To set this matter in a clear light, let me suppose that, some time ago, the banks had at once withdrawn all the credits granted to exchangers; and opened a subscription for a loan of money, equal to what they might estimate the sum borrowed by that set of men within the country, for the sake of carrying on their business.
According to principles, these two operations should go hand in hand: the recalling the credits would, no doubt, have greatly distressed exchangers; but as long as they could find money to borrow from private hands, that inconvenience would have been lessened. Besides, I apprehend that the late custom among exchangers, of borrowing at 4 per cent. owes its existence to the difficulty they felt in obtaining extensive credits from the bank; and if this be the case, then there has been a lucrum cessans to the bank of 5 per cent. upon the amount of all these borrowings; because exchangers, I apprehend, would prefer a credit from the bank at 5 per cent. to a loan at 4 per cent. payable on demand, according to the occasions of those who keep their money with them.
The most effectual method, therefore, to hurt exchangers, would have been to have recalled all their credits, and offered to borrow, upon the same terms, what was lent to them.
The execution of such a plan would, I think, have been, 1. diametrically opposite to the interest of the banks; 2. would have occasioned such a run upon exchangers, as to throw them into great distress; and 3. would have ended in the total ruin of the trade of Scotland.
That such a plan is diametrically opposite to all principles of banking, I suppose, is by this time sufficiently understood.
That it would have occasioned a run upon exchangers, is pretty certain: because however good their credit might be, it must be acknowledged to be inferior to that of the banks; and therefore no body would prefer them for debtors, to the bank, upon the same terms.
The third consequence is as evident, upon a short reflection, as the other two. The run upon the exchangers would have obliged them to make a call upon all the merchants and dealers in Scotland, to whom they gave credit: for which purpose, and for which alone, they find an interest in borrowing at so high an interest as 4 per cent.
The call, then, made by the exchangers upon their debtors, is neither more or less than a call upon the money employed in the trade of Scotland.
Now we have said, that whoever owes must pay. The merchants of Scotland owe to exchangers; the latter are pressed by their creditors, and must pay with what they have, which consists in money only: when that is exhausted, they must shut up shop. They again call upon the merchants, who must pay with what they have. This consists in goods, and in the manufactures of Scotland; and these they must sell at any price. There may not be time sufficient to export with advantage. To whom then must they sell? To people within the country, who have no money to buy with; because credit is withheld by that body which only can give it. I conclude with the old saying of the law,
Unum quodque eodem modo solvitur quo colligatum est.