of circulating bills of exchange, who
would employ the money in extravagant undertakings,
which, with all the assistance that
could be given them, they would probably
never be able to complete, and which, if they
should be completed, would never repay the
expense which they had really cost, would never
afford a fund capable of maintaining a
quantity of labour equal to that which had
been employed about them. The sober and
frugal debtors of private persons, on the contrary,
would be more likely to employ the money
borrowed in sober undertakings which
were proportioned to their capitals, and which,
though they might have less of the grand and
the marvellous, would have more of the solid
and the profitable; which would repay with a
large profit whatever had been laid out upon
them, and which would thus afford a fund
capable of maintaining a much greater quantity
of labour than that which had been employed
about them. The success of this operation,
therefore, without increasing in the
smallest degree the capital of the country,
would only have transferred a great part of
it from prudent and profitable to imprudent
and unprofitable undertakings.
That the industry of Scotland languished
for want of money to employ it, was the opinion
of the famous Mr Law. By establishing
a bank of a particular kind, which he
seems to have imagined might issue paper to
the amount of the whole value of all the lands
in the country, he proposed to remedy this
want of money. The parliament of Scotland,
when he first proposed his project, did not
think proper to adopt it. It was afterwards
adopted, with some variations, by the Duke
of Orleans, at that time regent of France.
The idea of the possibility of multiplying paper
money to almost any extent was the real
foundation of what is called the Mississippi
scheme, the most extravagant project, both of
banking and stock-jobbing, that perhaps the
world ever saw. The different operations of
this scheme are explained so fully, so clearly,
and with so much order and distinctness, by
Mr Du Verney, in his Examination of the
Political Reflections upon commerce and finances
of Mr Du Tot, that I shall not give
any account of them. The principles upon
which it was founded are explained by Mr
Law himself, in a discourse concerning money
and trade, which he published in Scotland
when he first proposed his project. The
splendid but visionary ideas which are set forth
in that and some other works upon the same
principles, still continue to make an impression
upon many people, and have, perhaps, in
part, contributed to that excess of banking,
which has of late been complained of, both in
Scotland and in other places.
The Bank of England is the greatest bank
of circulation in Europe. It was incorporated,
in pursuance of an act of parliament, by a
charter under the great seal, dated the 27th of
July 1694. It at that time advanced to government
the sum of L.1,200,000 for an annuity
of L.100,000, or for L.96,000 a-year,
interest at the rate of eight per cent. and
L.4,000 a-year for the expense of management.
The credit of the new government,
established by the Revolution, we may believe,
must have been very low, when it was obliged
to borrow at so high an interest.
In 1697, the bank was allowed to enlarge
its capital stock, by an ingraftment of
L.1,001,171 : 10s. Its whole capital stock,
therefore, amounted at this time to L.2,201,171 : 10s.
This ingraftment is said to have been
for the support of public credit. In 1696,
tallies had been at forty, and fifty, and sixty
per cent. discount, and bank notes at twenty
per cent.[29] During the great re-coinage of
the silver, which was going on at this time,
the bank had thought proper to discontinue
the payment of its notes, which necessarily
occasioned their discredit.
In pursuance of the 7th Anne, c. 7, the
bank advanced and paid into the exchequer
the sum of L.400,000; making in all the sum
of L.1,600,000, which it had advanced upon
its original annuity of L.96,000 interest, and
L.4,000 for expense of management. In
1708, therefore, the credit of government was
as good as that of private persons, since it could
borrow at six per cent. interest, the common
legal and market rate of those times. In pursuance
of the same act, the bank cancelled
exchequer bills to the amount of L.1,775,027 17s. 10½d.
at six per cent. interest, and was
at the same time allowed to take in subscriptions
for doubling its capital. In 1708,
therefore, the capital of the bank amounted to
L.4,402,343; and it had advanced to government
the sum of L.3,375,027 : 17 : 10½.
By a call of fifteen per cent. in 1709, there
was paid in, and made stock, L.656,204 : 1 : 9d.;
and by another of ten per cent. in 1710,
L.501,448 : 12 : 11. In consequence of those
two calls, therefore, the bank capital amounted
to L.5,559,995 : 14 : 8.
In pursuance of the 3d George I. c. 8, the
bank delivered up two millions of exchequer
bills to be cancelled. It had at this time, therefore,
advanced to government L.5,375,027 : 17 : 10d.
In pursuance of the 8th George I. c. 21,
the bank purchased of the South-sea company,
stock to the amount of L.4,000,000; and in
1722, in consequence of the subscriptions
which it had taken in for enabling it to make
this purchase, its capital stock was increased
by L.3,400,000. At this time, therefore, the
bank had advanced to the public L.9,375,027 17s. 10½d.;
and its capital stock amounted
only to L.8,959,995 : 14 : 8. It was upon
this occasion that the sum which the bank had