tions of the Bank of England, and served the latter as channels of communication with every part of the empire.

But a conjecture hazarded by Mr. Henry Thornton respecting the extent of the payments effected every day by the London banks, from sixty to seventy in number, deserves particular attention. He calculates them at the enormous sum of from four to five mil lions sterling a day; which, reckoning only four millions for three-hundred and ten days, gives one thousand two hundred and forty millions a year. And what appears not less wonderful is, that this immense circulation is effected with twelve or thirteen millions sterling in coin, or bank-notes, which supply its place *.

What an astonishingly rapid circulation! What an economy in the cost of circulation; and what an immense benefit to the nation which created, and knew how to avail itself of this advantage!

Several distinguished writers, among whom David Hume holds the first rank, are of opinion, that such a considerable issue of paper-currency has the same

issue of promissory notes payable on demand, delivered to the House of Lords by the Stamp Office, July 4th, 1811.-T.

* The number of London bankers, on the first of February, 1812, was exactly seventy; the circulation of Bank of England notes amounted, in 1810, to twenty-three millions sterling ; and the total circulation of Great Britain, including the private bankers' notes, to fifty-six millions, to which may be added about four millions in specie. See the very able speech of Mr. G. Johnstone, delivered in the House of Commons on the 19th of July, 1811.

effect as the introduction of a large quantity of gold and silver; that it must necessarily depreciate, raise the price of labour and merchandize, and be detrimental to the sale of national produce abroad and at . home.

Hume observes, that the high price of commodities occasioned by the abundance of gold and silver is a disadvantage for an established commerce, and restricts it every-where by enabling poor nations to sell cheaper than the rich ones *.

Mr. Henry Thornton observes, with as much sagacity as justness, that the issue of a paper-currency, like the introduction of a great quantity of gold and silver, does not raise the price of labour and commodities in one country only, but the effect, when it takes place, is general and extends to all countries. Indeed, a paper-currency drives gold and silver out of circulation, and causes the metallic currency to be exported. This exportation augments the quantity of the precious metals wheresoever they are carried, sinks their value, and of course raises the price of labour and commodities. Consequently, it is not only in the country in which a paper-currency is issued, that the price of labour and its produce rises; the rise is general, and of course detrimental to none or hurtful to all countries.

* Hume's Essays, Edinb. 1804; of the Balance of Trade, page 330.

+ But if a comparatively small island exports twenty-five millions of its coin, and increases its paper-currency to fifty-six millions, how can the effect of twenty-five millions upon a whole continent, be equal to that of thirty millions additional currency

These are the considerations which have hitherto been advanced on the system of banks of circulation. I have connected the subject with that of the Bank of England, because that establishment has been the model of such kinds of banks, and still serves them as a pattern and an example.

The theory of banks has never been well understood in France; a country so enlightened, which has made so great a progress in sciences, in arts, in every kind of knowledge, and which has almost always accelerated their improvement when it had not given them the impulse. At least, the knowledge of the banking system has never been sufficiently diffused in France, to dissipate the gloomy fears of ignorance, to protect the country against the deceitful illusions of improvidence, or to help her to overcome the obstacles connected with every new institution, and particularly with the establishment of banks, which comes in close contact with so many interests, and excites so many apprehensions and so much uneasiness in the minds. of all.

But the surprise ceases when we reflect on the nature and spirit of the ancient government of France. Instead of encouraging and favouring the study of political economy, it considered itself interested in proscribing it, or in leaving its tenets unpractised, and, if I may be allowed the expression, lived from day to day, and either rejected all

upon a country that counts no more than twelve or thirteen millions of inhabitants ? It is the most convincing argument that a great local depreciation in such a case is unavoidable.-T.

innovations, or adopted them merely to abuse them, and to render them as fatal as they might have been useful, if they had been well directed.

In 1716, a bank of circulation was established at Paris on the plan and principles of the Bank of England. France was indebted for it to Mr. Law, a foreigner, a Scotchman whose name is but too famous in the annals of finance. This bank had every success that could be expected, as long as it was conducted according to the guardian and beneficial rules of banks of circulation.

But its nature was soon altered, and measures peculiar to commercial credit were applied to public and private credit. I have elsewhere explained this mistake and its dangerous results *.

This mistake occasioned the ruin of the bank, and, what must appear very extraordinary, is that its beneficial effects, as long as it was confined to the operations of a bank of circulation, were completely forgotten. The bank was pronounced good for nothing, no doubt, because it was not found calculated for every use to which it had been attempted to be put.

Sixty years after, a merchant, whose knowledge of political economy I have heard greatly extolled, and whose talents for that reason were little employed †, succeeded by great exertions in establishing a discounting bank (caisse d'escompte) for the circulation of the commercial bills of Paris. The success of this bank exceeded his most sanguine expectations:

* Essai Politique sur le Revenu Public.

+ Mr. Panchaud.

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indeed it could not fail to be considerable at a time. when the commerce of France with foreign nations. afforded every year a balance of thirty or forty millions of French Livres; when Paris, the seat of a flourishing industry, the residence of a brilliant and magnificent court, of a numerous and opulent nobility, of a rich and sumptuous clergy, of an immense concourse of strangers eager in the pursuit of pleasure, and of several companies of financiers profusely lavishing their fortune: when Paris, I say, obtained, through its own private trade, as considerable a balance as that of the whole French trade with foreign countries. In such a state of things, it is difficult to conceive what reverses could have befallen a bank of circulation, the operations of which were limited to extinguish the debts and demands of the private trade of Paris.

But prompted by ignorance or weakness, or dazzled by its success, the discounting bank afforded public credit an useless assistance; and the being deprived of its capital stock brought upon it the fate reserved to all banks which fondly imagine they may combine commercial with public credit. The discounting bank was obliged to dissolve itself, and to swell the list of the creditors of the state.

In the sixth year of the French republic (17981799), after the calamities of the revolution, but before order was restored to the French finances, and in the midst of the general discredit, the bankers of Paris opened a bank of running or current accounts for their private wants, to assist each other reciprocally in their operations, and to enjoy by their asso

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