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and filver, which must be made ufe of in all foreign payments. Men may think what they pleafe, but there is no contending with the na. ture of things. Experience has every where justified the remark, that, wherever paper is introduced, in large quantities, the gold and filver vanishes univerfally. The joint fum of gold, filver, and paper, current, will exactly reprefent your whole commodities, and the prices will be accordingly. It is, therefore, as if you were to fill a veffel brim-full, making half the quantity water, and the other oil, the laft, being specifically lighteft, 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 abfurd and contemptible then, is the reafoning, which we have, of late, feen frequently in print, viz. the gold and filver are going away from us, therefore, we must have paper, to fupply their place. If the gold and filver are indeed going away from us, that is to fay, if the balance of trade is much against us, the paper-medium has a direct tendency to increase the evil, and fend 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 muft perceive, that there is a peculiar, and indeed a different evil to be feared from paper of a doubtful kind, and efpecially from that, which, being doubtful, is obliged to be fupported by coercive laws. This must raife general fufpicion, and, confequently, bring on a ftagnation of commerce, from univerfal and mutual diftruft. For the fame reason, it muft annihilate credit, and make every cautious perfon lock up his real money, that is gold and filver, as he cannot tell but he may be cheated in the repayment. This evil is very extenfive, indeed, for it makes people fufpicious, 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 fome unknown future law.

Hence it may be feen, that the refolution of the queftion, 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 perfons, by which their iuduftry and exertions are added to the common ftock. As it is upon this, that the question depends, we fhall find, that as the circumstances of a nation may be different, it may be for or against its intereft, to use a paper medium. If any nation were in fuch circumftances, as that credit were either not neceffary, or easily obtained; if the country were fully fettled, and the inhabitants fully employed in agriculture, manufac tures and internal commerce, with little foreign trade, any addition to the true money,would be unneceffary or pernicious. This is probably, the ftate of China, at prefent, perhaps, in fome degree, alfo, of France. 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 ftate of this country,or the different parts of it, as to judge with abfolute certainty, of what is neceffary or would be useful to it, but am inclined to think, that there must be fomething, in the ftate of things,in America, thatmakesiteither more neceffary or more expedient, to have paper here, than in the European states. We are affured, that, in former times, many of the ftates, then colonies, thought it a privilege, to be allowed to ftrike paper-money;

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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 I was chiefly because it was emitted in the way of a loan-office, and, by giving credit to hufbandmen, 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 fpeaking only hypothetically, the rather, that, at prefent, the inclination after paper of fome kind or another, feems to be fo ftrong that it would be in vain to withstand it.

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 tranfactions, and extending of credit to those who are likely to make a proper ufe of it. The plan fhould be fo conceived, as that the increase of the circulating medium fhould be as little as poffible, confiftently with thefe ends. It should be perfectly fecure, fo as to create an abfolute 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 intereft of the receiver. It may be fafely affirmed, that any deviation from these principles, which are deduced from the theory above laid down, will be an effential defect in the system. If we enquire what fort of paper will beft answer this defcription, we find that there is no other fort ufed in Europe than that of banking companies. The government, tamping paper, to pafs current for coin, is unknown there. Notwithstanding the immenfe fums, which have been borrowed by the English government, they always

prefer paying intereft for them, to iffuing paper without value, for money. The only thing refembling it in the English hiftory, is, James the fecond, coining bafe metal, and affixing a price to it by proclamation; a project contemptible in the contrivance, and abortive in the execution. This feems to be a

confiderable prefumption, that the measure is, upon the whole, not eligible.

The paper of banking companies has many advantages. It is confidered as perfectly fafe, because it can be exchanged for gold and filver at any time upon demand. Having this fecurity, 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 bufinefs of all banks to give credit, which, though directly only in favour of commercial, is ultimately useful to many different claffes of men. I may upon this obferve, that it is the duty of banking-companies, fo to conduct their operations, as to extend their regular credit, as far as is fafe for themselves. If, inttead of this, as has been fuppofed, at least to have been done by fome banks in Britain, they circulate their notes by agents, making purchases in different and diftant places, that the fum issued may

NOTE.

It seems to me, that thofe who cry out for emitting paper-money, by the legislatures, should take fome pains to ftate clearly, the difference between this and the European countries, and point out the reasons why it would be ferviceable here, and hurtful there; or elfe infift, that it would be a wife measure, every where, and recommend the ufe of it to the ftates of England, France, Holland, &c. who will be much indebted to them for the discovery.

very far exceed the fum neceflary to be kept for probable demands; they are, in that cafe, not ferving the public at all, but ufing the money of other people, to their own profit. It is alfo to be observed, that the denomination of their notes fhould never be very fmall; it should, indeed, be as high as is confiftent with fuch a general ufe as will bring in a fufficient profit. Very fmall denominations of paper, do the greatcft injury, by entering into univerfal circulation, and chiefly affecting the induftrious part of the community. It was a very great complaint against fome banks in Scotland, that they brought down the denominations of their notes as far as ten fhillings, and fome of them, even five fhillings. If this was an evil, what fhall we fay of paper, as has been feen in this country, as low as one fhilling, 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 lefs the evil; and, on the contrary, the fmaller the denominations, the greater the evil, and the lefs the benefit. High fums, 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 juft, would, from the reafoning in the preceding part of this difcourfe, tend to their condemnation. It is, that they have destroyed credit inftead of extending it, and have introduced or given occafion to exceffive ufury. I am not fufficiently informed to fay 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 neccfiary confequence. One would rather think that the regular credit,

which is or ought to be given by banks, fhould prevent ufury, by fupplying all thofe who deferve to be trufted. Agreeably to this, it was found in fact, that the inftitution of banks in Scotland lowered the intereft of money, which indeed feems to be the natural effect of every such inflitution, from the increased circulation. But if any inftances, more than before, have happened of this kind, it may be by perfons in extreme neceffity applying to others who have credit with the bank, and who have fo little confcientious fcruple as to take advantage of their neighbour's poverty. If this is the cafe, it is only a particular abuse, or occafional bad confequence of a thing otherwife good and ufeful. It is not a juft objection against any thing, that it may be or has been in fome inftances abufed. Befides, as it is the duty of every banking-company to guard against this evil as much as poffible, even by perfonal refentment, against those who make this ufe of their confidence, fo it is an evil not out of the reach of legal punishment or general infamy. Wife and well executed laws againft ufury, would at least so far reftrain it, as to make it an evil of little confequence.

Bat 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 difcourfe, against the paper of banks, or at least,a defect in their fyftem, that feems to call for other measures in addition to it. This is, that banking-companies give credit only fo as to be ferviceable 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

on of any kind. Now, I admit, that the fettlement and cultivation of the foil are the radical fource of the profperity of this country. It is, in deed, the fource of the profperity of every country, but comparatively more fo that of this country than of moft others. I also admit, that credit, properly extended to induftrious perfons in this way, would be exceedingly beneficial. For this reafon, and for this alone, dr. Franklin and others perhaps judged right when they faid, the country received great benefit from the loan-office paper of former times. I am alfo fenfible, that it is not practicable nor proper for banking companies to give credit upon mortgages on diftant lands. Being bound to prompt payment, they must expect the fame; therefore they are not to be blamed for refufing it in this form. For all these reasons, I do not take upon me wholly to condemn a meafure in America, which would be unneceffary or improper in Europe. We hear from every quarter, that is to fay, from almoft every ftate, a loud cry for paper money. Now, when there is a great and univerfal complaint, it is feldom without fome foundation; and though I have taken much pains in the preceding difcourfe to fhew, that they mistake their own wants, that they do not want a circulating medium, but ufe that phrafe without understanding its meaning; yet they certainly do want fomething. They particularly want credit; and they look back with defire to the former times when they

NOTE.

I muft here obferve, that the banks of Scotland never gave credit upon mortgages, but perfonal fecurity only, and yet they were univerfally fuppofed to put it in the power of landed men to improve their eftates; so that the money transactions muf have been, though not directly, yet remotely, in their favour.

had paper-money, which, by its name itfelf, pointed out its nature and ufe, the notes being then called bills of credit. I will therefore proceed, keeping a steady eye upon the principles above laid down, to ftate in what manner a loanoffice may be established within moderate bounds, that shall render a fervice probably greater than the evils neceffarily confequent upon it.

I would, therefore, propole, that any ftate, that thinks it neceflary, fhould emit a fum, of, fuppofe one hundred thousand pounds, and that the following rules fhould be laid down in the law, and invariably adhered to.

1. That not a fhilling of that money fhould iffue from the loanoffice treafury, but upon mortgage of land, to the amount of double the fum in value. 2. That it fhould not be a legal tender for any debts contracted or to be contracted, but receivable in all taxes within the ftate, and payable for the wages of council and affembly, and the fees and perquifites of all public officers, after it has been fo receiv

ed. 3. That, at the end of twelve calender months, a fum, precifely equal to the intereft that had accrued or become due in that time, should

be confumed by fire, and public intimation given of its being done.

NOTE.

been in one of our states, I mean * I am not ignorant that there has Pennfylvania, a violent controverfy for and against the bank, between the political factions which divide that state. On this account, I am forry I was obliged to mention banks at all; but it was impoffible for me to do juftice to the fubject, without confidering their general nature and effects; and I will not fo much as name any of the arguments on either fide of this question, but what is neceffarily connected with money in general as a currency, and its effects upon the national interest.

very far exceed the fum neceffary to be kept for probable demands; they are, in that cafe, not ferving the public at all, but ufing the money of other people, to their own profit. It is alfo to be observed, that the denomination of their notes should never be very fmall; it should, indeed, be as high as is confiftent with fuch a general ufe as will bring in a fufficient profit. Very fmall denominations of paper, do the greatcft injury, by entering into univerfal circulation, and chiefly affecting the industrious part of the community. It was a very great complaint against fome banks in Scotland, that they brought down the denominations of their notes as far as ten fhillings, and fome of them, even five fhillings. If this was an evil, what shall we fay of paper, as has been feen in this country, as low as one fhilling, 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 lefs the evil; and, on the contrary, the fmaller the denominations, the greater the evil, and the lefs the benefit. High fums, in paper obligations, may, perhaps, change hands once a week, but a fhilling or fixpenny ticket may be in fifty hands in one day.

I must mention here, what has been often objected againft banks in America, which, if juft, would, from the reafoning in the preceding part of this difcourfe, tend to their condemnation. It is, that they have deftroyed credit inflead of extending it, and have introduced or given occafion to exceffive ufury. I am not fufficiently informed to fay 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 necefiary confequence. One would. rather think that the regular credit.

which is or ought to be given by banks, fhould prevent ufury, by fupplying all those who deferve 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 feems to be the natural effect of every fuch inflitution, from the increased circulation. But if any inftances, more than before, have happened of this kind, it may be by perfons in extreme neceffity applying to others who have credit with the bank, and who have fo little confcientious fcruple as to take advantage of their neighbour's poverty. If this is the cafe, it is only a particular abuse, or occafional bad confequence of a thing otherwife good and ufeful. It is not a juft objection against any thing, that it may be or has been in fome inftances abufed. Befides, as it is the duty of every banking-company to guard against this evil as much as poffible, even by perfonal refentment, against thofe who make this ufe of their confidence, so it is an evil not out of the reach of legal punishment or general infamy. Wife and well executed laws againft ufury, would at least so far restrain it, as to make it an evil of little confequence.

Bat in examining the nature and operations of different kinds of paper, I must confider an objection of much greater importance, upon the prin ples of this difcourfe, again per of banks, or at least,ader fyftem, that seems to meafures in addition that banking.com only fo as to be chants, and th nected with it to hufb prove th for a r ding. thi

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