What benefit can ever a bank which lends upon private security reap by borrowing within the country of which it is the center of circulation; nay, what benefit can it ever reap from withholding its notes from those who can give good security for them!
Every penny it borrows, or calls in, circumscribes its own profits, while it distresses the country. After all the combinations I have been able to make, I can discover but one motive which (through a false light) may engage a bank to this step, to wit, jealousy of other banks.
As this speculation is designed to illustrate the principles of circulation, from circumstances relative to the present state of the Scotch banks, let us call things by their names.
The banks of Edinburgh resemble, more than any other in Scotland, a national bank. Let me then suppose all that can be supposed, viz. that the abundance of their paper has given occasion to lesser banks to pick up from them every shilling of coin which these lesser banks have ever had; and that these have had the address also to throw the whole load of the balance upon those of Edinburgh: let this be supposed, more cannot, and let us allow farther, that this must ever continue to be the case. In these circumstances, what motive can the banks of Edinburgh have for withholding credit from those who are able to give security? What motive can they have for borrowing up their own notes?
Indeed I can account for this plan of management in no other way than by supposing, that disgusted at the long continuance of an unfavourable balance of trade against their country, and vexed to find the whole load of it thrown upon themselves, they have taken the resolution to abandon the trade, and are taking this method of recalling their paper altogether.
Let me suppose the contrary, and I shall not be able to discover how it is possible that such a conduct can turn to their own advantage, throwing out all consideration of the public good, which for some time, no doubt, must be greatly hurt by it.
As long as any considerable quantity of their notes is in circulation, and that the principal exchangers reside at Edinburgh, they never can avoid the loss of paying the balance; and by refusing to fill up the void occasioned by the return of their notes, they deliver the whole profit of replacing them to the other banks, their rivals.
Let me next estimate the losses they sustain by furnishing coin to the other banks, and for the payment of the balance; and then compare these with what they lose by not keeping circulation full.
I shall suppose the balance to cost them two hundred thousand pounds per annum; and I shall suppose that all the lesser banks put together have occasion for two hundred thousand pounds in their chests: Is not this computation far above what can possibly be supposed?
Will it be allowed that if the banks of Edinburgh willingly submit to pay the whole of the bills of exchange demanded on London, for this balance, they will have at least the preference in replacing that sum to circulation?