pounds, the four thousand pounds which
are over and above what the circulation can
easily absorb and employ, will return upon it
almost as fast as they are issued. For answering
occasional demands, therefore, this
bank ought to keep at all times in its coffers,
not eleven thousand pounds only, but fourteen
thousand pounds. It will thus gain nothing
by the interest of the four thousand
pounds excessive circulation; and it will lose
the whole expense of continually collecting
four thousand pounds in gold and silver, which
will be continually going out of its coffers as
fast as they are brought into them.
Had every particular banking company always
understood and attended to its own particular
interest, the circulation never could
have been overstocked with paper money. But
every particular banking company has not always
understood or attended to its own particular
interest, and the circulation has frequently
been overstocked with paper money.
By issuing too great a quantity of paper, of
which the excess was continually returning,
in order to be exchanged for gold and silver,
the Bank of England was for many years together
obliged to coin gold to the extent of
between eight hundred thousand pounds and
a million a-year; or, at an average, about
eight hundred and fifty thousand pounds.
For this great coinage, the bank (in consequence
of the worn and degraded state into
which the gold coin had fallen a few years
ago) was frequently obliged to purchase gold
bullion at the high price of four pounds an
ounce, which it soon after issued in coin at
L.3 : 17 : 10½ an ounce, losing in this manner
between two and a half and three per
cent. upon the coinage of so very large a sum.
Though the bank, therefore, paid no seignorage,
though the government was properly at
the expense of this coinage, this liberality of
government did not prevent altogether the expense
of the bank.
The Scotch banks, in consequence of an excess
of the same kind, were all obliged to employ
constantly agents at London to collect
money for them, at an expense which was seldom
below one and a half or two per cent.
This money was sent down by the waggon,
and insured by the carriers at an additional expense
of three quarters per cent. or fifteen
shillings on the hundred pounds. Those agents
were not always able to replenish the
coffers of their employers so fast as they were
emptied. In this case, the resource of the
banks was, to draw upon their correspondents
in London bills of exchange, to the extent of
the sum which they wanted. When those
correspondents afterwards drew upon them
for the payment of this sum, together with
the interest and commission, some of those
banks, from the distress into which their excessive
circulation had thrown them, had sometimes
no other means of satisfying this draught,
but by drawing a second set of bills, either
upon the same, or upon some other correspondents
in London; and the same sum, or rather
bills for the same sum, would in this
manner make sometimes more than two or
three journeys; the debtor bank paying always
the interest and commission upon the whole
accumulated sum. Even those Scotch banks
which never distinguished themselves by their
extreme imprudence, were sometimes obliged
to employ this ruinous resource.
The gold coin which was paid out, either
by the Bank of England or by the Scotch
banks, in exchange for that part of their paper
which was over and above what could be employed
in the circulation of the country, being
likewise over and above what could be employed
in that circulation, was sometimes sent
abroad in the shape of coin, sometimes melted
down and sent abroad in the shape of bullion,
and sometimes melted down and sold to the
Bank of England at the high price of four
pounds an ounce. It was the newest, the
heaviest, and the best pieces only, which were
carefully picked out of the whole coin, and
either sent abroad or melted down. At home,
and while they remained in the shape of coin,
these heavy pieces were of no more value than
the light; but they were of more value abroad,
or when melted down into bullion at home.
The Bank of England, notwithstanding their
great annual coinage, found, to their astonishment,
that there was every year the same scarcity
of coin as there had been the year before;
and that, notwithstanding the great quantity
of good and new coin which was every year
issued from the bank, the state of the coin,
instead of growing better and better, became
every year worse and worse. Every year they
found themselves under the necessity of coining
nearly the same quantity of gold as they
had coined the year before; and from the continual
rise in the price of gold bullion, in
consequence of the continual wearing and clipping
of the coin, the expense of this great annual
coinage became, every year, greater and
greater. The Bank of England, it is to be
observed, by supplying its own coffers with
coin, is indirectly obliged to supply the whole
kingdom, into which coin is continually flowing
from those coffers in a great variety of
ways. Whatever coin, therefore, was wanted
to support this excessive circulation both of
Scotch and English paper money, whatever
vacuities this excessive circulation occasioned
in the necessary coin of the kingdom, the
Bank of England was obliged to supply them.
The Scotch banks, no doubt, paid all of them
very dearly for their own imprudence and inattention:
but the Bank of England paid very
dearly, not only for its own imprudence, but
for the much greater imprudence of almost all
the Scotch banks.
The over-trading of some bold projectors
in both parts of the united kingdom, was the