PAPER MONEY. 
384 
rency cannot be ina&ive or unapplied, a rife of price mull 
take place, and then an over-iffue may juftly be faid to have 
occurred. Thofe who fell as well as buy, probably will not 
be much or long injured by this rife, fince any addition 
to the currency is not long in adjufting itfelf to the 
various commodities in the market; and, confeqnently, if 
fome commodities are bought dearer, other commodities 
are fold dearer : but thofe perfons, whofe whole property 
confifts in money, are injured, w'hen there is an over-ilfue 
of the currency; i. e. when an addition to the currency 
does not produce a correfpondent addition to the com¬ 
modities in the market. While the currency is entirely 
metallic, they are in a great meafiire guarded from a fud- 
den or violent over-iffue, and confequently, fromafudden 
or violent rife of prices, or depreciation of money, their foie 
property ; fince, before any great addition can be made to 
the circulating medium, additional labour mull: have been 
bellowed on the mines. But, where paper-currency is 
ellablilhed, the cafe at firft light feems different; the value 
of their property, i. e. money, is at the mercy of all who 
can iffue bank-notes. If, however, we invelligate what 
actually takes place, where there is a paper-currency 
payable on demand, we ihall find that the property of the 
moneyed man is guarded as effedfually, though not fo 
direffly, as if the currency were metallic. 
Let us fuppofe a large addition to be made to the paper- 
currency of any particular diftri&.in this country. This 
addition operates either to the rife of prices folely, or to 
an increafe in the quantity of commodities; in the latter 
cafe, the moneyed man has no caufe to complain ; there is 
indeed more money in his neighbourhood, but, as there 
are alfo more goods, the value of his money is not affedled. 
On the other fuppolition, that the increafe to the paper- 
currency raifes the price of commodities, let us fee what 
will occur: thofe commodities, the price of which is 
railed, will be purchafed in another diftrift, where they 
have not undergone a limilar rile; but, before they can 
be purchafed, the local notes mult be exchanged for fuch 
as are current in the diftrift where the purchafe is to be 
made; or, in other words, fome part of the over-iffued 
notes will return to the bank which iffued them. This 
will be a fufficient proof and warning to the bank, that 
they have iffued more notes than the commercial tranf- 
a< 5 tions of the diftriiSf required; and as, on notes almoft 
immediately returned, the expenle in manufacturing them, 
and their proportion of the eftablifhment, mult far exceed 
the profit made on them while they were in circulation, 
the bank will be careful in future not to over-iffue their 
notes. 
A procefs limilar in all its lleps, and in its refult, will 
take place, if the Bank of England, while fubjeft to be 
called upon for calh-payments, Ihould over-iffue their 
notes : the over-iffued'notes will either fpread themfelves 
over the country, for the purchafe of luch commodities 
as have become cheaper in the country than in London, 
by the addition to the circulating medium, or they will 
be returned to the Bank of England for gold, wherewith 
to go to a foreign market. 
Thus it would appear that the property of the moneyed 
man is rather more fecure, and better proteCled from de¬ 
preciation, in a country, the currency of which confifts of 
paper payable on demand, than in a country, the cur¬ 
rency of which is entirely metallic ; fince, in the former 
country, the real and well-underftood intereft of thofe 
who iffue the paper-money mult lead them molt carefully 
to avoid any over-iffue ; whereas in a country, the cur¬ 
rency of which is entirely metallic, though no addition 
to it, fufficient to raife the prices, can long remain in it, 
yet it may both remain longer than an over-iffue of paper 
money, and be repeated more frequently. 
4. We now come to confider, laftly, the ftate of bank- 
paper, when not payable on demand , fo far as regards its 
over-iffue, and its luppofed depreciation arifing from this 
or other caufes. 
The fufpenfion of caffi payments in the Bank of Eng¬ 
land, in the beginning of the year 1797, forms a moft 
memorable era in the hiftory of the fcience of political 
economy; and the undiminiffied confidence, which after 
this meafure was, and is, repofed in the Bank-of-England 
notes, has ffiaken to the foundation many favourite 
theories in this moft intricate and delicate fcience. By 
fome it is alleged, that the confidence in Bank-of-Eng¬ 
land paper remained the fame, even after the fufpenfion 
of calh-payments, becaufe there was a general and well- 
founded belief, that the Bank was able to pay all its notes 
in fpecie ; but fometbing more than mere ability would 
feem neceffary to inlpire or continue confidence. Of 
what moment is it to the holder of a Bank-of-England 
note, to be told that the Bank can pay it in fpecie, if he 
knows that they will not, and that he cannot compel 
them ? By others it was argued, that the confidence 
was (till continued, becaufe it was expected, that in a fhort 
time calh-payments would be refumed. This coniidera- 
tion might have operated on fome perfons at the time of 
the impoling the reftriftion ; but afterwards it could have 
no weight, as the expe&ation that calh-payments would 
foon be refumed, w'ere till very lately utterly banilhed 
from the mind of every man; and yet no diminution of 
confidence took place. The continued confidence, with¬ 
out diminution, in the Bank-of-England paper, after they 
were relieved from the obligation to pay in caffi, feems to 
have arifen from the following circumftances. All the 
principal merchants, and government itfelf, declared 
their willingnefs to receive bank-paper as before; the 
mafs of the nation were content with this; for, though 
intrinfic value is indifpenfibly neceffary at firft to give 
circulation, yet, in procefs of time, that circumftance is 
never adverted to, except by thofe whofe bufinefs it is to 
watch the variations in the value of the metals of which 
the money is formed. The nation at large knew, that 
the Bank would no longer pay in caffi; but they alfo 
knew, that Bank-of-England paper, though thus deprived 
of its intrinfic value, would be received the fame as 
before by all thofe to whom their principal or moft com¬ 
mon payments were to be made: as, therefore, the bank- 
paper (till retained the character and ufes of money, the 
alteration in its intrinfic value was not adverted to. 
With refpeit to the danger of over-iffue, when calh- 
payments are fufpended, it is argued, that it is merely 
chimerical; fince no one will pay intereft to the Bank for 
money, from which he does not expeft to derive more 
profit than the intereft he pays; anti confequently, as all 
iffues are made for commercial purpofes, they will not be 
carried to a greater extent than the ftate of commerce 
requires. But it may be very true, that there are no 
iffues, but what the ftate of commerce requires, and what 
will produce, or are expefted to produce, a profit to the 
borrower; and yet there may be an over-iffue of bank- 
paper; or, in other words, an iffue that will raife the 
price of commodities; fince, in many inftances, the profit 
expected by the borrower may arife from this increafe of 
prices. Let us fuppofe a merchant wiffies to buy largely 
cotton, corn, or any other commodity, and for this pur- 
pole gets his bills difcounted at the Bank-of-England : 
his fpeculations fucceed, and he makes a large profit; in 
this cafe, the price of the cotton or corn is neceilarily in- 
creafed by the greater lum brought into the market for 
the purchafe of if, by means of the difcount afforded by 
the Bank-of-England : there is a real commercial tranf- 
adfion ; and yet, as there is no increafe in the quantity of 
commodities, but a mere transfer, the bank-notes iffued 
for this purpofe ought to be confidered an over-iffue, 
that is prejudicial to the property of the moneyed man, 
though advantageous to the bank and the merchant. 
It is evident that paper-money, when not payable in 
cafli on demand, muft be more liable to depreciation 
from any doubt refpefting the fecurity of the country, 
than if it could be converted into caffi at pleafure; but 
4 liow 
