and filver, which must be made use of in all foreign payments. Men may think what they please, but there is no contending with the nature of things. Experience has every where justified the remark, that, wherever paper is introduced, in large quantities, the gold and silver vanishes universally. The joint fum of gold, filver, and paper, current, will exactly reprefent your whole commodities, and the prices will be accordingly. It is, there fore, as if you were to fill a vessel brim-full, making half the quantity water, and the other oil, the last, being specifically lightest, will be at the top, and if you add more water, the oil only will run over, and continue running, till there is none left. How absurd and contemptible then, is the reasoning, which we have, of late, seen frequently in print, viz. the gold and fiiver are going away from us, therefore, we must have paper, to fupply their place. Ifthe gold and filver are indeed going away from us, that is to say, if the balance of trade is much against us, the paper-medium has a direct tendency to increase the evil, and send them away by a quicker pace.

I have faid, that this confequence follows from all paper, as fuch, good and bad, fo far as it enters into circulation; but every one must perceive, that there is a peculiar, and indeed a different evil to be feared from paper of a doubtful kind, and especially from that, which, being doubtful, is obliged to be supported by coercive laws. This must raise general fufpicion, and, consequently, bring on a fstagnation of commerce, from universal and mutual distrust. For the same reason, it must annihilate credit, and make every cautious perfon lock up his real money, that is gold and silver, as he cannot tell but he may be cheated in the repayment. This evil is very extensive, indeed, for it makes people suspicious, not

only of what is, but what may be. Though the injury should be but partial, or inconfiderable, at present, it may become wholly ruinous by fonte unknown future law.

a

Hence it may be seen, that the resolution of the question, whether it is proper to have paper-money, at all, or not, depends entirely upon another, viz. whether the evil that is done, by augmenting the circulating medium, is, or is not, overbalanced, by the facility given to commerce, and the credit given to particular persons, by which their iudustry and exertions are added to the common stock. As it is upon this, that the question depends, we shall find, that as the circumstances of nation may be different, it may be for or against its interest, to use a paper medium. If any nation were in such circumstances, as that credit were either not necessary, or easily obtained; if the country were fully settled, and the inhabitants fully employed in agriculture, manufactures and internal commerce, with little foreign trade, any addition to the true money, would be unneceffary or pernicious. This is probably, the state of China, at present, perhaps, in some degree, also, of France. On the contrary, if a nation had an extenfive and complicated commerce, and much land to settle and improve, the facilitating of commerce, and extending of credit, might be highly beneficial. I do not pretend to fo exact a knowledge of the state of this country, or the different parts of it, as to judge with absolute certainty, of what is necessary or would be useful to it, but am inclined to think, that there must be something, in the state of things, in America, thatmakesiteither more necessary or more expedient, to have paper here, than in the European states. We are affured, that, in former times, many of the states, then colonies, thought it a privilege, to be allowed to strike paper-money;

1

and we are told by people of good understanding, that it contributed to their growth and improvement. If this was the cafe, I am confident, it was chiefly because it was emitted in the way of a loan-office, and, by giving credit to husbandmen, accelerated the fettlement and improvement of the foil. This question I do not take upon me to decide, and therefore in what follows, defire I may be confidered as speaking only hypothetically, the rather, that, at present, the inclination after paper of some kind or another, seems to be so strong that it would be in vain to withstand ic.

If, therefore, paper is to be employed in circulation, we may fee, from what has been said above, what are the principles on which it ought to be conducted, the ends that ought to be aimed at, and the evils that ought to be avoided. The ends to be aimed at, are the facilitating of commercial transactions, and extending of credit to those who are likely to make a proper use of it. The plan should be so conceived, as that the increase of the circulating medium should be as little as possible, consistently with these ends. It should be perfectly secure, so as to create an absolute confidence. And as it is of the nature of an obligation, no force whatever should be used, but the reception of it left entirely to the inclination and interest of the receiver. It may be safely affirmed, that any deviation from these principles, which are deduced from the theory above laid down, will be an essential defect in the system. If we enquire what fort of paper will best answer this description, we find that there is no other fort used in Europe than that of banking companies. The government, stamping paper, to pass current for coin, is unknown there. Notwithstanding the immense sums, which have been borrowed by the English government, they always

prefer paying interest for them, to issuing paper without value, for money. The only thing resembling it in the English history, is, James the second, coining base metal, and affixing a price to it by proclamation; a project contemptible in the contrivance, and abortive in the execution. This seems to be confiderable presumption, that the measure is, upon the whole, not eligible.*

a

The paper of banking companies has many advantages. It is confidered as perfectly safe, because it can be exchanged for gold and filver at any time upon demand. Having this security, at bottom, it is perfectly convenient for transportation, which, indeed, is common to it with all paper. In addition to this, it is confidered as the principal business of all banks to give credit, which, though directly only in favour of commercial, is ultimately useful to many different classes of men. I may upon pon this observe, that it is the duty of banking-companies, so to conduct their operations, as to extend their regular credit, as far as is fafe for themselves. If, instead of this, as has been supposed, at least to have been done by fome banks in Britain, they circulate their notes by agents, making purchases in different and distant places, that the sum issued may

NOTE.

* It seems to me, that those who cry out for emitting paper-money, by the legislatures, should take some pains to state clearly, the difference between this and the European countries, and point out the reasons why it would be serviceable here, and hurtful there; or else insist, that it would be a wife measure, every where, and recommend the use of it to the states of England, France, Holland, &c. who will be much indebted to them for the discovery.

very far exceed the fum necessary to be kept for probable demands; they are, in that cafe, not ferving the public at all, but using the money of other people, to their own profit. It is also to be observed, that the denomination of their notes should never be very small; it should, indeed, be as high as is confiftent with such a general use as will bring in a fufficient profit. Very small denominations of paper, do the greatest injury, by entering into universal circulation, and chiefly affecting the industrious part of the community. It was a very great complaint against some banks in Scotland, that they brought down the denominations of their notes as far as ten shillings, and fome of them, even five shillings. If this was an evil, what shall we fay of paper, as has been seen in this country, as low as one shilling, fixpence, or even threepence value? It is a rule, that will hardly admit of any exception, that the higher the denominations of paper-bills, the greater the benefit, and the less the evil; and, on the contrary, the smaller the denominations, the greater the evil, and the less the benefit. High sums, in paper obligations, may, perhaps, change hands once a week, but a hilling or fixpenny ticket may be in fifty hands in one day.

I must mention here, what has been often objected against banks in America, which, if just, would, from the reasoning in the preceding part of this discourse, tend to their condemnation. It is, that they have destroyed credit instead of extending it, and have introduced or given occafion to excessive ufury. I am not fufficiently informed to say how far this is really the cafe; but cannot help obferving, that treating the matter theoretically, as I have all along done, and confidering the nature of the thing, this does not appear to be a necessary confequence. One would rather think that the regular credit,

which is or ought to be given by banks, should prevent ufury, by supplying all those who deserve to be trusted. Agreeably to this, it was found in fact, that the inftitution of banks in Scotland lowered the interest of money, which indeed seems to be the natural effect of every such inftitution, from the increased circulation. But if any instances, more than before, have happened of this kind, it may be by persons in extreme necessity applying to others who have credit with the bank, and who have so little confcientious scruple as to take advantage of their neighbour's poverty. If this is the cafe, it is only a particular abuse, or occasional bad consequence of thing otherwife good and useful. It is not a just objection against any thing, that it may be or has been in some instances abused. Besides, as it is the duty of every banking-company to guard against this evil as much as possible, even by personal resentment, against those who make this use of their confidence, so it is an evil not out of the reach of legal punishment or general infamy. Wife and well executed laws against usury, would at least so far restrain it, as to make it an evil of little consequence.

a

But in examining the nature and operations of different kinds of paper, I must confider an objection of much greater importance, upon the principles of this discourse, against the paper of banks, or at least, a defect in their system, that seems to call for other measures in addition to it. This is, that banking-companies give credit only fo as to be serviceable to merchants, and those immediately connected with them, but do not extend it to husbandmen, or those who improve the foil, by taking mortgages for a confiderable time: yet, according to the theory above laid down, this is not only one of the advantages, but perhaps the chief advantage to be derived from a paper circulati

The same should be done every fubfequent year. 4. That, at no time, any part of this money should be made ufe of in the payment of the public dehts, but that which had been first levied in taxes. It would not be proper, even to borrow from the stock, for this purpose, by anticipation.

• If these rules were observed, credit would be given to fome persons who needed and deserved it, to the amount of the whole fum. The bills current, would be dimirished in quantity every year, so as not to load the circulation, which would have a tenfible effect upon the public opinion, and indeed, from the nature of the thing, would increase their value, or rather confirm it, from year to year. At the end of four

NOTES.

* The paying of the public creditors, is one of the most common

and popular arguments for paperemiffions, but, to pay them with money not loaned, is not paying, but continuing the debt upon the state, and only making it change hands. All fuch bills, so paid, must be accounted for by the public. It is better, therefore, that, by the loans, men

may be enabled easily to pay their taxes; and then let the public creditors be paid by money demanded equally from the whole for that purpofe.

†1 cannot help observing here, that the titles of most of the acts, for emitting money, do, unawares, con.. fess the justice of all that has been faid above; they run thus, "An act for emitting thousand pounds in bills of credit, and directing the manner of finking the fame." Does not this shew, what fort of a circulating medium they are? Does it not admit, that they will do evil if they continue to circulate? When you coin gold and filver, do you provide for finking it ?

teen or fifteen years, they would be wholly taken out of circulation, and that, not by any tax laid on for the purpose, but by the hire or use of the money itself, and after all, the principal sum would be still due to the state, in good money, which might bear interest for ever. It would be an important addition to this scheme, if no bills less than two dollars, or perhaps three, or five, should be emitted, as this would still keep filver at least, in circulation. On the above principles, all the good that can be produced by paper, would be effected, viz. facilitating commerce, and giving credit; and as little of the evil as possible, because the quantity would be fixed and moderate at firft, and continually decreasing, so as, at last, to vanish altogether; and then another emiffion of the same kind might be made, if the utility of the first should recommend it.

Perhaps it will be faid, that this money, not being a legal tender, would not answer the purpose ot borrowers, by paying their debts, nor get at all into circulation. To this I answer, that it would not answer the purpose of those who want to pay their debts with half nothing, and cheat their creditors; nor do I with to see any thing attempted that would produce that effect. But I affirm, that it would get better into circulation than by a tender-law, which creates general and just suspicion. Tender-laws, as has been already proved, may be made use of by deceitful persons to do particular acts of injustice, but are not fufficient to procure general circulation, nor to excite and reward industry, without the opinion and approbation of the public. Such money, as I have described, would excite no alarm; it might easily be tried. It should in my opinion, certainly be tried, for all would know, that it would pay every tax to government, and even borrowers of large fums might make