It must, however, be confessed that, as all these questions of trade and money are extremely complicated, there are certain lights in which this subject may be placed so as to represent the advantages of paper-credit and banks to be superior to their disadvantages. That they banish specie and bullion from a state is undoubtedly true, and whoever looks no farther than this circumstance does well to condemn them; but specie and bullion are not of so great consequence as not to admit of a compensation, and even an overbalance from the increase of industry and of credit which may be promoted by the right use of paper-money. It is well known of what advantage it is to a merchant to be able to discount his bills upon occasion; and everything that facilitates this species of traffic is favourable to the general commerce of a state. But private bankers are enabled to give such credit by the credit they receive from the depositing of money in their shops; and the Bank of England in the same manner, from the liberty they have to issue their notes in all payments. There was an invention of this kind which was fallen upon some years ago by the banks of Edinburgh, and which, as it is one of the most ingenious ideas that has been executed in commerce, has also been found very advantageous to Scotland. It is there called a bank-credit, and is of this nature: A man goes to the bank and finds surety to the amount, we shall suppose, of five thousand pounds. This money, or any part of it, he has the liberty of drawing out whenever he pleases, and he pays only the ordinary interest for it while it is in his hands. He may, when he pleases, repay any sum so small as twenty pounds, and the interest is discounted from the very day of the repayment. The advantages resulting from this contrivance are manifold. As a man may find surety nearly to the amount of his substance, and his bank-credit is equivalent to ready money, {p61} a merchant does hereby in a manner coin his houses, his household furniture, the goods in his warehouse, the foreign debts due to him, his ships at sea; and can, upon occasion, employ them in all payments as if they were the current money of the country. If a man borrows five thousand pounds from a private hand, besides that it is not always to be found when required, he pays interest for it whether he be using it or not; his bank-credit costs him nothing except during the very moment in which it is of service to him, and this circumstance is of equal advantage as if he had borrowed money at much lower interest. Merchants likewise from this invention acquire a great facility in supporting each other’s credit, which is a considerable security against bankruptcies. A man, when his own bank-credit is exhausted, goes to any of his neighbours who is not in the same condition, and he gets the money, which he replaces at his convenience.
After this practice had taken place during some years at Edinburgh, several companies of merchants at Glasgow carried the matter farther. They associated themselves into different banks and issued notes so low as ten shillings, which they used in all payments for goods, manufactures, tradesmen, labour of all kinds; and these notes, from the established credit of the companies, passed as money in all payments throughout the country. By this means a stock of five thousand pounds was able to perform the same operations as if it were ten, and merchants were thereby enabled to trade to a greater extent, and to require less profit in all their transactions. In Newcastle and Bristol, as well as other trading places, the merchants have since instituted banks of a like nature, in imitation of those in Glasgow. But whatever other advantages result from these inventions, it must still be allowed that they banish the precious metals; and nothing can be a more evident proof of it than a comparison of the past and present condition of Scotland in that particular. It was found, upon the recoinage made after the Union, that there was near a million of specie in that country; but notwithstanding the great increase of {p62} riches, commerce and manufactures of all kinds, it is thought that, even where there is no extraordinary drain made by England, the current specie will not now amount to a fifth of that sum.
But as our projects of paper-credit are almost the only expedient by which we can sink money below its level, so, in my opinion, the only expedient by which we can raise money above its level is a practice which we should all exclaim against as destructive—viz., the gathering large sums into a public treasure, locking them up, and absolutely preventing their circulation. The fluid not communicating with the neighbouring element may, by such an artifice, be raised to what height we please. To prove this we need only return to our first supposition of the annihilating the half or any part of our cash, where we found that the immediate consequence of such an event would be the attraction of an equal sum from all the neighbouring kingdoms. Nor does there seem to be any necessary bounds set by the nature of things to this practice of hoarding. A small city like Geneva, continuing this policy for ages, might engross nine-tenths of the money of Europe. There seems, indeed, in the nature of man an invincible obstacle to that immense growth of riches. A weak state with an enormous treasure will soon become a prey to some of its poorer but more powerful neighbours; a great state would dissipate its wealth in dangerous and ill-concerted projects, and probably destroy with it what is much more valuable—the industry, morals, and number of its people. The fluid in this case, raised to too great a height, bursts and destroys the vessel that contains it, and mixing itself with the surrounding element, soon falls to its proper level.
So little are we commonly acquainted with this principle that, though all historians agree in relating uniformly so recent an event as the immense treasure amassed by Harry VII. (which they make amount to £1,700,000), we rather reject their concurring testimony than admit of a fact which agrees so ill with our inveterate prejudices. It is indeed probable that that sum might be {p63} three-fourths of all the money in England; but where is the difficulty that such a sum might be amassed in twenty years by a cunning, rapacious, frugal, and almost absolute monarch? Nor is it probable that the diminution of circulating money was ever sensibly felt by the people, or ever did them any prejudice. The sinking of the prices of all commodities would immediately replace it, by giving England the advantage in its commerce with all the neighbouring kingdoms.
Have we not an instance in the small republic of Athens with its allies, who in about fifty years between the Median and Peloponnesian Wars amassed a sum greater than that of Harry VII.?[20] for all the Greek historians and orators agree that the Athenians collected in the citadel more than 10,000 talents, which they afterwards dissipated, to their own ruin, in rash and imprudent enterprises. But when this money was set a-running, and began to communicate with the surrounding fluid, what was the consequence? Did it remain in the state? No; for we find by the memorable census mentioned by Demosthenes and Polybius that, in about fifty years afterwards, the whole value of the republic, comprehending lands, houses, commodities, slaves, and money was less than 6000 talents.
What an ambitious, high-spirited people was this, to collect and keep in their treasury, with a view to conquests, a sum which it was every day in the power of the citizens, by a single vote, to distribute among themselves, and which would go near to triple the riches of every individual; for we must observe that the numbers and private riches of the Athenians are said by ancient writers to have been no greater at the beginning of the Peloponnesian War than at the beginning of the Macedonian.
Money was little more plentiful in Greece during the age of Philip and Perseus than in England during that of Harry VII., yet these two monarchs in thirty years {p64} collected from the small kingdom of Macedon a much larger treasure than that of the English monarch. Paulus Æmilius brought to Rome about £1,700,000 sterling—Pliny says £2,400,000—and that was but a part of the Macedonian treasure; the rest was dissipated by the resistance and flight of Perseus.
We may learn from Stanyan that the Canton of Berne had £300,000 lent at interest, and had above six times as much in their treasury. Here, then, is a sum hoarded of £1,800,000 sterling, which is at least quadruple of what should naturally circulate in such a petty state; and yet no one who travels into the Pais de Vaux, or any part of that canton, observes any want of money more than could be supposed in a country of that extent, soil, and situation. On the contrary, there are scarce any inland provinces in the countries of France or Germany where the inhabitants are at this time so opulent, though that canton has vastly increased its treasure since 1714, the time when Stanyan wrote his judicious account of Switzerland.[21]
The account given by Appian of the treasure of the Ptolemies is so prodigious that one cannot admit of it, and so much the less because the historian says the other successors of Alexander were all so frugal, and had many of them treasures not much inferior; for this saving humour of the neighbouring princes must necessarily have checked the frugality of the Egyptian monarchs, according to the foregoing theory. The sum he mentions is 740,000 talents, or £191,166,666 13s. 4d., according to Dr. Arbuthnot’s computation; and yet Appian says that he extracted his account from the public records, and he was himself a native of Alexandria.
From these principles we may learn what judgment we ought to form of those numberless bars, obstructions, and imposts which all nations of Europe, and none more than {p65} England, have put upon trade, from an exorbitant desire of amassing money, which never will heap up beyond its level while it circulates; or from an ill-grounded apprehension of losing their specie, which never will sink below it. Could anything scatter our riches, it would be such impolitic contrivances. But this general ill effect, however, results from them, that they deprive neighbouring nations of that free communication and exchange which the Author of the world has intended, by giving them soils, climates, and geniuses so different from each other.