II. BOOK great part of this dead stock into active and productive flock; into stock which produces fomething to the country. The gold and filver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grafs and corn of the country, produces itself not a fingle pile of either. The judicious operations of banking, by providing, if I may be allowed fo violent a metaphor, a fort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures and corn fields, and thereby to increase very confiderably the annual produce of its land and labour. The commerce and induftry of the country, however, it must be acknowledged, though they may be fomewhat augmented, cannot be altogether fo fecure, when they are thus, as it were, fufpended upon the Dædalian wings of paper money, as when they travel about upon the folid ground of gold and filver. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to feveral others, from which no prudence or skill of those conductors can guard them. An unfuccessful war, for example, in which the enemy got poffeffion of the capital, and confequently of that treasure which fupported the cre'dit of the paper money, would occafion a much greater confufion in a country where the whole circulation was carried on by paper, than II. in one where the greater part of it was carried CHA P. on by gold and filver. The ufual inftrument of commerce having loft its value, no exchanges could be made but either by barter or upon credit. All taxes having been usually paid in paper money, the prince would not have wherewithal either to pay his troops, or to furnish his magazines; and the state of the country would be much more irretrievable than if the greater part of its circulation had confifted in gold and filver. A prince, anxious to maintain his domi. nions at all times in the ftate in which he can most easily defend them, ought, upon this account, to guard, not only against that exceffive multiplication of paper money which ruins the very banks which iffue it; but even against that multiplication of it, which enables them to fill the greater part of the circulation of the country with it. The circulation of every country may be con, fidered as divided into two different branches; the circulation of the dealers with one another, and the circulation between the dealers and the confumers. Though the fame pieces of money, whether paper or metal, may be employed fometimes in the one circulation and fometimes in the other; yet as both are conftantly going on at the fame time, each requires a certain stock of money of one kind or another, to carry it on. The value of the goods circulated between the different dealers, never can exceed the value of thofe circulated between the dealers and the confumers; whatever 113 II. BOOK whatever is bought by the dealers, being ulti mately destined to be fold to the confumers. The circulation between the dealers, as it is carried on by wholefale, requires generally a pretty large fum for every particular tranfaction. That between the dealers and the confumers, on the contrary, as it is generally carried on by retail, frequently requires but very fmall ones, a fhilling, or even a halfpenny, being often fufficient. But fmall fums circulate much fafter than large ones, A fhilling changes mafters more frequently than a guinea, and a halfpenny more frequently than a fhilling. Though the annual purchases of all the confumers, therefore, are at least equal in value to thofe of all the dealers, they can generally be tranfacted with a much fmaller quantity of money; the fame pieces, by a more rapid circulation, ferving as the inftrument of many more purchases of the one kind than of the other, Paper money may be fo regulated, as either to confine itself very much to the circulation between the different dealers, or to extend itself likewise to a great part of that between the dealers and the confumers. Where no bank notes are circulated under ten pounds value, as in London, paper money confines itself very much to the circulation between the dealers. When a ten pound bank note comes into the hands of a confumer, he is generally obliged to change it at the firft fhop where he has occafion to purchase five fhillings worth of goods; fo that it often re turns II. turns into the hands of a dealer, before the con- CHA P. fumer has spent the fortieth part of the money. Where bank notes are iffued for fo fmall fums as twenty fhillings, as in Scotland, paper money extends itself to a confiderable part of the circulation between dealers and confumers. Before the act of parliament, which put a stop to the circulation of ten and five fhilling notes, it filled a still greater part of that circulation. In the cur-' rencies of North America, paper was commonly iffued for fo finall a fum as a fhilling, and filled almoft the whole of that circulation. In fome paper currencies of Yorkshire, it was iffued even for fo fmall a fum as a fixpence. Where the iffuing of bank notes for fuch very fmall fums is allowed and commonly practifed, many mean people are both enabled and encouraged to become bankers. A person whofe promiffory note for five pounds, or even for twenty fhillings, would be rejected by every body, will get it to be received without fcruple when it is iffued for fo fmall a fum as a fixpence. But the frequent bankruptcies to which fuch beggarly bankers must be liable, may occafion a very confiderable inconveniency, and fometimes even a very great calamity, to many poor people who had received their notes in payment. It were better, perhaps, that no bank notes were iffued in any part of the kingdom for a fmaller fum than five pounds. Paper money would then, probably, confine itself, in every part of the kingdom, to the circulation between II 4 the II. BOOK the different dealers, as much as it does at prefent in London, where no bank notes are iffued under ten pounds value; five pounds being, in moft parts of the kingdom, a fum which, though it will purchase, perhaps, little more than half the quantity of goods, is as much confidered, and is as feldom spent all at once, as ten pounds are amidst the profuse expence of London. Where paper money, it is to be observed, is pretty much confined to the circulation between dealers and dealers, as at London, there is always plenty of gold and filver. Where it extends itfelf to a confiderable part of the circulation between dealers and confumers, as in Scotland, and ftill more in North America, it banishes gold and filver almost entirely from the country; almost all the ordinary tranfactions of its interior commerce being thus carried on by paper. The fuppreffion of ten and five fhilling bank notes, fomewhat relieved the fcarcity of gold and filver in Scotland; and the fuppreffion of twenty fhilling notes would probably relieve it ftill more. Thofe metals are faid to have become more abundant in America, fince the fuppreffion of fome of their paper currencies. They are faid, likewife, to have been more abundant before the inftitution of thofe currencies. Though paper money should be pretty much confined to the circulation between dealers and dealers, yet banks and bankers might still be able to give nearly the fame affiftance to the in duftry |