to a larger purchase of precious metals, and occasions it a little more expence.

Hoarding becomes of some importance only when it takes place in consequence of political causes or mal-administration, when the minds of men are uneasy about public affairs, or when their safety and property are threatened. In such cases, the hoarding may be so considerable, that capitals may not be çasily or but partially circulated; that, according to Dr. Quesnay's expression, the distribution of part of the annual income of the nation may be paralyzed ; that the returns of the advances on cultivation, of the wages of labour, and of the consumption of the different classes who exercise lucrative trades, may be impeded; and that the re-production of the revenue and taxes may be diminished.* Instances of such hoarding are met with wherever government respects not persons and property, nor causes them to be respected; and in times of political commotions.

Political economy affords no remedies against this calamity.

To substitute a paper currency to the hoarded coin, is impossible; because, wherever the stability of government is threatened, and wherever government either will not, or cannot protect persons and property, there is no public credit.

As the interchange of the produce of labour is the source of wealth, whatever endangers the safety of individuals, the circulation of productions, the return and peaceable enjoyment of equivalents, causes the

See the preceding note.

metallic currency to be eagerly sought for by all classes of the community, occasions its being hoarded, and. opposes an insurmountable obstacle to that credit which might, to a certain degree, supply its place.

To import precious metals for the purpose of converting them into money, and thus replace the coin that has disappeared from circulation, can be done only at a great expence, and is not of material assistance. The operation can only be entrusted to merchants, who cannot perform it otherwise than by the exchange of national produce: but commerce is liable to all the chances which occasion the hoarding of coin. Nothing can induce merchants fearing for their property, to import precious metals but the certain prospect of a considerable benefit which is to indemnify them for the risks to which they expose themselves, or afford them, in fraud and corruption, a guarantee which they find not either in the laws or in government. To complete the misfortune; when the newly imported precious metals are circulated in the shape of coin, they do not remain long in circulation; the same motives which caused the old coin to be hoarded, cause the new coin to disappear; the penury continues the same, and the scantiness of circulation dries up every source of wealth.

Against these inconveniencies, the constant attendants of political commotions and bad governments, science loses its power, and all those measures, which political economy disavows, are but juggling tricks or miserable palliatives, which aggravate the evil and delay its cure, or render it impracticable.

Thus capital stock, considered in its three great

divisions, as fixed capital, circulating capital, and capital destined for immediate consumption, provides for the wants of labour, contributes to its progress in proportion to its own increase, and always affords an exact measure of the progress of national wealth.

There is a fourth employment of capital, distinct from those which I have just examined, the nature of which is not yet completely ascertained, neither are its effects certain or sufficiently known; I mean its being lent out at interest either to private individuals or to the public. Authors are not yet agreed respecting either the utility or the disadvantages of this kind of employment of capital.

Dr. Quesnay has considered this subject both with regard to the interest of the capitals thus employed, and the nature of national debts; his observations on these two points are very concise, and rather dogmatical than luminous.

He states that, "if money is lent out at a high rate of interest, it shows that the country has not money enough in proportion to its income, since "the use of it is so dearly paid for.

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"On the other hand, he would have governments "to avoid loans which pay interest, and burden the state with all-devouring debts; and in case of extraordinary necessities, he would have them to have recourse to the resources of the nation, and not to "the credit of financiers."*

Adam Smith has carefully and amply discussed the

* Physiocratie.

subject. He begins by ascertaining the part which metallic currency performs in the lending out of capital stock at interest; and clearly shews, that it is but the means, the instrument by which the lender conveys to the borrower the material productions of labour. "Money," says he, "is neither what the "borrower is actually in need of, nor what the lend"er provides him with to supply his wants. The "former only requires, and the latter but gives the "value of the money, or rather the commodities "which the money may purchase:" whence he infers, that the abundance or scarcity of inetallic currency has no influence whatever on the interest of capital.

He regulates this interest by the quantity of capitals to be lent out, by the competition between the various owners of capital, and by the profit of capital employed in the divers branches of labour in general.

He examines the effects of this kind of employment of capital upon national wealth, and is of opinion that whenever the capital devoted to loans is such as the owner does not chuse to employ himself, no injury arises, provided the borrower employs it in some productive labour; but that the matter is altered when such capitals are immediately consumed, and consumed without any reproduction, which is the casé with public loans.

He admits, however, that the resource of public loans to which modern states resort, preserves the rest of the capitals employed in productive labour which might have been affected by the contributions required by the necessities of the state. But after having weigh

ed the advantages and disadvantages resulting from this method of providing for extraordinary wants, he still regards it as a cause of weakness or distress in every country where it is adopted.

This rapid analysis of the opinion of these two authors on capitals lent out at interest, plainly shews that they agree respecting public loans, and only differ about the causes which fix the rate of interest or profit of the capitals lent out at interest.

If the difficulties with which this subject is involved, concerned this single point, it would be easy to dispel them, and to shew that Adam Smith was right when he asserted that the abundance or scarcity of coin has no influence whatever upon the rate of interest or profit of capitals lent out.

But capital stock performs so conspicuous a part in the political economy of modern nations, governments pay so little regard to the tenets of philosophical inquirers, and theory and practice are so openly at variance, that it is important not to neglect any means to put an end to all doubts, to dispel the clouds in which this part of the science is still enveloped, and to throw upon it the same light which has been thrown upon the rest.

All capitals are derived from economy in consumption. They must therefore necessarily consist in a produce of labour susceptible of being consumed. In the same manner as metallic currency enables capitals to find three principal kinds of employment, which Adam Smith has so properly characterized by the denomination of fixed capital, circulating capital, and capital stock reserved for consumption, it enables