Anoperationofthiskindhas，withinthesefive—and—twentyorthirtyyears，beenperformedinScotland，bytheerectionofnewbankingcompaniesinalmosteveryconsiderabletown，andeveninsomecountryvillages。Theeffectsofithavebeenpreciselythoseabovedescribed。Thebusinessofthecountryisalmostentirelycarriedonbymeansofthepaperofthosedifferentbankingcompanies，withwhichpurchasesandpaymentsofkindsarecommonlymade。Silververyseldomappearsexceptinthechangeofatwentyshillingsbanknote，andgoldstillseldomer。Butthoughtheconductofallthosedifferentcompanieshasnotbeenunexceptionable，andhasaccordinglyrequiredanactofParliamenttoregulateit，thecountry，notwithstanding，hasevidentlyderivedgreatbenefitfromtheirtrade。Ihavehearditasserted，thatthetradeofthecityofGlasgowdoubledinaboutfifteenyearsafterthefirsterectionofthebanksthere;andthatthetradeofScotlandhasmorethanquadrupledsincethefirsterectionofthetwopublicbanksatEdinburgh，ofwhichtheone，calledtheBankofScotland，wasestablishedbyactofParliamentin1695;theother，calledtheRoyalBank，byroyalcharterin1727。Whetherthetrade，eitherofScotlandingeneral，orthecityofGlasgowinparticular，hasreallyincreasedinsogreataproportion，duringsoshortaperiod，I
donotpretendtoknow。Ifeitherofthemhasincreasedinthisproportion，itseemstobeaneffecttoogreattobeaccountedforbythesoleoperationofthiscause。ThatthetradeandindustryofScotland，however，haveincreasedveryconsiderablyduringthisperiod，andthatthebankshavecontributedagooddealtothisincrease，cannotbedoubted。
ThevalueofthesilvermoneywhichcirculatedinScotlandbeforetheunion，in1707，andwhich，immediatelyafterit，wasbroughtintotheBankofScotlandinordertoberecoined，amountedtoL411，11710s。9d。sterling。Noaccounthasbeengotofthegoldcoin;butitappearsfromtheancientaccountsofthemintofScotland，thatthevalueofthegoldannuallycoinedsomewhatexceededthatofthesilver。Therewereagoodmanypeople，too，uponthisoccasion，who，fromadiffidenceofrepayment，didnotbringtheirsilverintotheBankofScotland:
andtherewas，besides，someEnglishcoinwhichwasnotcalledin。Thewholevalueofthegoldandsilver，therefore，whichcirculatedinScotlandbeforetheunion，cannotbeestimatedatlessthanamillionsterling。Itseemstohaveconstitutedalmostthewholecirculationofthatcountry;forthoughthecirculationoftheBankofScotland，whichhadthennorival，wasconsiderable，itseemstohavemadebutaverysmallpartofthewhole。InthepresenttimesthewholecirculationofScotlandcannotbeestimatedatlessthantwomillions，ofwhichthatpartwhichconsistsingoldandsilvermostprobablydoesnotamounttohalfamillion。ButthoughthecirculatinggoldandsilverofScotlandhavesufferedsogreatadiminutionduringthisperiod，itsrealrichesandprosperitydonotappeartohavesufferedany。Itsagriculture，manufactures，andtrade，onthecontrary，theannualproduceofitslandandlabour，haveevidentlybeenaugmented。
Itischieflybydiscountingbillsofexchange，thatis，byadvancingmoneyuponthembeforetheyaredue，thatthegreaterpartofbanksandbankersissuetheirpromissorynotes。Theydeductalways，uponwhateversumtheyadvance，thelegalinteresttillthebillshallbecomedue。Thepaymentofthebill，whenitbecomesdue，replacestothebankthevalueofwhathadbeenadvanced，togetherwithaclearprofitoftheinterest。Thebankerwhoadvancestothemerchantwhosebillhediscounts，notgoldandsilver，buthisownpromissorynotes，hastheadvantageofbeingabletodiscounttoagreateramount，bythewholevalueofhispromissorynotes，whichhefindsbyexperiencearecommonlyincirculation。Heistherebyenabledtomakehiscleargainofinterestonsomuchalargersum。
ThecommerceofScotland，whichatpresentisnotverygreat，wasstillmoreinconsiderablewhenthetwofirstbankingcompanieswereestablished，andthosecompanieswouldhavehadbutlittletradehadtheyconfinedtheirbusinesstothediscountingofbillsofexchange。Theyinvented，therefore，anothermethodofissuingtheirpromissorynotes;bygrantingwhattheycalledcashaccounts，thatisbygivingcredittotheextentofacertainsum（twoorthreethousandpounds，forexample）toanyindividualwhocouldprocuretwopersonsofundoubtedcreditandgoodlandedestatetobecomesuretyforhim，thatwhatevermoneyshouldbeadvancedtohim，withinthesumforwhichthecredithadbeengiven，shouldberepaidupondemand，togetherwiththelegalinterest。Creditsofthiskindare，I
believe，commonlygrantedbybanksandbankersinalldifferentpartsoftheworld。ButtheeasytermsuponwhichtheScotchbankingcompaniesacceptofrepaymentare，sofarasIknow，peculiartothem，andhave，perhaps，beentheprincipalcause，bothofthegreattradeofthosecompaniesandofthebenefitwhichthecountryhasreceivedfromit。
Whoeverhasacreditofthiskindwithoneofthosecompanies，andborrowsathousandpoundsuponit，forexample，mayrepaythissumpiecemeal，bytwentyandthirtypoundsatatime，thecompanydiscountingaproportionablepartoftheinterestofthegreatsumfromthedayonwhicheachofthosesmallsumsispaidintillthewholebeinthismannerrepaid。
Allmerchants，therefore，andalmostallmenofbusiness，finditconvenienttokeepsuchcashaccountswiththem，andaretherebyinterestedtopromotethetradeofthosecompanies，byreadilyreceivingtheirnotesinallpayments，andbyencouragingallthosewithwhomtheyhaveanyinfluencetodothesame。Thebanks，whentheircustomersapplytothemformoney，generallyadvanceittothemintheirownpromissorynotes。Thesethemerchantspayawaytothemanufacturersforgoods，themanufacturerstothefarmersformaterialsandprovisions，thefarmerstotheirlandlordsforrent，thelandlordsrepaythemtothemerchantsfortheconvenienciesandluxurieswithwhichtheysupplythem，andthemerchantsagainreturnthemtothebanksinordertobalancetheircashaccounts，ortoreplacewhattheymayhaveborrowedofthem;andthusalmostthewholemoneybusinessofthecountryistransactedbymeansofthem。Hencethegreattradeofthosecompanies。
Bymeansofthosecashaccountseverymerchantcan，withoutimprudence，carryonagreatertradethanheotherwisecoulddo。
Iftherearetwomerchants，oneinLondonandtheotherinEdinburgh，whoemployequalstocksinthesamebranchoftrade，theEdinburghmerchantcan，withoutimprudence，carryonagreatertradeandgiveemploymenttoagreaternumberofpeoplethantheLondonmerchant。TheLondonmerchantmustalwayskeepbyhimaconsiderablesumofmoney，eitherinhisowncoffers，orinthoseofhisbanker，whogiveshimnointerestforit，inordertoanswerthedemandscontinuallycominguponhimforpaymentofthegoodswhichhepurchasesuponcredit。Lettheordinaryamountofthissumbesupposedfivehundredpounds。Thevalueofthegoodsinhiswarehousemustalwaysbelessbyfivehundredpoundsthanitwouldhavebeenhadhenotbeenobligedtokeepsuchasumunemployed。Letussupposethathegenerallydisposesofhiswholestockuponhand，orofgoodstothevalueofhiswholestockuponhand，onceintheyear。Bybeingobligedtokeepsogreatasumunemployed，hemustsellinayearfivehundredpounds’worthlessgoodsthanhemightotherwisehavedone。Hisannualprofitsmustbelessbyallthathecouldhavemadebythesaleoffivehundredpoundsworthmoregoods;andthenumberofpeopleemployedinpreparinghisgoodsforthemarketmustbelessbyallthosethatfivehundredpoundsmorestockcouldhaveemployed。ThemerchantinEdinburgh，ontheotherhand，keepsnomoneyunemployedforansweringsuchoccasionaldemands。Whentheyactuallycomeuponhim，hesatisfiesthemfromhiscashaccountwiththebank，andgraduallyreplacesthesumborrowedwiththemoneyorpaperwhichcomesinfromtheoccasionalsalesofhisgoods。Withthesamestock，therefore，hecan，withoutimprudence，haveatalltimesinhiswarehousealargerquantityofgoodsthantheLondonmerchant;andcantherebybothmakeagreaterprofithimself，andgiveconstantemploymenttoagreaternumberofindustriouspeoplewhopreparethosegoodsforthemarket。Hencethegreatbenefitwhichthecountryhasderivedfromthistrade。
Thefacilityofdiscountingbillsofexchangeitmaybethoughtindeed，givestheEnglishmerchantsaconveniencyequivalenttothecashaccountsoftheScotchmerchants。ButtheScotchmerchants，itmustberemembered，candiscounttheirbillsofexchangeaseasilyastheEnglishmerchants;andhave，besides，theadditionalconveniencyoftheircashaccounts。
Thewholepapermoneyofeverykindwhichcaneasilycirculateinanycountrynevercanexceedthevalueofthegoldandsilver，ofwhichitsuppliestheplace，orwhich（thecommercebeingsupposedthesame）wouldcirculatethere，iftherewasnopapermoney。Iftwentyshillingnotes，forexample，arethelowestpapermoneycurrentinScotland，thewholeofthatcurrencywhichcaneasilycirculatetherecannotexceedthesumofgoldandsilverwhichwouldbenecessaryfortransactingtheannualexchangesoftwentyshillingsvalueandupwardsusuallytransactedwithinthatcountry。Shouldthecirculatingpaperatanytimeexceedthatsum，astheexcesscouldneitherbesentabroadnorbeemployedinthecirculationofthecountry，itmustimmediatelyreturnuponthebankstobeexchangedforgoldandsilver。Manypeoplewouldimmediatelyperceivethattheyhadmoreofthispaperthanwasnecessaryfortransactingtheirbusinessathome，andastheycouldnotsenditabroad，theywouldimmediatelydemandpaymentofitfromthebanks。Whenthissuperfluouspaperwasconvertedintogoldandsilver，theycouldeasilyfindauseforitbysendingitabroad;buttheycouldfindnonewhileitremainedintheshapeofpaper。Therewouldimmediately，therefore，bearunuponthebankstothewholeextentofthissuperfluouspaper，and，iftheyshowedanydifficultyorbackwardnessinpayment，toamuchgreaterextent;
thealarmwhichthiswouldoccasionnecessarilyincreasingtherun。
Overandabovetheexpenseswhicharecommontoeverybranchoftrade;suchastheexpenseofhouse—rent，thewagesofservants，clerks，accountants，etc。;theexpensespeculiartoabankconsistchieflyintwoarticles:first，intheexpenseofkeepingatalltimesinitscoffers，foransweringtheoccasionaldemandsoftheholdersofitsnotes，alargesumofmoney，ofwhichitlosestheinterest;and，secondly，intheexpenseofreplenishingthosecoffersasfastastheyareemptiedbyansweringsuchoccasionaldemands。
Abankingcompany，whichissuesmorepaperthancanbeemployedinthecirculationofthecountry，andofwhichtheexcessiscontinuallyreturninguponthemforpayment，oughttoincreasethequantityofgoldandsilver，whichtheykeepatalltimesintheircoffers，notonlyinproportiontothisexcessiveincreaseoftheircirculation，butinamuchgreaterproportion;
theirnotesreturninguponthemmuchfasterthaninproportiontotheexcessoftheirquantity。Suchacompany，therefore，oughttoincreasethefirstarticleoftheirexpense，notonlyinproportiontothisforcedincreaseoftheirbusiness，butinamuchgreaterproportion。
Thecoffersofsuchacompanytoo，thoughtheyoughttobefilledmuchfuller，yetmustemptythemselvesmuchfasterthaniftheirbusinesswasconfinedwithinmorereasonablebounds，andmustrequire，notonlyamoreviolent，butamoreconstantanduninterruptedexertionofexpenseinordertoreplenishthem。Thecointoo，whichisthuscontinuallydrawninsuchlargequantitiesfromtheircoffers，cannotbeemployedinthecirculationofthecountry。Itcomesinplaceofapaperwhichisoverandabovewhatcanbeemployedinthatcirculation，andisthereforeoverandabovewhatcanbeemployedinittoo。Butasthatcoinwillnotbeallowedtolieidle，itmust，inoneshapeoranother，besentabroad，inordertofindthatprofitableemploymentwhichitcannotfindathome;andthiscontinualexportationofgoldandsilver，byenhancingthedifficulty，mustnecessarilyenhancestillfurthertheexpenseofthebank，infindingnewgoldandsilverinordertoreplenishthosecoffers，whichemptythemselvessoveryrapidly。Suchacompany，therefore，must，inproportiontothisforcedincreaseoftheirbusiness，increasethesecondarticleoftheirexpensestillmorethanthefirst。
Letussupposethatallthepaperofaparticularbank，whichthecirculationofthecountrycaneasilyabsorbandemploy，amountsexactlytofortythousandpounds;andthatforansweringoccasionaldemands，thisbankisobligedtokeepatalltimesinitscofferstenthousandpoundsingoldandsilver。
Shouldthisbankattempttocirculateforty—fourthousandpounds，thefourthousandpoundswhichareoverandabovewhatthecirculationcaneasilyabsorbandemploy，willreturnuponitalmostasfastastheyareissued。Foransweringoccasionaldemands，therefore，thisbankoughttokeepatalltimesinitscoffers，noteleventhousandpoundsonly，butfourteenthousandpounds。Itwillthusgainnothingbytheinterestofthefourthousandpounds’excessivecirculation;anditwilllosethewholeexpenseofcontinuallycollectingfourthousandpoundsingoldandsilver，whichwillbecontinuallygoingoutofitscoffersasfastastheyarebroughtintothem。
Hadeveryparticularbankingcompanyalwaysunderstoodandattendedtoitsownparticularinterest，thecirculationnevercouldhavebeenoverstockedwithpapermoney。Buteveryparticularbankingcompanyhasnotalwaysunderstoodorattendedtoitsownparticularinterest，andthecirculationhasfrequentlybeenoverstockedwithpapermoney。
Byissuingtoogreataquantityofpaper，ofwhichtheexcesswascontinuallyreturning，inordertobeexchangedforgoldandsilver，theBankofEnglandwasformanyyearstogetherobligedtocoingoldtotheextentofbetweeneighthundredthousandpoundsandamillionayear;oratanaverage，abouteighthundredandfiftythousandpounds。Forthisgreatcoinagethebank（inconsequenceofthewornanddegradedstateintowhichthegoldcoinhadfallenafewyearsago）wasfrequentlyobligedtopurchasegoldbullionatthehighpriceoffourpoundsanounce，whichitsoonafterissuedincoinat5317s。101/2d。
anounce，losinginthismannerbetweentwoandahalfandthreepercentuponthecoinageofsoverylargeasum。Thoughthebankthereforepaidnoseignorage，thoughthegovernmentwasproperlyattheexpenseofthecoinage，thisliberalityofgovernmentdidnotpreventaltogethertheexpenseofthebank。
TheScotchbanks，inconsequenceofanexcessofthesamekind，wereallobligedtoemployconstantlyagentsatLondontocollectmoneyforthem，atanexpensewhichwasseldombelowoneandahalfortwopercent。Thismoneywassentdownbythewaggon，andinsuredbythecarriersatanadditionalexpenseofthreequarterspercentorfifteenshillingsonthehundredpounds。Thoseagentswerenotalwaysabletoreplenishthecoffersoftheiremployerssofastastheywereemptied。InthiscasetheresourceofthebankswastodrawupontheircorrespondentsinLondonbillsofexchangetotheextentofthesumwhichtheywanted。Whenthosecorrespondentsafterwardsdrewuponthemforthepaymentofthissum，togetherwiththeinterestandacommission，sonicofthosebanks，fromthedistressintowhichtheirexcessivecirculationhadthrownthem，hadsometimesnoothermeansofsatisfyingthisdraughtbutbydrawingasecondsetofbillseitheruponthesame，oruponsomeothercorrespondentsinLondon;andthesamesum，orratherbillsforthesamesum，wouldinthismannermakesometimesmorethantwoorthreejourneys，thedebtor，bank，payingalwaystheinterestandcommissionuponthewholeaccumulatedsum。EventhoseScotchbankswhichneverdistinguishedthemselvesbytheirextremeimprudence，weresometimesobligedtoemploythisruinousresource。
ThegoldcoinwhichwaspaidouteitherbytheBankofEngland，orbytheScotchbanks，inexchangeforthatpartoftheirpaperwhichwasoverandabovewhatcouldbeemployedinthecirculationofthecountry，beinglikewiseoverandabovewhatcouldbeemployedinthatcirculation，wassometimessentabroadintheshapeofcoin，sometimesmelteddownandsentabroadintheshapeofbullion，andsometimesmelteddownandsoldtotheBankofEnglandatthehighpriceoffourpoundsanounce。Itwasthenewest，theheaviest，andthebestpiecesonlywhichwerecarefullypickedoutofthewholecoin，andeithersentabroadormelteddown。Athome，andwhiletheyremainedintheshapeofcoin，thoseheavypieceswereofnomorevaluethanthelight。Buttheywereofmorevalueabroad，orwhenmelteddownintobullion，athome。TheBankofEngland，notwithstandingtheirgreatannualcoinage，foundtotheirastonishmentthattherewaseveryyearthesamescarcityofcoinastherehadbeentheyearbefore;andthatnotwithstandingthegreatquantityofgoodandnewcoinwhichwaseveryyearissuedfromthebank，thestateofthecoin，insteadofgrowingbetterandbetter，becameeveryyearworseandworse。Everyyeartheyfoundthemselvesunderthenecessityofcoiningnearlythesamequantityofgoldastheyhadcoinedtheyearbefore，andfromthecontinualriseinthepriceofgoldbullion，inconsequenceofthecontinualwearingandclippingofthecoin，theexpenseofthisgreatannualcoinagebecameeveryyeargreaterandgreater。TheBankofEngland，itistobeobserved，bysupplyingitsowncofferswithcoin，isindirectlyobligedtosupplythewholekingdom，intowhichcoiniscontinuallyflowingfromthosecoffersinagreatvarietyofways。WhatevercointhereforewaswantedtosupportthisexcessivecirculationbothofScotchandEnglishpapermoney，whatevervacuitiesthisexcessivecirculationoccasionedinthenecessarycoinofthekingdom，theBankofEnglandwasobligedtosupplythem。TheScotchbanks，nodoubt，paidallofthemverydearlyfortheirownimprudenceandinattention。ButtheBankofEnglandpaidverydearly，notonlyforitsownimprudence，butforthemuchgreaterimprudenceofalmostalltheScotchbanks。
TheovertradingofsomeboldprojectorsinbothpartsoftheUnitedKingdomwastheoriginalcauseofthisexcessivecirculationofpapermoney。
Whatabankcanwithproprietyadvancetoamerchantorundertakerofanykind，isnoteitherthewholecapitalwithwhichhetrades，orevenanyconsiderablepartofthatcapital;
butthatpartofitonlywhichhewouldotherwisebeobligedtokeepbyhimunemployed，andinreadymoneyforansweringoccasionaldemands。Ifthepapermoneywhichthebankadvancesneverexceedsthisvalue，itcanneverexceedthevalueofthegoldandsilverwhichwouldnecessarilycirculateinthecountryiftherewasnopapermoney;itcanneverexceedthequantitywhichthecirculationofthecountrycaneasilyabsorbandemploy。
Whenabankdiscountstoamerchantarealbillofexchangedrawnbyarealcreditoruponarealdebtor，andwhich，assoonasitbecomesdue，isreallypaidbythatdebtor，itonlyadvancestohimapartofthevaluewhichhewouldotherwisebeobligedtokeepbyhimunemployedandinreadymoneyforansweringoccasionaldemands。Thepaymentofthebill，whenitbecomesdue，replacestothebankthevalueofwhatithadadvanced，togetherwiththeinterest。Thecoffersofthebank，sofarasitsdealingsareconfinedtosuchcustomers，resembleawaterpond，fromwhich，thoughastreamiscontinuallyrunningout，yetanotheriscontinuallyrunningin，fullyequaltothatwhichrunsout;sothat，withoutanyfurthercareorattention，thepondkeepsalwaysequally，orverynearequallyfull。Littleornoexpensecaneverbenecessaryforreplenishingthecoffersofsuchabank。
Amerchant，withoutovertrading，mayfrequentlyhaveoccasionforasumofreadymoney，evenwhenhehasnobillstodiscount。Whenabank，besidesdiscountinghisbills，advanceshimlikewiseuponsuchoccasionssuchsumsuponhiscashaccount，andacceptsofapiecemealrepaymentasthemoneycomesinfromtheoccasionalsaleofhisgoods，upontheeasytermsofthebankingcompaniesofScotland;itdispenseshimentirelyfromthenecessityofkeepinganypartofhisstockbyhimunemployedandinreadymoneyforansweringoccasionaldemands。Whensuchdemandsactuallycomeuponhim，hecananswerthemsufficientlyfromhiscashaccount。Thebank，however，indealingwithsuchcustomers，oughttoobservewithgreatattention，whetherinthecourseofsomeshortperiod（offour，five，six，oreightmonthsforexample）thesumoftherepaymentswhichitcommonlyreceivesfromthemis，orisnot，fullyequaltothatoftheadvanceswhichitcommonlymakestothem。If，withinthecourseofsuchshortperiods，thesumoftherepaymentsfromcertaincustomersis，uponmostoccasions，fullyequaltothatoftheadvances，itmaysafelycontinuetodealwithsuchcustomers。Thoughthestreamwhichisinthiscasecontinuallyrunningoutfromitscoffersmaybeverylarge，thatwhichiscontinuallyrunningintothemmustbeatleastequallylarge;sothatwithoutanyfurthercareorattentionthosecoffersarelikelytobealwaysequallyorverynearequallyfull;andscarceevertorequireanyextraordinaryexpensetoreplenishthem。If，onthecontrary，thesumoftherepaymentsfromcertainothercustomersfallscommonlyverymuchshortoftheadvanceswhichitmakestothem，itcannotwithanysafetycontinuetodealwithsuchcustomers，atleastiftheycontinuetodealwithitinthismanner。Thestreamwhichisinthiscasecontinuallyrunningoutfromitscoffersisnecessarilymuchlargerthanthatwhichiscontinuallyrunningin;sothat，unlesstheyarereplenishedbysomegreatandcontinualeffortofexpense，thosecoffersmustsoonbeexhaustedaltogether。
ThebankingcompaniesofScotland，accordingly，wereforalongtimeverycarefultorequirefrequentandregularrepaymentsfromalltheircustomers，anddidnotcaretodealwithanyperson，whatevermightbehisfortuneorcredit，whodidnotmake，whattheycalled，frequentandregularoperationswiththem。Bythisattention，besidessavingalmostentirelytheextraordinaryexpenseofreplenishingtheircoffers，theygainedtwootherveryconsiderableadvantages。
First，bythisattentiontheywereenabledtomakesometolerablejudgmentconcerningthethrivingordecliningcircumstancesoftheirdebtors，withoutbeingobligedtolookoutforanyotherevidencebesideswhattheirownbooksaffordedthem;menbeingforthemostparteitherregularorirregularintheirrepayments，accordingastheircircumstancesareeitherthrivingordeclining。Aprivatemanwholendsouthismoneytoperhapshalfadozenoradozenofdebtors，may，eitherbyhimselforhisagents，observeandinquirebothconstantlyandcarefullyintotheconductandsituationofeachofthem。Butabankingcompany，whichlendsmoneytoperhapsfivehundreddifferentpeople，andofwhichtheattentioniscontinuallyoccupiedbyobjectsofaverydifferentkind，canhavenoregularinformationconcerningtheconductandcircumstancesofthegreaterpartofitsdebtorsbeyondwhatitsownbooksaffordit。
Inrequiringfrequentandregularrepaymentsfromalltheircustomers，thebankingcompaniesofScotlandhadprobablythisadvantageinview。
Secondly，bythisattentiontheysecuredthemselvesfromthepossibilityofissuingmorepapermoneythanwhatthecirculationofthecountrycouldeasilyabsorbandemploy。Whentheyobservedthatwithinmoderateperiodsoftimetherepaymentsofaparticularcustomerwereuponmostoccasionsfullyequaltotheadvanceswhichtheyhadmadetohim，theymightbeassuredthatthepapermoneywhichtheyhadadvancedtohimhadnotatanytimeexceededthequantityofgoldandsilverwhichhewouldotherwisehavebeenobligedtokeepbyhimforansweringoccasionaldemands;andthat，consequently，thepapermoney，whichtheyhadcirculatedbyhismeans，hadnotatanytimeexceededthequantityofgoldandsilverwhichwouldhavecirculatedinthecountryhadtherebeennopapermoney。Thefrequency，regularity，andamountofhisrepaymentswouldsufficientlydemonstratethattheamountoftheiradvanceshadatnotimeexceededthatpartofhiscapitalwhichhewouldotherwisehavebeenobligedtokeepbyhimunemployedandinreadymoneyforansweringoccasionaldemands;thatis，forthepurposeofkeepingtherestofhiscapitalinconstantemployment。Itisthispartofhiscapitalonlywhich，withinmoderateperiodsoftime，iscontinuallyreturningtoeverydealerintheshapeofmoney，whetherpaperorcoin，andcontinuallygoingfromhiminthesameshape。Iftheadvancesofthebankhadcommonlyexceededthispartofhiscapital，theordinaryamountofhisrepaymentscouldnot，withinmoderateperiodsoftime，haveequalledtheordinaryamountofitsadvances。Thestreamwhich，bymeansofhisdealings，wascontinuallyrunningintothecoffersofthebank，couldnothavebeenequaltothestreamwhich，bymeansofthesamedealings，wascontinuallyrunningout。Theadvancesofthebankpaper，byexceedingthequantityofgoldandsilverwhich，hadtherebeennosuchadvances，hewouldhavebeenobligedtokeepbyhimforansweringoccasionaldemands，mightsooncometoexceedthewholequantityofgoldandsilverwhich（thecommercebeingsupposedthesame）wouldhavecirculatedinthecountryhadtherebeennopapermoney;andconsequentlytoexceedthequantitywhichthecirculationofthecountrycouldeasilyabsorbandemploy;andtheexcessofthispapermoneywouldimmediatelyhavereturneduponthebankinordertobeexchangedforgoldandsilver。Thissecondadvantage，thoughequallyreal，wasnotperhapssowellunderstoodbyallthedifferentbankingcompaniesofScotlandasthefirst。
When，partlybytheconveniencyofdiscountingbills，andpartlybythatofcashaccounts，thecreditabletradersofanycountrycanbedispensedfromthenecessityofkeepinganypartoftheirstockbythemunemployedandinreadymoneyforansweringoccasionaldemands，theycanreasonablyexpectnofartherassistancefrombanksandbankers，who，whentheyhavegonethusfar，cannot，consistentlywiththeirowninterestandsafety，gofarther。Abankcannot，consistentlywithitsowninterest，advancetoatraderthewholeoreventhegreaterpartofthecirculatingcapitalwithwhichhetrades;because，thoughthatcapitaliscontinuallyreturningtohimintheshapeofmoney，andgoingfromhiminthesameshape，yetthewholeofthereturnsistoodistantfromthewholeoftheoutgoings，andthesumofhisrepaymentscouldnotequalthesumofitsadvanceswithinsuchmoderateperiodsoftimeassuittheconveniencyofabank。Stillless，couldabankaffordtoadvancehimanyconsiderablepartofhisfixedcapital;ofthecapitalwhichtheundertakerofanironforge，forexample，employsinerectinghisforgeandsmelting—house，hisworkhousesandwarehouses，thedwelling—housesofhisworkmen，etc。;ofthecapitalwhichtheundertakerofamineemploysinsinkinghisshafts，inerectingenginesfordrawingoutthewater，inmakingroadsandwaggon—ways，etc。;ofthecapitalwhichthepersonwhoundertakestoimprovelandemploysinclearing，draining，enclosing，manuring，andploughingwasteanduncultivatedfields，inbuildingfarm—houses，withalltheirnecessaryappendagesofstables，granaries，etc。Thereturnsofthefixedcapitalareinalmostallcasesmuchslowerthanthoseofthecirculatingcapital;andsuchexpenses，evenwhenlaidoutwiththegreatestprudenceandjudgment，veryseldomreturntotheundertakertillafteraperiodofmanyyears，aperiodbyfartoodistanttosuittheconveniencyofabank。Tradersandotherundertakersmay，nodoubt，withgreatpropriety，carryonaveryconsiderablepartoftheirprojectswithborrowedmoney。Injusticetotheircreditors，however，theirowncapitalought，inthiscase，tobesufficienttoensure，ifImaysayso，thecapitalofthosecreditors;ortorenderitextremelyimprobablethatthosecreditorsshouldincuranyloss，eventhoughthesuccessoftheprojectshouldfallverymuchshortoftheexpectationoftheprojectors。Evenwiththisprecautiontoo，themoneywhichisborrowed，andwhichitismeantshouldnotberepaidtillafteraperiodofseveralyears，oughtnottobeborrowedofabank，butoughttobeborroweduponbondormortgageofsuchprivatepeopleasproposetoliveupontheinterestoftheirmoneywithouttakingthetroublethemselvestoemploythecapital，andwhoareuponthataccountwillingtolendthatcapitaltosuchpeopleofgoodcreditasarelikelytokeepitforseveralyears。Abank，indeed，whichlendsitsmoneywithouttheexpenseofstampedpaper，orofattorneys’feesfordrawingbondsandmortgages，andwhichacceptsofrepaymentupontheeasytermsofthebankingcompaniesofScotland，would，nodoubt，beaveryconvenientcreditortosuchtradersandundertakers。Butsuchtradersandundertakerswould，surely，bemostinconvenientdebtorstosuchabank。
Itisnowmorethanfive—and—twentyyearssincethepapermoneyissuedbythedifferentbankingcompaniesofScotlandwasfullyequal，orratherwassomewhatmorethanfullyequal，towhatthecirculationofthecountrycouldeasilyabsorbandemploy。Thosecompanies，therefore，hadsolongagogivenalltheassistancetothetradersandotherundertakersofScotlandwhichitispossibleforbanksandbankers，consistentlywiththeirowninterest，togive。Theyhadevendonesomewhatmore。Theyhadovertradedalittle，andhadbroughtuponthemselvesthatloss，oratleastthatdiminutionofprofit，whichinthisparticularbusinessneverfailstoattendthesmallestdegreeofovertrading。Thosetradersandotherundertakers，havinggotsomuchassistancefrombanksandbankers，wishedtogetstillmore。
Thebanks，theyseemtohavethought，couldextendtheircreditstowhateversummightbewanted，withoutincurringanyotherexpensebesidesthatofafewreamsofpaper。Theycomplainedofthecontractedviewsanddastardlyspiritofthedirectorsofthosebanks，whichdidnot，theysaid，extendtheircreditsinproportiontotheextensionofthetradeofthecountry;meaning，nodoubt，bytheextensionofthattradetheextensionoftheirownprojectsbeyondwhattheycouldcarryon，eitherwiththeirowncapital，orwithwhattheyhadcredittoborrowofprivatepeopleintheusualwayofbondormortgage。Thebanks，theyseemtohavethought，wereinhonourboundtosupplythedeficiency，andtoprovidethemwithallthecapitalwhichtheywantedtotradewith。Thebanks，however，wereofadifferentopinion，andupontheirrefusingtoextendtheircredits，someofthosetradershadrecoursetoanexpedientwhich，foratime，servedtheirpurpose，thoughatamuchgreaterexpense，yetaseffectuallyastheutmostextensionofbankcreditscouldhavedone。Thisexpedientwasnootherthanthewell—knownshiftofdrawingandredrawing;theshifttowhichunfortunatetradershavesometimesrecoursewhentheyareuponthebrinkofbankruptcy。ThepracticeofraisingmoneyinthismannerhadbeenlongknowninEngland，andduringthecourseofthelatewar，whenthehighprofitsoftradeaffordedagreattemptationtoovertrading，issaidtohavecarriedontoaverygreatextent。
FromEnglanditwasbroughtintoScotland，where，inproportiontotheverylimitedcommerce，andtotheverymoderatecapitalofthecountry，itwassooncarriedontoamuchgreaterextentthaniteverhadbeeninEngland。
Thepracticeofdrawingandredrawingissowellknowntoallmenofbusinessthatitmayperhapsbethoughtunnecessarytogiveanaccountofit。Butasthisbookmaycomeintothehandsofmanypeoplewhoarenotmenofbusiness，andastheeffectsofthispracticeuponthebankingtradearenotperhapsgenerallyunderstoodevenbymenofbusinessthemselves，IshallendeavourtoexplainitasdistinctlyasIcan。
Thecustomsofmerchants，whichwereestablishedwhenthebarbarouslawsofEuropedidnotenforcetheperformanceoftheircontracts，andwhichduringthecourseofthetwolastcenturieshavebeenadoptedintothelawsofallEuropeannations，havegivensuchextraordinaryprivilegestobillsofexchangethatmoneyismorereadilyadvanceduponthemthanuponanyotherspeciesofobligation，especiallywhentheyaremadepayablewithinsoshortaperiodastwoorthreemonthsaftertheirdate。
If，whenthebillbecomesdue，theacceptordoesnotpayitassoonasitispresented，hebecomesfromthatmomentabankrupt。
Thebillisprotested，andreturnsuponthedrawer，who，ifhedoesnotimmediatelypayit，becomeslikewiseabankrupt。If，beforeitcametothepersonwhopresentsittotheacceptorforpayment，ithadpassedthroughthehandsofseveralotherpersons，whohadsuccessivelyadvancedtooneanotherthecontentsofiteitherinmoneyorgoods，andwhotoexpressthateachofthemhadinhisturnreceivedthosecontents，hadallofthemintheirorderendorsed，thatis，writtentheirnamesuponthebackofthebill;eachendorserbecomesinhisturnliabletotheownerofthebillforthosecontents，and，ifhefailstopay，hebecomestoofromthatmomentabankrupt。Thoughthedrawer，acceptor，andendorsersofthebillshould，allofthem，bepersonsofdoubtfulcredit;yetstilltheshortnessofthedategivessomesecuritytotheownerofthebill。Thoughallofthemmaybeverylikelytobecomebankrupts，itisachanceiftheyallbecomesoinsoshortatime。Thehouseiscrazy，saysawearytravellertohimself，andwillnotstandverylong;butitisachanceifitfallsto—night，andIwillventure，therefore，tosleepinitto—night。
ThetraderAinEdinburgh，weshallsuppose，drawsabilluponBinLondon，payabletwomonthsafterdate。InrealityBinLondonowesnothingtoAinEdinburgh;butheagreestoacceptofA’sbill，uponconditionthatbeforethetermofpaymentheshallredrawuponAinEdinburghforthesamesum，togetherwiththeinterestandacommission，anotherbill，payablelikewisetwomonthsafterdate。Baccordingly，beforetheexpirationofthefirsttwomonths，redrawsthisbilluponAinEdinburgh;whoagain，beforetheexpirationofthesecondtwomonths，drawsasecondbilluponBinLondon，payablelikewisetwomonthsafterdate;andbeforetheexpirationofthethirdtwomonths，BinLondonredrawsuponAinEdinburghanotherbill，payablealsotwomonthsafterdate。Thispracticehassometimesgoneon，notonlyforseveralmonths，butforseveralyearstogether，thebillalwaysreturninguponAinEdinburgh，withtheaccumulatedinterestandcommissionofalltheformerbills。Theinterestwasfivepercentintheyear，andthecommissionwasneverlessthanonehalfpercentoneachdraft。Thiscommissionbeingrepeatedmorethansixtimesintheyear，whatevermoneyAmightraisebythisexpedientmustnecessarilyhave，costhimsomethingmorethaneightpercentintheyear，andsometimesagreatdealmore;
wheneitherthepriceofthecommissionhappenedtorise，orwhenhewasobligedtopaycompoundinterestupontheinterestandcommissionofformerbills。Thispracticewascalledraisingmoneybycirculation。
Inacountrywheretheordinaryprofitsofstockinthegreaterpartofmercantileprojectsaresupposedtorunbetweensixandtenpercent，itmusthavebeenaveryfortunatespeculationofwhichthereturnscouldnotonlyrepaytheenormousexpenseatwhichthemoneywasthusborrowedforcarryingiton;butafford，besides，agoodsurplusprofittotheprojector。Manyvastandextensiveprojects，however，wereundertaken，andforseveralyearscarriedonwithoutanyotherfundtosupportthembesideswhatwasraisedatthisenormousexpense。Theprojectors，nodoubt，hadintheirgoldendreamsthemostdistinctvisionofthisgreatprofit。Upontheirawaking，however，eitherattheendoftheirprojects，orwhentheywerenolongerabletocarrythemon，theyveryseldom，Ibelieve，hadthegoodfortunetofindit。
ThebillsAinEdinburghdrewuponBinLondon，heregularlydiscountedtwomonthsbeforetheywereduewithsomebankorbankerinEdinburgh;andthebillswhichBinLondonredrewuponAinEdinburgh，heasregularlydiscountedeitherwiththeBankofEngland，orwithsomeotherbankersinLondon。Whateverwasadvanceduponsuchcirculatingbills，was，inEdinburgh，advancedinthepaperoftheScotchbanks，andinLondon，whentheywerediscountedattheBankofEngland，inthepaperofthatbank。
Thoughthebillsuponwhichthispaperhadbeenadvancedwereallofthemrepaidintheirturnassoonastheybecamedue;yetthevaluewhichhadbeenreallyadvanceduponthefirstbill，wasneverreallyreturnedtothebankswhichadvancedit;because，beforeeachbillbecamedue，anotherbillwasalwaysdrawntosomewhatagreateramountthanthebillwhichwassoontobepaid;andthediscountingofthisotherbillwasessentiallynecessarytowardsthepaymentofthatwhichwassoontobedue。
Thispayment，therefore，wasaltogetherfictitious。Thestream，which，bymeansofthosecirculatingbillsofexchange，hadoncebeenmadetorunoutfromthecoffersofthebanks，wasneverreplacedbyanystreamwhichreallyrunintothem。