consisted in gold and silver. A prince, anxious
to maintain his dominions at all times in
the state in which he can most easily defend
them, ought upon this account to guard not
only against that excessive multiplication of
paper money which ruins the very banks
which issue 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 considered as divided into two different
branches; the circulation of the dealers with
one another, and the circulation between the
dealers and the consumers. Though the same
pieces of money, whether paper or metal, may
be employed sometimes in the one circulation
and sometimes in the other; yet as both are
constantly going on at the same 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 those circulated
between the dealers and the consumers; whatever
is bought by the dealers being ultimately
destined to be sold to the consumers. The
circulation between the dealers, as it is carried
on by wholesale, requires generally a pretty
large sum for every particular transaction.
That between the dealers and the consumers,
on the contrary, as it is generally carried on
by retail, frequently requires but very small
ones, a shilling, or even a halfpenny, being often
sufficient. But small sums circulate much
faster than large ones. A shilling changes
masters more frequently than a guinea, and a
halfpenny more frequently than a shilling.
Though the annual purchases of all the consumers,
therefore, are at least equal in value
to those of all the dealers, they can generally
be transacted with a much smaller quantity of
money; the same pieces, by a more rapid circulation,
serving as the instrument of many
more purchases of the one kind than of the other.
Paper money may be so 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 consumers. Where no
bank notes are circulated under £10 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 consumer, he is generally obliged
to change it at the first shop where he has occasion
to purchase five shillings worth of
goods; so that it often returns into the hands
of a dealer before the consumer has spent the
fortieth part of the money. Where bank
notes are issued for so small sums as 20s. as
in Scotland, paper money extends itself to
considerable part of the circulation between
dealers and consumers. Before the act of
parliament which put a stop to the circulation
of ten and five shilling notes, it filled a still
greater part of that circulation. In the currencies
of North America, paper was commonly
issued for so small a sum as a shilling, and
filled almost the whole of that circulation. In
some paper currencies of Yorkshire, it was issued
even for so small a sum as a sixpence.
Where the issuing of bank notes for such
very small sums is allowed, and commonly
practised, many mean people are both enabled
and encouraged to become bankers. A person
whose promissory note for £5, or even for
20s. would be rejected by everybody, will get
it to be received without scruple when it is issued
for so small a sum as a sixpence. But
the frequent bankruptcies to which such beggarly
bankers must be liable, may occasion a
very considerable inconveniency, and sometimes
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 issued in any part of the kingdom for a
smaller sum than £5. Paper money would
then, probably, confine itself, in every part of
the kingdom, to the circulation between the
different dealers, as much as it does at present
in London, where no bank notes are issued
under L.10 value; L.5 being, in most part of
the kingdom, a sum which, though it will purchase,
perhaps, little more than half the quantity
of goods, is as much considered, and is as
seldom spent all at once, as L.10 are amidst
the profuse expense 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 silver.
Where it extends itself to a considerable part
of the circulation between dealers and consumers,
as in Scotland, and still more in
North America, it banishes gold and silver
almost entirely from the country; almost all
the ordinary transactions of its interior commerce
being thus carried on by paper. The
suppression of ten and five shilling bank notes,
somewhat relieved the scarcity of gold and
silver in Scotland; and the suppression of
twenty shilling notes will probably relieve it
still more. Those metals are said to have become
more abundant in America, since the
suppression or some of their paper currencies.
They are said, likewise, to have been more
abundant before the institution of those 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 same assistance
to the industry and commerce of the country,
as they had done when paper money filled almost
the whole circulation. The ready money
which a dealer is obliged to keep by him,
for answering occasional demands, is destined
altogether for the circulation between himself