paper-currency, that its 
ufe is folely confined to tranfadfions of domeftic traffic; 
and confequently that a country, which has no other 
fpecies of currency, muft go to a foreign market to pur¬ 
chafe commodities at a great difadvantage. The fadt is 
undoubted, that, generally fpeaking, a paper-currency is 
without value in a foreign country ; but the inference by 
no means follows, that on this account foreign commo¬ 
dities muft be purchafed by a country which poifelfes only 
a paper-currency at a great difadvantage. On the firft 
eftablifhment of a paper-currency, the very reverfe muft 
be the cafe ; or, to fpeak more corredlly, the eftablilhmenc 
of a paper-currency fetting loofe a portion of the metallic 
currency, this may be employed in purchafing a larger 
quantity of foreign commodities than the country could 
afford to purchafe while this metallic currency was ne- 
ceffary for the circulation of its internal commerce. But, 
even after a paper-currency is eftablifhed, foreign com¬ 
modities may be purchafed at an equally-cheap rate as 
they were while the currency was metallic ; for, in the 
firft place, foreign commodities are feldom purchafed by 
the coin of the country purchafing, but either by bullion, 
or the interchange of commodities; and fecondly, while 
a bank-note for a guinea will exchange for a guinea, it 
will always command, indiredtly, the fame quantity of 
foreign commodifies, as could be purchafed if the cur¬ 
rency were entirely metallic. 
But the objection to paper-currency, urged moft fre¬ 
quently and with the moft confidence, arifes from the 
extreme facility with which it may be increafed, the 
ftrong temptations to increafe it, and the evils to the 
community to which an improper increafe muft give 
rife. This objection naturally leads us to confider the 
nature and procefs of the checks to the over ilfue of bank- 
paper, when it is payable on demand. 
3. It may be proper firft to confider what is meant by 
an o'ver-ijfue of paper-money: the term is too often ufed 
without any clear and definite idea being attached to it. 
When the quantity of circulating medium, whether 
metallic or of paper, is increafed in a country, the in¬ 
creafe either operates to the production of a great quan¬ 
tity of commodities, that is, is ufefully employed, or it 
merely operates to raife the prices of the commodities 
already in exilience: before, therefore, the addition of 
any fum to the circulating medium can be faid to an over- 
iffue or not, the effeCts produced by it muft be traced and 
afcertained: if a correfpondent addition to the quantity 
of commodities has taken place, there cannot be faid to 
be an over-ifiue of currency; but, if no fuch correfpondent 
addition has taken place, as the fum added to the cur¬ 
rency 
