advanced to the public, and for which it received
interest, began first to exceed its capital
stock, or the sum for which it paid a dividend
to the proprietors of bank stock; or, in
other words, that the bank began to have an
undivided capital, over and above its divided
one. It has continued to have an undivided
capital of the same kind ever since. In 1746,
the bank had, upon different occasions, advanced
to the public L.11,686,800, and its divided
capital had been raised by different calls
and subscriptions to L.10,780,000. The state
of those two sums has continued to be the same
ever since. In pursuance of the 4th of George
III. c. 25, the bank agreed to pay to government
for the renewal of its charter L.110,000,
without interest or re-payment. This sum,
therefore did not increase either of these two
other sums.
The dividend of the bank has varied according
to the variations in the rate of the interest
which it has, at different times, received for the
money it had advanced to the public, as well
as according to other circumstances. This
rate of interest has gradually been reduced
from eight to three per cent. For some years
past, the bank dividend has been at five and a
half per cent.
The stability of the bank of England is
equal to that of the British government. All
that it has advanced to the public must be lost
before its creditors can sustain any loss. No
other banking company in England can be
established by act of parliament, or can consist
of more than six members. It acts, not
only as an ordinary bank, but as a great engine
of state. It receives and pays the greater
part of the annuities which are due to the
creditors of the public; it circulates exchequer
bills; and it advances to government the annual
amount of the land and malt taxes, which
are frequently not paid up till some years thereafter.
In these different operations, its duty
to the public may sometimes have obliged it,
without any fault of its directors, to overstock
the circulation with paper money. It likewise
discounts merchants' bills, and has upon
several different occasions, supported the credit
of the principal houses, not only of England,
but of Hamburgh and Holland. Upon one
occasion, in 1768, it is said to have advanced
for this purpose, in one week, about
L.1,600,000, a great part of it in bullion. I do
not, however, pretend to warrant either the
greatness of the sum, or the shortness of the
time. Upon other occasions, this great company
has been reduced to the necessity of paying
in sixpences.
It is not by augmenting the capital of the
country, but by rendering a greater part of
that capital active and productive than would
otherwise be so, that the must judicious operations
of banking can increase the industry of
the country. That part of his capital which
a dealer is obliged to keep by him unemployed
and in ready money, for answering occasional
demands, is so much dead stock, which,
so long as it remains in this situation, produces
nothing, either to him or to his country.
The judicious operations of banking enable
him to convert this dead stock into active and
productive stock; into materials to work upon;
into tools to work with and into provisions
and subsistence to work for; into stock
which produces something both to himself and
to his country. The gold and silver money
which circulates in any country, and by means
of which, the produce of its land and labour
is annually circulated and distributed
to the proper consumers, is, in the same manner
as the ready money of the dealer, all dead
stock. It is a very valuable part of the capital
of the country, which produces nothing to
the country. The judicious operations of
banking, by substituting paper in the room of
a great part of this gold and silver, enable the
country to convert a great part of this dead
stock into active and productive stock; into
stock which produces something to the country.
The gold and silver money which circulates
in any country may very properly be
compared to a highway, which, while it circulates
and carries to market all the grass and
corn of the country, produces itself not a single
pile of either. The judicious operations
of banking, by providing, if I may be allowed
so violent a metaphor, a sort 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 considerably, the annual produce
of its land and labour. The commerce
and industry of the country, however, it must
be acknowledged, though they may be somewhat
augmented, cannot be altogether so secure,
when they are thus, as it were, suspended
upon the Dædalian wings of paper money,
as when they travel about upon the solid
ground of gold and silver. Over and above
the accidents to which they are exposed from
the unskilfulness of the conductors of this paper
money, they are liable to several others,
from which no prudence or skill of those
conductors can guard them.
An unsuccessful war, for example, in which
the enemy got possession of the capital, and
consequently of that treasure which supported
the credit of the paper money, would occasion
much greater confusion in a country where
the whole circulation was carried on by paper,
than in one where the greater part of it was
carried on by gold and silver. The usual
instrument of commerce having lost 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