The whole delicacy of the intricate combinations of commerce, depends upon a just and equable vibration of prices, according as circumstances demand it. The more therefore the industrious classes are instructed in the principles which influence prices, the more easily will the machine move. A workman then learns to sink his price without regret, and can raise it without avidity. When principles are not understood, prices cannot gently fall, they must be pulled down; and merchants dare not suffer them to rise, for fear of abuse, even although the perfection of an infant manufacture should require it.
Interest of the bank examined.
The last interest I shall examine is that of the bank of England, which naturally must regulate that of every other.
Had this great company followed the example of other banks, and established a bank-money of an invariable standard, as the measure of all their debts and credits, they would not have been liable to any inconvenience upon a variation of the standard.
I am not sufficiently versed in English affairs to be able to sift out every reason which that company may have had to neglect a thing which other companies have found of such importance.
An attention to the circumstances of the time of its institution, and to others relative to the principles of English government with regard to money, may help us to guess at what other people, who have access to be informed, may discover with certainty.
The bank of England was projected about the year 1694, at a time when the current money of the nation was in the greatest disorder, and government in the greatest distress, both for money and for credit. Commerce was then at a very low ebb, and the only, or at least the most profitable trade of any, was jobbing in coin, and carrying backwards and forwards the precious metals from Holland to England. Merchants profited also greatly from the effects which the utter disorder of the coin produced upon the price of merchandize.
At such a juncture the resolution was taken to make a new coinage, and upon the prospect of this, a company was found, who, for an exclusive charter to hold a bank for 13 years, willingly lent the government upwards of a million sterling at 8 per cent. (in light money I suppose) with a prospect of being repaid both interest and capital in heavy. This was not all: part of the money lent, was to be applied for the establishment of the bank, and no less than 4000 pounds a year was allowed to the company, above the full interest, for defraying the charge of management.
Under such circumstances the introduction of bank-money was very superfluous, and would have been very impolitic. That invention is calculated against the raising of the standard; but here the bank profited of that rise in its quality of creditor for the money lent, and took care not to commence debtor by circulating their paper, until the effect of the new regulation took place in 1695. That is after the general recoinage of all the clipped silver.
From that time till now, the bank of England has been the basis of the nation’s credit; and with great reason, has been constantly under the most intimate protection of every minister.