this power of purchasing or consuming, and
not in the pieces which convey it.
But if this is sufficiently evident, even with
regard to an individual, it is still more so with
regard to a society. The amount of the metal
pieces which are annually paid to an individual,
is often precisely equal to his revenue,
and is upon that account the shortest and best
expression of its value. But the amount of
the metal pieces which circulate in a society,
can never be equal to the revenue of all its
members. As the same guinea which pays
the weekly pension of one man to-day, may
pay that of another to-morrow, and that of a
third the day thereafter, the amount of the
metal pieces which annually circulate in any
country, must always be of much less value
than the whole money pensions annually paid
with them. But the power of purchasing, or
the goods which can successively be bought
with the whole of those money pensions, as
they are successively paid, must always be precisely
of the same value with those pensions;
as must likewise be the revenue of the different
persons to whom they are paid. That revenue,
therefore, cannot consist in those metal
pieces, of which the amount is so much inferior
to its value, but in the power of purchasing,
in the goods which can successively be
bought with them as they circulate from hand
to hand.
Money, therefore, the great wheel of circulation,
the great instrument of commerce,
like all other instruments of trade, though it
makes a part, and a very valuable part, of the
capital, makes no part of the revenue of the
society to which it belongs; and though the
metal pieces of which it is composed, in the
course of their annual circulation, distribute
to every man the revenue which properly belongs
to him, they make themselves no part of
that revenue.
Thirdly, and lastly, the machines and instruments
of trade, &c. which compose the
fixed capital, bear this further resemblance to
that part of the circulating capital which consists
in money; that as every saving in the
expense of erecting and supporting those machines,
which does not diminish the introductive
powers of labour, is an improvement of
the neat revenue of the society; so every saving
in the expense of collecting and supporting
that part of the circulating capital which
consists in money is an improvement of exactly
the same kind.
It is sufficiently obvious, and it has partly,
too, been explained already, in what manner
every saving in the expense of supporting the
fixed capital is an improvement of the neat
revenue of the society. The whole capital of
the undertaker of every work is necessarily
divided between his fixed and his circulating
capital. While his whole capital remains the
same, the smaller the one part, the greater
must necessarily be the other. It is the circulating
capital which furnishes the materials
and wages of labour, and puts industry into
motion. Every saving, therefore, in the expense
of maintaining the fixed capital, which
does not diminish the productive powers of
labour, must increase the fund which puts industry
into motion, and consequently the annual
produce of land and labour, the real revenue
of every society.
The substitution of paper in the room of
gold and silver money, replaces a very expensive
instrument of commerce with one much
less costly, and sometimes equally convenient.
Circulation comes to be carried on by a new
wheel, which it costs less both to erect and to
maintain than the old one. But in what manner
this operation is performed, and in what
manner it tends to increase either the gross or
the neat revenue of the society, is not altogether
so obvious, and may therefore require
some further explication.
There are several different sorts of paper
money; but the circulating notes of banks
and bankers are the species which is best
known, and which seems best adapted for this
purpose.
When the people of any particular country
have such confidence in the fortune, probity
and prudence of a particular banker, as to believe
that he is always ready to pay upon demand
such of his promissory notes as are likely
to be at any time presented to him, those notes
come to have the same currency as gold and
silver money, from the confidence that such
money can at any time be had for them.
A particular banker lends among his customers
his own promissory notes, to the extent,
we shall suppose, of a hundred thousand
pounds. As those notes serve all the purposes
of money, his debtors pay him the same interest
as if he had lent them so much money.
This interest is the source of his gain. Though
some of those notes are continually coming
back upon him for payment, part of them
continue to circulate for months and years together.
Though he has generally in circulation,
therefore, notes to the extent of a hundred
thousand pounds, twenty thousand pounds
in gold and silver may, frequently, be a sufficient
provision for answering occasional demands.
By this operation, therefore, twenty
thousand pounds in gold and silver perform
all the functions which a hundred thousand
could otherwise have performed. The same
exchanges may be made, the same quantity of
consumable goods may be circulated and distributed
to their proper consumers, by means
of his promissory notes, to the value of a hundred
thousand pounds, as by an equal value
of gold and silver money. Eighty thousand
pounds of gold and silver, therefore, can in
this manner be spared from the circulation of
the country; and if different operations of the
same kind should, at the same time, be
carried on by many different banks and bankers,