monetary value does not come up as near as possible to its exchangeable value. Credit, of which money is the basis, is more or less impaired by such an alteration, and frequently receives a mortal blow. Thus credit is intimately connected with a gold and silver currency, and cannot exist but through such a currency.

But what ought to be the proportion of credit to a gold and silver currency?

I believe that, on this head, there are none but peculiar, local, and accidental data, which it is almost impossible to generalize. We shall hereafter investigate whatever is known on the subject.

There are three sorts of credit; commercial, private, and public credit. Their nature, their object, and their end, are not the same; and it is evidently through mistake that they have been confounded and assimilated.

Commercial credit must have taken place the instant when the labourer, the primitive producer of a production, was enabled by his savings to wait, for the wages of his labour, or the price of his produce, till the end of the week, of the fortnight, of a month, of three months, of six months, or a year.

By affording this facility to the undertaker, the labourer enabled him to sell his articles to the merchant or wholesale dealer without requesting immediate payment in money.

The merchant, in his turn, was enabled to grant the same indulgence to the retail dealer.

And the retail dealer could grant the same favour to the consumer,

So that, on the very first outset, or from the first effort of commercial credit, commodities were produced; they ran the whole career of circulation and were even consumed without the assistance and use of a single piece of coin.

Were this the only advantage afforded by commercial credit, it would still deserve the highest consideration. The facility of consuming without handing an actual and present equivalent is one of the greatest encouragements that can possibly be given to production, and one of the most fruitful elements of wealth. It affords a just notion of the power of credit, and yet it is only its very first advantage, and one of its least benefits.

When the day of payment, or term of credit arrived, the consumer was under the necessity of furnisliing the promised monetary equivalent ; and this equivalent being carried from the retail dealer to the merchant, from the merchant to the undertaker of the manufacture, and from the manufacturer to the labourer, and being distributed among them in the proportion of their co-operation in the value of the produce, required the same quantity of money as if it had been paid in small payments at every partial formation of the produce, and during its circulation, before it reached the consumer. The only advantage of credit in this hypothesis was therefore reduced to

elay the delivery of the monetary equivalent, which was, no doubt, a considerable advantage, as has been shewn just now.; but not to be compared with its other benefits and properties which time and circumstances have successively displayed.

The Jews, being creditors of considerable sums in several states of Europe, wlience their blind cupidity

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and the ignorance of governments had banished them, contrived to collect their debts by letters, addressed to their debtors; and the bearer of the letters acted as if he had become, and frequently was in reality, the owner of the demand. The debts were actually discharged at the delivery of the letters, and through this circumstance it was discovered that a creditor may transmit or make over his demand to another person, and by this transfer pay what he owes to his own creditor, or acquire the objects of his desire.

This discovery* was.a ray of light to trade; and from that instant metallic money became as it were, a stranger in all purely commercial transactions. It is well known, that, materially considered, such transactions consist in forwarding the productions of the producers to the consumers ; and it is easy to conceive that, after the invention of bills of exchange, comntercial transactions required no longer the assistance and intervention of money.t

* Bills of exchange, according to De Paw, were used at Athens. Gibbon, in his History of the Decline and Fall of the Roman Empire, remarks, that bills of exchange were known among the Arabs. The Abbé Raynal, in his Philosophical and Political History of 'both the Indies, asserts that bills of exchange were used in the East Indies at the time the Portuguese arrived there. Whether the Arabs availed themselves of the discovery of the Athenians, and transmitted it to the Jews, and to the people of Hindostan, is a problem of history which I shall not attempt to resolve.

+ David Macpherson, in his Annals' of Commerce, vol. j. page 405, states that bills of exchange are mentioned for the first time in 1955. He says, “ Though the excellent accommodation of remitting money by bills of cxchange was probably known long

Indeed, whenever a merchant received any quantity of produce from the farmer or manufacturer, he gave him a bill of exchange upon his debtor; and when he transferred any part of this produce to the retail dealer, he in turn obtained of him a bill of exchange ;

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before this time, in Italy and all other countries in which there was any commerce ; there is not, I believe, any express mention of them (so little attention did historians pay to matters of real utility and importance,) till a very extraordinary and infamous occasion connected them with the political events of the age. The Pope having a quarrel with Manfred, king of Sicily, had, in the plenitude of his power as sovereign of the world, offered the kingdom of Sicily and Apulia, on condition of driving Manfred out of it, to the brothers of the king of France, and, after their refusal, to Richard, earl of Cornwall, brother of King Henry III. ; who said he might as well offer to make him King of the Moon. At last he offered it to Henry for his second son, Edmund, who without hesitation accepted the fatal gift, and empowered the Pope to carry on his war against Manfred at the expence of England : whereupon be immediately took up large sums from the merchants of Italy. When they asked him for payment, he applied for the money to Henry, whose constant profusion made him for ever poor. While Henry was in terror of losing his son's visionary kingdom for want of money to feed the Pope's rapacity, Peter de Egeblanke, Bishop of Hereford, told him, that he had hit upon an expedient to raise the sums wanted, which was, that the Italian merchants, wbo had advanced the money, being authorized by the King and the Pope, neither of whom had any reluctance to forward sọ honourable a business, should draw bills upon the English prelates for sums pretended to have. been advanced to them by merchant's of Sienna or Florence. This righteous plan was accordingly executed, and an agent was sent into England to receive payment of the bills."

- Possibly the Jews were mere imitators of the merchants of Siena or Florence.

so that bills of exchange supplied the place of money in all commercial transactions, and performed its functions much better. They avoided the charges attendant on the transport of money, the losses resulting from the risk of the conveyance, and the friction, falsification and alteration of the coin; they even afforded the means of extinguishing by compensation the reciprocal commercial debts between retail dealers and merchants of the same or of different places, of the same or of different countries; and it is obvious how greatly this facility must haveincreased the benefits of credit and the resourcesof trade.

The compensation of commercial debts, which was casily effected when two merchants of the same place had bills of exchange to the same amount on each other, became more difficult, when these bills were in the hands of different persons resident in different places or countries, it was then necessary that every individual who had a bill of exchange to pay, should provide himself with the money necessary to discharge that bill when due; and the quantity of money which this compensation, or rather this exchange of bills, would require, is obvious.

Two ways equally ingenious were contrived to effect this exchange without the assistance of money ; both have been crowned with the same success. One is the setting off or compensating one debt against the other; and the other the banking system.

The first way, that of setting off, was successfully practised for a great length of time at Lyons. All bills were drawn payable at one of the fairs, which took

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