Thisiswhatbankerscallspeculation，whichoftencausesvariationsintheexchangesforashortperiodindependentlyofthebalanceoftrade；butinthelongrunwemustgetbacktothisbalancewhichfixestheconstantanduniformruleofexchange。Andthoughthespeculationsandcreditsofbankersmaysometimesdelaythetransportofthesumswhichonecityorstateowestoanother，intheenditisalwaysnecessarytopaythedebtandsendthebalanceoftradeinspecietotheplacewhereitisdue。
IfEnglandgainsregularlyabalanceoftradewithPortugalandalwayslosesabalancewithHollandtheratesofexchangewithHollandandPortugalwillmakethisevident：itwillbeseenthatatLondontheexchangeonLisbonisbelowparandthatPortugalisindebtedtoEngland。ItwillbeseenalsothattheexchangeonAmsterdamisaboveparandthatEnglandisindebtedtoHolland。Butthequantityofthedebtcannotbeseenfromtheexchanges。ItwillnotbeseenwhetherthebalanceofsilverdrawnfromPortugalwillbegreaterorlessthanwhathastobesenttoHolland。
ThereishoweveronethingwhichwillalwaysshowatLondonwhetherEnglandgainsorlosesthegeneralbalanceofhertrade（bygeneralbalanceisunderstoodthedifferenceoftheindividualbalanceswithalltheforeignstateswhichtradewithEngland），andthatisthepriceofgoldandsilvermetalbutespeciallyofgold（nowthattheproportionbetweengoldandsilverincoinedmoneydiffersfromthemarketrate，aswillbeexplainedinthenextchapter）。IfthepriceofgoldmetalintheLondonmarket，whichisthecentreofEnglishtrade，islowerthanthepriceattheTowerwhereguineasorgoldcoinsareminted，oratthesamepriceasthesecoinsintrinsically，andifgoldmetalistakentotheTowerinexchangefortheirvalueinguineasormintedcoins，itisacertainproofthatEnglandisagainerinthegeneralbalanceofhertrade。ItprovesthatthegoldtakenfromPortugalsufficesnotonlytopaythebalancewhichEnglandsendsintoHolland，Sweden，Muscovy，andtheotherstateswheresheisindebted，butthatthereremainssomeofthegoldtobesenttotheMint，andthequantityorsumofthisgeneralbalanceoftradeisknownfromthatofthespeciecoinedattheTowerofLondon。
ButifthegoldmetalissoldintheLondonmarketabovetheTowerprice，whichisusually？。18。0anounce，themetalwillnolongerbetakentotheMint，andthisisacertainsignthatsomuchgoldisnotdrawnfromabroad（fromPortugalforinstance）
asmustbesentintotheothercountrieswhereEnglandisindebted。ItisaproofthatthegeneralbalanceoftradeisagainstEngland。ThiswouldnotbeknownbutfortheprohibitioninEnglandtosendgoldcoinoutofthecountry。ButthisprohibitionisthereasonwhythetimidLondonbankersprefertobuygoldmetal（whichtheyareallowedtosendabroad）at？。18。0
upto？anounceforexportratherthansendoutguineasorgoldcoinsat？。18。0againstthelawandattheriskofconfiscation。
Someofthemtakethisrisk，othersmeltthegoldcoinstosendthemoutasbullion，anditisimpossibletojudgehowmuchgoldEnglandloseswhenthegeneralbalanceoftradeisagainsther。
InFrancethecostofmintingisdeducted，usually1？percent，i。e。thepriceforcoinisalwayshigherthanforuncoinedmetal。ToknowwhetherFrancelosesinthegeneralvalanceofhertrade，itwillsufficetoknowwhetherthebankerssendFrenchcoinsabroad。Iftheydosoitisaproofthattheydonotfindbulliontobuyforexport，sincethebullionthoughatalowerpricethancoinedmoneyinFrance，isofgreatervaluethanthesecoinsinforeigncountriesbyatleast1？percent。
Thoughtheexchangesrarelyvaryapartfromthebalanceoftradebetweenonecountryandothers，andthoughthisbalanceisnaturallythemeredifferenceinvalueofthegoodsandmerchandisewhichthestatesendstoothercountriesandreceivesfromthem，yetthereareoftencircumstancesandaccidentalcauseswhichcauseconsiderablesumstobeconveyedfromonestatetoanotherwithoutanyquestionofmerchandiseortrade，andthesecausesaffecttheexchangesjustasthebalanceoftradewoulddo。
Sucharethesumsofmoneywhichonestatesendsintoanotherforitssecretservicesandpoliticalaims，forsubsidiestoallies，fortheupkeepoftroops，Ambassadors，noblemenwhotravel，etc。，capitalwhichtheinhabitantsofonestatesendtoanothertoinvestinpublicorprivatefunds，theinterestwhichtheseinhabitantsreceiveannuallyfromsuchinvestments，etc。
Theexchangesvarywithalltheseaccidentalcausesandfollowtheruleofthetransportofsilverrequired。Inconsideringthebalanceoftrademattersofthiskindarenotseparated，andindeeditwouldbeverydifficulttoseparatethem。Theyhaveverycertainlyaninfluenceontheincreaseanddecreaseofcirculatingmoneyinastateandonitscomparativestrengthandpower。
Mysubjectdoesnotallowmetoenlargeontheeffectsoftheseaccidentalcauses：IconfinemyselfalwaystothesimpleviewsofcommercelestIshouldcomplicatemysubject，whichistoomuchencumberedbythemultiplicityofthefactswhichrelatetoit。
Exchangesrisemoreorlessaboveparinproportiontothegreatorsmallcostsandrisksofthetransportofmoneyandthisbeinggrantedtheynaturallyrisemuchmoreaboveparinthecitiesorstateswhereitisforbiddentoexportmoneythaninthosewhereitsexportisfree。
SupposethatPortugalconsumesregularlyeveryyearconsiderablequantitiesofwoollenandothermanufacturesofEngland，aswellforitsownpeopleasforthoseofBrazil，thatitpaysforthempartlyinwine，oils，etc。，butforthesurpluspaymentthereisaregularbalanceoftraderemittedfromLisbontoLondon。IftheKingofPortugalrigorouslyprohibitsunderpenaltynotonlyofconfiscationbutoflifethetransportofanygoldorsilvermetaloutofhisStates，theterrorofthisprohibitionwillinthefirstplacestoptheBankersfrommeddlingaboutsendingthebalance。ThepriceoftheEnglishmanufactureswillbekeptinhandatLisbon。TheEnglishmerchantsunabletoreceivetheirfundsfromLisbonwillsendnomorecloththither。Theresultwillbethatclothwillbecomeextraordinarilydear。ThoughtheirpricehasnotgoneupinEnglandtheyceasetobesenttoLisbonbecausetheirvaluecannotberecovered。TohavetheseclothsthePortuguesenobilityandotherswhocannotdowithoutthemwilloffertwicetheusualprice，butastheycannotgetenoughofthemwithoutsendingmoneyoutofPortugal，theincreasedpriceofclothwillbecometheprofitofanyonewhoinspiteoftheprohibitionwillexportgoldorsilver。ThiswillencouragevariousJewsandotherstotakegoldandsilvertoEnglishvesselsintheportofLisbon，evenattheriskoftheirlives。Theywillgainatfirst100or50percentinthistrafficandthisprofitispaidbythePortugueseinthehighpricetheygiveforthecloth。Theywillgraduallyfamiliarisethemselveswiththismanoeuvreafterhavingoftenpractiseditsuccessfully，andatlengthmoneywillbeseentobeputonboardEnglishshipsforapaymentof2or1percent。
TheKingofPortugallaysdownthelaworprohibition。Hissubjects，evenhiscourtiers，paythecostoftheriskruntocircumventandeludeit。Noadvantagethenisgainedbysuchalaw，onthecontraryitcausesareallosstoPortugalsinceitcausesmoremoneyofthestatetogoabroadthaniftherewerenosuchlaw。
Forthosewhogainbythismanoeuvre，whetherJewsorothers，sendtheirprofitsabroad，andwhentheyhaveenoughofthemorwhentheytakefrighttheyoftenthemselvesfollowtheirmoney。
Ifsomeoftheselawbreakersweretakenintheact，theirgoodsconfiscatedandtheirlivesforfeited，thiscircumstanceandexecutioninsteadofstoppingtheexportofmoneywouldonlyincreaseit，becausethosewhoformerlyweresatisfiedwith1or2percentforexportingmoneywillask20or50percent，andsotheexportmustalwaysgoontopaythebalance。
IdonotknowwhetherIhavesucceededinmakingthesereasonscleartothosewhohavenoideaoftrade。Iknowthatforthosewhohavepracticalknowledgeofitnothingiseasiertounderstand，andthattheyarerightlyastonishedthatthosewhogovernstatesandadministerthefinancesofgreatkingdomshavesolittleknowledgeofthenatureofexchangesastoforbidtheexportofbullionandspecieofgoldandsilver。
Theonlywaytokeeptheminastateissotoconductforeigntradethatthebalanceisnotadversetothestate。
Chapter4
OfthevariationsintheproportionofvalueswithregardtothemetalswhichserveasmoneyIfmetalswereaseasilyfoundaswatercommonlyiseverybodywouldtakewhathewantedofthemandtheywouldhavehardlyanyvalue。Themetalswhicharemostplentifulandcosttheleasttroubletoproducearealsothecheapest。Ironseemsthemostnecessary，butasitiscommonlyfoundinEuropewithlesstroubleandlabourthancopperitismuchcheaper。
Copper，silver，andgoldarethethreemetalsingeneraluseformoney。Copperminesarethemostabundantandcostlessinlandandlabourtowork。TherichestcopperminestodayareinSweden。80ouncesofcopperareneededtheretopayforanounceofsilver。Itisalsotobeobservedthatthecopperextractedfromsomeminesismoreperfectandlustrousthanwhatisobtainedfromothers。ThecopperofJapanandSwedenisbrighterthanthatofEngland。ThatofSpainwas，inthetimeoftheRomans，betterthanthatofCyprus。Butgoldandsilver，fromwhatevermineextracted，arealwaysofthesameperfectionwhenrefined。
Thevalueofcopper，asofeverythingelse，isproportionabletothelandandlabourwhichenterintoitsproduction。Besidetheordinaryusestowhichitisput，likepotsandpans，kitchenutensils，locks，etc。itisinnearlyallstatesusedasmoneyinsmallpurchases。InSwedenitisusedeveninlargepaymentswhensilverisscarcethere。DuringthefirstfivecenturiesofRomeitwastheonlymoney。Silveronlybegantobeemployedinexchangeintheyear484。Theratioofcoppertosilverwasthenratedinthemintsat72to1：inthecoinageof512at80to1：in537，64to1：in586at48to1；in663byDrususand672bySullaat53to1：in712byMarcusAntoniusand724byAugustus56to1：inAD54underNero60to1：in160ADunderAntoninus64to1；inthetimeofConstantineAD330，120and125to1：intheageofJustinianaboutAD550at100to1。Sincethenithasalwaysvariedbelowtheratioof100
to1intheEuropeanmints。
Todaywhencoppermoneyisonlyusedinsmalldealings，whetheralloyedwithcalaminetomakeyellowcopperasinEngland，orwithasmallportionofsilverasinFranceandGermanyitisgenerallyratedinthe，proportionof40to1，thoughthemarketpriceofcopperisordinarilytothatofsilveras80or100to1。Thereasonisthatthecostofcoiningisgenerallydeductedfromtheweightofthecopper。Whenthereisnottoomuchofthissmallmoneyforeffectingthepettyexchangesinthestate，coinsofcopperorcopperandalloypasswithoutdifficultyinspiteoftheirdefectinintrinsicvalue。
Butwhenitisattemptedtopasstheminaforeigncountrytheywillonlybetakenattheweightofthecopperandthesilveralloy。Eveninstateswherethroughtheavariceorignoranceofthegovernors，currencyisgiventotoogreataquantityofthissmallcashforthetransactionofsmalldealings，anditisorderedthatitshouldbereceiveduptoacertainlimitinlargepaymentsitisunwillinglyacceptedandsmallcashisatadiscountinsilvercoin，asinthetokenmoneyandArditesinSpaininlarge，payments。Yetsmallcoinsalwayspasswithoutdifficultyinsmallpurchases，thevalueofthepaymentsbeingusuallysmallinthemselvesthelossisstillless。Thisiswhytheyareacceptedwithoutdifficulty，andthatcopperisexchangedforsmallsilvercoinsabovetheweightandintrinsicvalueofcopperinthestateitself，butnotinotherstates，eachstatehavingwherewithtocarryonitssmalldealingswithitsowncoppercoins。
Goldandsilver，likecopper，haveavalueproportionabletothelandandlabournecessaryfortheirproduction；andifthepublicassumesthecostofmintingthesemetalstheirvalueinbarsandincoinisidentical，theirmarketvalueandtheirmintvalueisthesame，theirvalueinthestateandinforeigncountriesisalwaysalike，dependingontheweightandfineness，thatisonweightaloneifthemetalsarepureandwithoutalloy。
Silvermineshavealwaysbeenfoundmoreabundantthanthoseofgold，butnotequallyinallcountriesoratalltimes。
Severalouncesofsilverhavealwaysbeenneededtobuyoneounceofgold，sometimesmoresometimeslessaccordingtotheabundanceofthesemetalsandthedemandforthem。IntheyearAUC310，13
ouncesofsilverwereneededinGreecetobuyanounceofgold，i。e。goldwastosilveras1to13：AUC400orthereabouts1to12，AUC4601to10inGreece，ItalyandthewholeofEurope。
Thisratioof1to10seemstohavepersistedfor3centuriestothedeathofAugustus，AUC767orAD14。UnderTiberiusgoldbecamescarceorsilvermoreplentiful，andtheratiograduallyroseto1to12，12？and13。UnderConstantineAD330andJustinianAD550itwas1to14。Laterhistoryismoreobscure。
Someauthorsthinkitwas1to18undercertainFrenchkings。InAD840underCharlestheBaldgoldandsilvercoinswerestruckat1to12。UnderStLouis，whodiedin1270theratiowas1to10：in1361，1to12：in1421over1to11：in1500under1to12：about1600，1to12：in1641，1to14：in1700，1to15：in1730，1to14？
ThequantityofgoldandsilverbroughtfromMexicoandPeruinthelastcenturyhasnotonlymadethesemetalsmoreplentifulbuthasincreasedthevalueofgoldcomparedwithsilverwhichhasbeenmoreabundant，sothatintheSpanishmints，followingthemarketprices，theratioisfixedat1to16。TheotherStatesofEuropehavefollowedprettycloselytheSpanishpriceintheirMints，someat1to15，othersat157/8，155/8，etc。
followingtheideasandviewsoftheDirectorsoftheMints。ButsincePortugalhasdrawngreatquantitiesofgoldfromBraziltheratiohascommencedtofallagainifnointheMintsatleastinthemarkets，andthisgivesagreatervaluetosilverthaninthepast。MoreoveragooddealofgoldisoftenbroughtfromtheEastIndiesinexchangeforthesilvertakenthitherfromEurope，becausetheratioismuchlowerinIndia。
InJapanwherethereareagoodmanysilverminestheratioofgoldtosilveristoday1to8：inChina1to10：intheothercountriesoftheIndiesonthisside1to11，1to12，1to13，and1to14aswegetnearertotheWestandtoEurope。ButiftheminesofBrazilcontinuetosupplysomuchgoldtheratiomayprobablyfalleventuallyto1to10eveninEuropewhichseemstomethemostnaturalifanythingbutchanceistheguidetotheratio。ItisquitecertainthatwhenallthegoldandsilverminesinEurope，AsiaandAfricawerethemostexploitedfortheRomanrepublictheratioof1to10wasthemostconstant。Ifallthegoldminesregularlyproducedatenthpartofwhatthesilverminesproduce，itcouldnotbedeterminedthatforthatreasontheratiobetweenthesetwometalswouldbeas1to10。Theratiowouldalwaysdependonthedemandandonthemarketprice。
Possiblyrichpeoplemightprefertocarrygoldmoneyintheirpocketsratherthansilverandmightdevelopeatasteforgildingsandgoldornamentsratherthansilver，thusincreasingthemarketpriceofgold。
Neithercouldtheratiobetweenthesemetalsbearrivedatbyconsideringthequantityofthemfoundinastate。Supposetheratio1to10inEnglandandthatthequantityofgoldandsilverincirculationtherewere20millionouncesofsilverand2
millionouncesofgold，thatwouldbeequalto40millionouncesofsilver，andsupposethat1millionouncesofgoldbeexportedfromEnglandoutofthe2millions，and10millionouncesofsilverbroughtininexchange，therewouldthenbe30millionouncesinofsilverandonly1millionouncesofgold，stillequivalentinallto40millionouncesofsilver。Ifthequantityofouncesbeconsideredthereare30millionsofsilverand1
millionofgold，andthereforeifthequantityofthetwometalsdecidedtheratioitwouldbeas1to30，butthatisimpossible。
Theratiointheneighbouringcountriesis1to10，anditwouldthereforecostonly10millionouncesofsilverwithatrifleforthecostofcarriagetobringbacktothestate1millionouncesofgoldinexchangefor10millionouncesofsilver。
Tojudgethenoftheratiobetweengoldandsilverthemarketpriceisalonedecisive：thenumberofthosewhoneedonemetalinexchangefortheother，andofthosewhoarewillingtomakesuchanexchange，determinestheratio。Itoftendependsonthehumourofmen：thebargainingisdoneroughlyandnotgeometrically。StillIdonotthinkthatonecanimagineanyrulebutthistoarriveatit。Atleastweknowthatinpracticeitistheonewhichdecides，asinthepriceandvalueofeverythingelse。Foreignmarketsaffectthepriceofgoldandsilvermorethantheydothepriceofanyothergoodsormerchandisebecausenothingistransportedwithgreatereaseandlessinjury。IftherewereafreeandregulartradebetweenEnglandandJapan，ifanumberofshipswereregularlyemployedinthistradeandthebalanceoftradewereinallrespectsequal，i。e。ifasmuchmerchandisewerealwayssentfromEnglandtoJapan，havingregardtopriceandvalue，aswasimportedfromJapan，itwouldendindrawingatlastallthegoldfromJapaninexchangeforsilver，andtheratiobetweengoldandsilverinJapanwouldbemadethesameasitisinEngland，subjectonlytotherisksofnavigation；forinourhypothesisthecostsofthevoyagewouldbesupportedbythetradeinmerchandise。
Takingtheratioat1to15inEnglandand1to8inJapantherewouldbemorethan87percenttogainbycarryingsilverfromEnglandtoJapanandbringingbackgold。Butthisdifferenceisnotenoughintheordinarycoursetopaythecostsofsolonganddifficultavoyage。
ItpaysbettertobringbackmerchandisefromJapanratherthangoldinexchangeforsilver。Itisonlythecostsandrisksofthetransportofgoldandsilverwhichcanleaveadifferenceintheratiobetweenthesemetalsindifferentstates：intheneareststatetheratiowilldifferverylittle，therewillbeadifferencefromonestatetoanotherof1，2or3percentandfromEnglandtoJapanthetotalofallthesedifferencesofratiowillamounttomorethan87percent。
Itisthemarketpricewhichdecidestheratioofthevalueofgoldtothatofsilver。Themarketpriceisthebaseofthisproportioninthevalueassignedtocoinsofgoldandsilver。Ifthemarketpricevariesconsiderably，thatofthecoinagemustbereformedtofollowthemarketrate。Ifthisbenotdoneconfusionanddisordersetininthecirculation，andcoinsofoneortheothermetalwillbetakenabovetheMintvalue。Thereareaninfinityofexamplesofthisinantiquity。ThereisaquiterecentoneinEnglandundertheregulationsmadeattheLondonMint。Theounceofsilver，eleventwelfthsfine，isworththere5s2dsterling。Sincetheratioofgoldtosilver（whichhadbeenfixedat1to16inimitationofSpain）hasfallento1to15and1to14？theounceofsilversoldat5s6dsterling，whilethegoldguineacontinuedtocirculateat21s6dsterling，whichcausedtheexportfromEnglandofallthesilvercrowns，shillingsandsixpenceswhichwerenotwornbycirculation，silvermoneybecamesoscarcein1728（thoughonlythemostwornpiecesremained）thatpeoplehadtochangeaguineaatalossofnearly5percent。ThetroubleandconfusionthusproducedintradeandcirculationobligedtheTreasurytorequestthecelebratedSirIsaacNewton，Master，oftheTowerMint，tomakeaReportonthemeasureshethoughtmostsuitabletoremedythisdisorder。
Therewasnothingeasier。ItwasonlynecessarytofollowthemarketpriceofsilverincoiningsilverattheTower。AndwhereastheratioofgoldtosilverwasofoldtimebythelawsandregulationsoftheTowerMint1to15？itwasonlynecessarytomakethesilvercoinslighterintheproportionofthemarketpricewhichhadfallenbelow1to15；and，toanticipatethevariationwhichthegoldofBrazilbringsaboutannuallyintheratiobetweenthesetwometals，itmightevenhavebeenpossibletofixitonthefootingof1to14？aswasdonein1725inFranceandastheywillbeforcedlatertodoinEnglanditself。
ItistruethatthecoinageinEnglandmightequallyhavebeenadjustedtothemarketpriceandratiobydiminishingthenominalvalueofgoldcoins。ThiswasthepolicyadoptedbySirIsaacNewtoninhisReport，andbyParliamentinconsequenceofthisReport。But，asIshallexplain，itwastheleastnaturalandthemostdisadvantageouspolicy。Firstlyitwasmorenaturaltoraisethepriceofsilvercoins，becausethepublichadalreadydonesointhemarket，theounceofsilverwhichwasworthonly62dsterlingattheMintbeingworthmorethan65dinthemarket，andallthesilvermoneybeingexportedexceptwhatthecirculationhadconsiderablyreducedinweight。OntheotherhanditwaslessdisadvantageoustotheEnglishnationtoraisethesilvermoneythantolowerthegoldmoneyconsideringthesumswhichEnglandowestheforeigner。
IfitissupposedthatEnglandowestheforeigner5millionssterlingofcapital，investedinthepublicfunds，itmaybeequallysupposedthattheForeignerpaidthisamountingoldattherateof21s6daguineaorinsilverat65dsterlingtheounce，accordingtothemarketprice。
These5millionshavethereforecosttheForeignerat21s6dtheguinea4，651，163guineas；butnowthattheguineaisreducedto21sthecapitaltoberepaidis4，761，904guineas，alosstoEnglandof110，741guineas，withoutcountingthelossontheinterestannuallypaid。
NewtontoldmeinanswertothisobjectionthataccordingtothefundamentallawsoftheKingdomsilverwasthetrueandonlymonetarystandardandthatassuchitcouldnotbealtered。
ItiseasytoanswerthatthepublichavingalteredthisLawbycustomandthepriceofthemarketithadceasedtobealaw，thatinthesecircumstancestherewasnoneedtoadherescrupulouslytoittothedetrimentofthenationandtopaytoforeignersmorethantheirdue。Ifthegoldcoinswerenotconsideredtruemoney，goldwouldhavesupportedthevariation，asinHollandandChinawheregoldislookeduponratherasmerchandisethanmoney。Ifthesilvercoinshadbeenraisedtotheirmarketpricewithouttouchinggoldtherewouldhavebeennolosstotheforeigner，andtherewouldhavebeenplentyofsilvercoinsincirculation。TheywouldhavebeencoinedattheMint，whereasnownomorewillbecoineduntilsomenewarrangementismade。
Byreducingthevalueofgold（broughtaboutbyNewton’sReportfrom21s6dto21s）theounceofsilverwhichwassoldintheLondonmarketbeforeat65penceand65？pencenolongersoldintruthbutat64d。ButasitwascoinedattheTowertheouncewasvaluedinthemarketat64dandifitwastakentotheTowertobecoineditwouldbeworthnomorethan62d。Sonomoreistaken。AfewshillingsorfifthsofcrownshavebeenstruckattheexpenseoftheSouthSeaCompany，losingthedifferenceofthemarketprice；buttheydisappearedassoonastheywereputintocirculation。Todaynosilvercoinscanbeseenincirculationiftheyareoffullmintweight，onlycoinswhicharewornanddonotexceedinweightthemarketprice。
Howeverthevalueofsilvercontinuestoriseimperceptiblyinthemarket。Theouncewhichwasworthonly64afterthereductionofwhichwehavespokenhasrisenagainto65？and66
inthemarket；andinordertohavesilvercoinincirculationandcoinedattheTower，itwillbenecessaryagaintoreducethevalueofthegoldguineafrom21sto20sandtolosetotheforeignerdoubleofwhatislostalreadyunlessitispreferredtofollowthenaturalcourseandtoadjustsilvercointothemarketprice。Onlythemarketpricecanfindtheratioofthevalueofgoldandsilverasofallothervalues。Newton’sreductionoftheguineato21swasdevisedonlytopreventthedisappearanceofthelightandworncoinswhichremainincirculation，andnottofixingoldandsilvercoinsthetrueratiooftheirprice，Imeanbytheirtrueratiothatwhichisfixedbymarketprices。Thispriceisalwaysthetouchstoneinthesematters。Itsvariationsareslowenoughtoallowtimetoregulatethemintsandpreventdisordersinthecirculation。
Insomecenturiesthevalueofsilverrisesslowlyagainstgold，inothersthevalueofgoldrisesagainstsilver。ThiswasthecaseintheageofConstantinewhoreducedallvaluestothatofgoldasthemorepermanent；butthevalueofsilverisgenerallythemorepermanentandgoldismoresubjecttovariation。
ChapterV
OftheaugmentationanddiminutionofcoinindenominationAccordingtotheprincipleswehaveestablishedthequantityofmoneycirculatinginexchangefixesanddeterminesthepriceofeverythinginaStatetakingintoaccounttherapidityorsluggishnessofcirculation。
WeoftenseehoweverintheincreasesanddecreasespractisedinFrancesuchstrangevariationsthatitmightbesupposedthatmarketpricescorrespondrathertothenominalvalueofcointhantoitsquantityinexchange，thequantityoflivrestournoisinmoneyofaccountratherthanthequantityofmarksandounces，whichseemsdirectlyopposedtoourprinciples。
Suppose，ashappenedin1714，ecuiscurrentfor5livresandtheKingArretwhichorderstheloweringoftheecufor20
months，viz1percentpermonthtonominalvalueto4livresinsteadof5。LetusseewillbenaturallytheconsequencesofthishavingregardtothespiritoftheNation。
Allthosewhoowemoneywillmakehastetopayitduringthediminutionssoasnottolosebythem。UndertakersandMerchantsfinditeasytoborrowwhichdecidestheleastableandtheleastincreasetheirenterprise。Theyborrowmoney，asfancy，withoutinterestandloadthemselveswithviolenceoftheirdemands。
Vendorshavegettingridoftheirmerchandiseformoneywhichdiminishintheirhandsinnominalvalue。Theytowardsforeignmerchandiseandimportconsiderablequantitiesofitfortheconsumptionofseveralyears。Allthiscausesmoneytocirculatemorerapidlyandraisesthepriceofeverything。ThenhighpricespreventtheforeignerfromtakingmerchandisefromFranceasusual。Francekeepsherownmerchandiseandatthesametimeimportsgreatquantities。Thisdoubleoperationisthereasonwhyconsiderableamountsofspeciemustbesentabroadtopaythebalance。
Therateofexchangeneverfailstoshowthisdisadvantage。
Exchangeiscommonlyseenat6and10percentagainstFranceduringthesediminutions。EnlightenedpeopleinFrancehoardtheirmoneyinthesetimes。TheKingfindsmeanstoborrowmuchmoneyonwhichhewillinglylosesthediminution，proposingtocompensatehimselfbyanaugmentationattheendofthediminution。
WiththisobjectafterseveraldiminutionstheybegintohoardmoneyintheKing’sTreasury，topostponethepayments，pensions，andarmypay。InthesecircumstancesmoneybecomesextremelyrareattheendofthediminutionsbothbyreasonofthesumshoardedbytheKingandvariousindividualsandbyreasonofthenominalvalueofthecoin，whichvalueisdiminished。Theamountssentabroadalsocontributegreatlytothescarcityofmoney，andthisscarcitygraduallybringsitaboutthatthemerchandisewithwhichtheundertakersareloadedupisofferedat50or60percentbelowthepricesprevailingatthetimeofthefirstdiminutions。Circulationfallsintoconvulsions。Hardlyenoughmoneycanbefoundtosendtomarket。
ManyUndertakersandMerchantsgobankruptandtheirmerchandiseissoldatbargainprices。
ThentheKingaugmentsanewthecoinage，settlesthenewecuorounceofsilverofthenewissueat5livres，beginswiththisnewcoinagetopaythetroopsandthepensions。TheoldcoinageisdemonetisedandreceivedattheMintatalowernominalvalue。
TheKingprofitsbythedifference。
ButallthesumsofnewcoinagewhichcomefromtheMintdonotrestoretheabundanceofmoneyincirculation。TheamountskepthoardedbyindividualsandthosesentabroadgreatlyexceedthenominalincreaseonthecoinagewhichcomesfromtheMint。
ThecheapnessofmerchandiseinFrancebeginstodrawthitherthemoneyoftheforeigner，whofindingit50or60ormorepercentcheapersendsgoldandsilvermetaltoFrancetobuyit。InthiswaytheforeignerwhosendshisbulliontotheMintrecoupshimselfeasilyfromthetaxpaidthereonthisbullion。Hefindsthedoubleadvantageofthelowpriceofthemerchandisehebuys，andthelossoftheMintchargefallsreallyontheFrenchinthesaleoftheirmerchandisetotheforeigner。Theyhavemerchandiseenoughforseveralyears’consumption。TheyreselltotheDutch，forexample，thespiceswhichtheyboughtofthemfortwothirdsofwhattheypaid。Allthistakesplacegradually，theforeignerdecidestobuythesemerchandisesfromFranceonlybecauseoftheircheapness。Thebalanceoftrade，whichwasagainstFranceatthetimeofthediminutionsturnsinherfavouratthetimeofaugmentation，andtheKingisabletoprofitby20percentormoreonallthebullionbroughtintoFranceandtakentotheMint。AsForeignersnowoweatradebalancetoFranceandhavenotintheircountrycoinsofthenewissuetheymusttaketheirbullionandcoinsoftheoldissuetotheMinttoobtainnewcoinsforpayment。ButthistradebalancewhichForeignersowetoFrancearisesonlyfromthemerchandisewhichtheyimportfromitatlowprices。
Franceisallroundthedupeoftheseoperations。Shepaysveryhighpricesforforeigngoodsduringthediminutions，sellsthembackatverylowpricesatthetimeoftheaugmentationtothesameforeigners，sellsherownmerchandiseatlowpriceswhichshehadkeptsohighduringthediminutionsandsoitwouldbedifficultforallthemoneywhichleftFranceduringthediminutionstocomebackduringtheaugmentation。Ifcoinsofthenewissuearecounterfeitedabroad，asisnearlyalwaysthecase，Francelosesthe20percentwhichtheKinghasestablishedastheMintcharge。ThisissomuchgainedfortheForeignerwhoprofitsfurtherbythelowpricesofmerchandiseinFrance。
TheKingmakesaconsiderableprofitbytheMinttax，butitcostsFrancethreetimesasmuchtoenablehimtomakethisprofit。
ItiswellunderstoodthatwhenthereisacurrentbalanceoftradeinfavourofFranceagainsttheforeignertheKingisabletoraiseataxof20percentormorebyanewcoinageandanincreaseinthenominalvalueofcoins。ButifthetradebalancewasagainstFranceatthetimeofthisnewcoinageandaugmentationtheoperationwouldhavenosuccessandtheKingwouldnotderiveagreatprofitfromit。Thereasonisthatinthiscaseitisnecessarytosendmoneycontinuallyabroad。Buttheoldecuisasgoodinforeigncountriesasthenew。ThatbeingsotheJewsandBankerswillgiveapremiumorbonusinsecretfortheoldcoinsandtheindividualwhocansellthemabovetheMintpricewillnottakethemthither。AttheMinttheygivehimonlyabout4livresforhisecu，buttheBankerwillgivehimatfirst4livres5sols，andthen4livres10，andatlast4livres15。Andthisishowitmayhappenthatanaugmentationofthecoinagemaylacksuccess。Itcanhardlyhappenwhentheraisingismadeaftertheloweringsindicated，becausethenthebalancenaturallyturnsinfavourofFrance，aswehaveexplained。
Theexperienceoftheaugmentationof1726mayservetoconfirmallthis。Thediminutionswhichhadprecededthisaugmentationweremadesuddenlywithoutwarning，whichpreventedtheordinaryoperationsofdiminutions。ThispreventedthetradebalancefromturningstronglyinfavourofFranceattheaugmentationof1726，fewpeopletooktheiroldcointotheMint，andtheprofitoftheMinttaxwhichwasinviewhadtobeabandoned。
ItisnotwithinmysubjecttoexplainthereasonsofMinistersforloweringthecoinagesuddenlynorthereasonswhichdeceivedthemintheirprojectoftheaugmentationof1726。I
havementionedtheincreasesanddecreasesinFranceonlybecausetheirresultsseemsometimestoclashwiththeprinciplesIhaveestablishedthatabundanceorscarcityofmoneyinaStateraisesorlowersallpricesproportionably。
Afterexplainingtheeffectsofloweringandraisingthecoinage，aspractisedinFrance，Imaintainthattheyneitherdestroynorweakenmyprinciples，forifIamtoldthatwhatcost20livresor5ouncesofsilverbeforetheloweringreferredtodoesnotevencost4ouncesor20livresofthenewmoneyaftertheaugmentation，Iwillassenttothiswithoutdepartingfrommyprinciples，becausethereislessmoneyincirculationthantherewasbeforethediminutions，asIhaveexplained。Thedifficultiesofexchangeinthetimesandoperationsofwhichwespeakcausevariationsinthepricesofthingsandinthatoftheinterestofmoneywhichcannotbetakenasaruleintheordinaryprinciplesofcirculationanddealing。
ThechangeinthenominalvalueofmoneyhasatalltimesbeentheeffectofsomedisasterorscarcityintheState，oroftheambitionofsomePrinceorindividual。IntheyearA。U。C。157
SolonincreasedthenominalvalueofthedrachmaofAthensafteraseditionandabolitionofdebt。BetweenA。U。C。490and512theRomanRepublicseveraltimesincreasedthenominalvalueofitscoppercoins，sothattheirascametobeworthsix。ThepretextwastoprovidefortheneedsoftheStateandtopaythedebtsincurredinthefirstPunicWar。Thisdidnotfailtocausegreatconfusion。In663LiviusDrusus，Tribuneofthepeople，increasedthenominalvalueofamount，andthisgaveoccasiontointroduceconfusionintoexchange。InA。U。C。712AntonyinhisTriumvirateincreasedthenominalofsilverby5percent，mixingironwiththesilver，tomeettheneedsoftheTriumvirate。ManyEmperorssubsequentlydebasedorincreasedcoinage。TheKingsofFranceatdifferenttimeshavedonelikewise。Thisiswhythelivretournois，whichwasapoundweightofsilverhassunktosolittlevalue。TheseproceedingshaveneverfailedtocausedisorderinStates。Itmatterslittleornothingwhatisthenominalvalueofcoinsprovideditbepermanent。ThepistoleofSpainisworth9livresorflorinsinHolland，about18livresinFrance，37livres10solsatVenice，50livresatParma。Inthesameproportionvaluesareexchangedbetweenthesedifferentcountries。Thepriceofeverythingincreasesgraduallywhenthenominalvalneofcoinsincreases，andtheactualquantityinweightandfinenessofthecoins，takingintoaccounttherapidityofcirculation，isthebaseandregulatorofvalues。A
Stateneithergainsnorlosesbytheraisingorloweringofthesecoinssolongasitkeepsthesamequantityofthem，thoughindividualsmaygainorlosebythevariationaccordingtotheirengagements。Allpeoplearefulloffalseprejudiceandfalseideasastothenominalvalueoftheircoinage。WehaveshownintheChapteronExchangesthattheinvariableruleofthemisthepriceandfinenessofthecurrentcoinsofdifferentcountries，marcformarcandounceforounce。IfaraisingorloweringofthenominalvaluechangesthisruleforatimeinFranceitisonlyduringacrisisanddifficultyintrade。Areturnisalwaysmadelittlebylittletointrinsicvalue，towhichpricesarenecessarilybroughtbothinthemarketandintheforeignexchanges。
ChapterVI
OfBanksandtheirCreditIfahundredeconomicalgentlemenorproprietorsofland，whoputbyeveryyearmoneyfromtheirsavingstobuylandonoccasion，depositeachone10，000ouncesofsilverwithagoldsmithorbankerinLondon，toavoidthetroubleofkeepingthismoneyintheirhousesandthetheftswhichmightbemadeofit，theywilltakefromthemnotespayableondemand。Oftentheywillleavetheirmoneytherealongtime，andevenwhentheyhavemadesomepurchasetheywillgivenoticetothebankersometimeinadvancetohavetheirmoneyreadywhentheformalitiesandlegaldocumentsarecomplete。
Inthesecircumstancesthebankerwilloftenbeabletolend90，000ouncesofthe100，000heowesthroughouttheyearandwillonlyneedtokeepinhand10，000ouncestomeetallthewithdrawals。Hehastodowithwealthyandeconomicalpersons；asfastasonethousandouncesaredemandedofhiminonedirection，athousandarebroughttohimfromanother。Itisenoughasaruleforhimtokeepinhandthetenthpartofhisdeposits。
TherehavebeenexamplesandexperiencesofthisinLondon。
Insteadoftheindividualsinquestionkeepinginhandalltheyearroundthegreatestpartof100，000ouncesthecustomofdepositingitwithabankercauses90，000ouncesofthe100，000
tobeputintocirculation。Thisisprimarilytheideaonecanformoftheutilityofbanksofthissort。Thebankersorgoldsmithscontributetoacceleratethecirculationofmoney。
Theylenditoutatinterestattheirownriskandperil，andyettheyareoroughttobealwaysreadytocashtheirnoteswhendesiredondemand。
Ifanindividualhas1000ouncestopaytoanotherhewillgivehiminpaymentthebanker’snoteforthatamount。Thisotherwillperhapsnotgoanddemandthemoneyofthebanker。Hewillkeepthenoteandgiveitonoccasiontoathirdpersoninpayment，andthisnotemaypassthroughseveralhandsinlargepaymentswithoutanyonegoingforalongtimetodemandthemoneyfromthebanker。Itwillbeonlysomeonewhohasnotcompleteconfidenceorhasseveralsmallsumstopaywhowilldemandtheamountofit。Inthisfirstexamplethecashofabankerisonlythetenthpartofhistrade。
If100individualsorlandownersdepositwithabankertheirincomeeverysixmonthsasitisreceived，andthendemandtheirmoneybackasandwhentheyhaveneedtospendit，thebankerwillbeinapositiontolendmuchmoreofthemoneywhichheowesandreceivesatthebeginningofthehalfyears，forashorttermofsomemonths，thanhewillbetowardstheendoftheseperiods。Andhisexperienceoftheconductofhisclientswillteachhimthathecanhardlylendduringthewholeyearmorethanaboutonehalfofthesumswhichheowes。Bankersofthiskindwillberuinedincreditiftheyfailforoneinstanttopaytheirnotesontheirfirstpresentation，andwhentheyareshortofcashinhandtheywillgiveanythingtohavemoneyatonce，thatistosayamuchhigherinterestthantheyreceiveonthesumstheyhavelent。Hencetheymakeitarulebasedontheirexperiencetokeepalwaysinhandenoughtomeetdemands，andrathermorethanless。ManyBankersofthiskind（andtheyarethegreatestnumber）alwayskeepinhandhalftheamountdepositedwiththemandlendtheotherhalfatinterestandputitintocirculation。InthissecondexampletheBankercauseshisnotesof100，000ouncesorecustocirculatewith50，000ecus，Ifhehasagreatflowofdepositsandgreatcreditthisincreasesconfidenceinhisnotes，andmakespeoplelesseagertocashthem，butonlydelays，hispaymentsafewdaysorweekswhenthenotesfallintothehandsofpersonswhoarenotaccustomedtodealwithhim，andheoughtalwaystoguidehimselfbythosewhoareaccustomedtoentrusttheirmoneytohim。Ifhisnotescomeintothehandsofthoseofhisownbusinesstheywillhavenothingmorepressingthantowithdrawthemoneyfromhim。
IfthosewhodepositmoneywiththeBankerareUndertakersandMerchantswhopayinlargesumsdailyandsoonafterdrawthemoutitwilloftenhappenthatiftheBankerdivertmorethanonethirdofhiscashhewillfindhimselfindifficultytomeetthedemands。
ItiseasytounderstandbytheseexamplesthatthesumsofmoneywhichaGoldsmithoraBankercanlendatinterestordivertfromhiscasharenaturallyproportionabletothepracticeandconductofhisclients；thatwhilewehaveseenBankerswhoweresafewithacashreserveofone-tenth，otherscanhardlykeeplessthanonehalfortwo-thirds，thoughtheircreditbeashighasthatofthefirst。
SometrustoneBanker，someanother。ThemostfortunateistheBankerwhohasforclientsrichgentlemenwhoarealwayslookingoutforsafeemploymentfortheirmoneywithoutwishingtoinvestitatinterestwhiletheywait。
AgeneralnationalbankhasthisadvantageoverthebankofasingleGoldsmiththatthereisalwaysmoreconfidenceinit。Thelargestdepositsarewillinglybroughttoit，evenfromthemostremotequartersofthecity，anditleavesgenerallytosmallBankersonlythedepositofpettysumsintheirneighbourhood。
EventherevenuesoftheStatearepaidintoitincountrieswherethePrinceisnotabsolute。Andthis，farfrominjuringcreditandconfidenceinit，servesonlytoincreasethem。
Ifpaymentsinanationalbankaremadebytransfersorclearingstherewillbethisadvantage，thattheyarenotsubjecttoforgeries，butiftheBankgivesnotesfalsenotesmaybemadeandcausedisorder。TherewillbealsothisdisadvantagethatthosewhoareinthequartersofthecityatadistancefromtheBankwillratherpayandreceiveinmoneythangothither，especiallythoseinthecountry。Butifthebanknotesaredispersedtheycanbeusedfarandnear。InthenationalBanksofVeniceandAmsterdampaymentismadeonlyinbookcredit，butinthatofLondonitismadeincredit，innotes，andinmoneyatthechoiceoftheindividuals，anditistodaythestrongestBank。
ItwillthenbeunderstoodthatalltheadvantageofBanks，publicorprivateinacity，istoacceleratethecirculationofmoneyandtopreventsomuchofitfrombeinghoardedasitwouldnaturallybeforseveralintervals。
ChapterVII
FurtherexplanationsandenquiriesastotheutilityofaNationalBankItisoflittleimportancetoexaminewhytheBankofVeniceandthatofAmsterdamkeeptheirbooksinmoneysofaccountdifferentfromcurrentmoney，andwhythereisalwaysanagioonconvertingthesebookcreditsintocurrency。Itisnotapointofanyserviceforcirculation。TheBankofEnglandhasnotfolloweditinthis。Itsaccounts，itsnotesanditspaymentsaremadeandarekeptincurrentcoin，whichseemstomemoreuniformandmorenaturalandnolessuseful。
IhavenotbeenabletoobtainexactinformationofthequantityofsumsordinarilybroughttotheseBanks，northeamountoftheirnotesandaccounts，loans，andsumskeptasreserve。Someonewhoisbetterinformedonthesepointswillbebetterabletodiscussthem。As，however，IknowfairlywellthatthesesumsarenotsohugeascommonlysupposedIwillnotomittogiveanideaofthem。
IfthebillsandnotesoftheBankofEnglandwhichseemstomethemostconsiderable，amountweeklyonanaverageto4，000，000ouncesofsilverorabout1millionsterling，andiftheyarecontenttokeepregularlyinreserveaquarteror？50，000sterlingor1millionouncesofsilverincoin，theutilityofthisBanktocirculationcorrespondstoanincreaseofthemoneyoftheStateby3millionouncesor？50，000sterlingwhichiswithoutdoubtaverylargesumandofverygreatutilityforthecirculationwhenithasneedtobespeededup：forIhaveremarkedelsewherethattherearecaseswhereitisbetterforthewelfareoftheStatetoretardthecirculationthantoaccelerateit。IhaveheardthatthenotesandbillsoftheBankofEnglandhaveriseninsomecasesto2millionssterling，butitseemstomethiscanonlyhavebeenbyextraordinaryaccident。
AndIthinktheutilityofthisBankcorrespondsingeneralonlytoaboutonetenthpartofallthemoneyincirculationinEngland。
Iftheexplanationsgiventomeinroundfiguresin1719onthereceiptsoftheBankofVenicearecorrectitmaybesaidofnationalbanksgenerallythattheirutilitynevercorrespondstothetenthpartofthecurrentmoneycirculatinginaState。ThisisapproximatelywhatIascertainedthere。
TherevenuesoftheStateofVenicemayamountannuallyto4
millionouncesofsilver，whichmustbepaidinBankmoney，andtheCollectorssetupforthatpurposewhoreceiveatBergamoandinthemostdistantplacestaxesinmoney，areobligedtochangethemintobankmoneywhentheymakepaymentofthemtotheRepublic。
AllpaymentsatVenicefornegociations，purchasesandsalesaboveacertainmodestsummustbylawbemadeinBankmoney。AlltheretailerswhohavecollectedcurrentmoneyintheirdealingsarecompelledtobuyBankmoneywithittomaketheirpaymentsforlargeamounts。AndthosewhoneedfortheirexpensesorforthedetailofsmallcirculationtogetbackcurrentmoneyhavetoselltheirBankmoneytoobtainit。
ItisfoundthatthesellersandbuyersoftheBankmoneyareregularlyequalwhenthetotalofallthecreditsorinscriptionsonthebooksoftheBankdonotexceedthevalueof800，000
ouncesofsilverorthereabout。
Timeandexperience（accordingtomyinformant）havegiventhisknowledgetotheVenetians。WhentheBankwasfirstsetupindividualsbroughttheirmoneytotheBanktohavecreditattheBankofthesamevalue。ThismoneydepositedattheBankwaslaterspentfortheneedsoftheRepublicandyettheBankmoneypreserveditsoriginalvaluebecausetherewereasmanypeoplewhohadneedtobuyitasthosewhohadneedtosellit。FinallytheStatebeingpressedformoneygavetotheWarContractorscreditsinBankmoneyinsteadofsilveranddoubledtheamountofitscredits。
ThenthenumberofsellersofBankmoneybeingmuchgreaterthanthebuyersBankmoneybegantobeatadiscountagainstsilverandfell20percentbelow。BythisdiscredittherevenueoftheRepublicfelloffonefifthandtheonlyremedyfoundforthisdisorderwastopledgepartoftheStaterevenuetoborrowBankmoneyatinterest。BytheseborrowingsofBankmoneyhalfofthemwerecancelledandthenthesellersandbuyersbeingaboutequaltheBankregaineditsoriginalcreditandthetotalofBankmoneywasbroughtbackto800，000ouncesofsilver。
ItisthusthatithasbeenascertainedthattheutilityoftheBankofVeniceasregardscirculationcorrespondstoabout800，000ouncesofsilver：andifitissupposedthatallthecurrentmoneyintheStatesofthatRepublicamountto8millionouncesofsilvertheutilityoftheBankcorrespondstoonetenthofthatsilver。
AnationalBankinthecapitalofagreatKingdomorStatemust，itseems，contributelesstotheutilityofcirculationbecauseofthedistanceofitsprovinces，thaninasmallState。
AndwhenmoneycirculatesthereingreaterabundancethanamongitsneighboursanationalBankdoesmoreharmthangood。Anabundanceoffictitiousandimaginarymoneycausesthesamedisadvantagesasanincreaseofrealmoneyincirculation，byraisingthepriceoflandandlabour，orbymakingworksandmanufacturesmoreexpensiveattheriskofsubsequentloss。Butthisfurtiveabundancevanishesatthefirstgustofdiscreetandprecipitatesdisorder。
TowardsthemiddleofthereignofLouisXIVtherewasmoremoneyincirculationinFrancethaninneighbouringcountries，andtheKing’srevenuewascollectedtherewithoutthehelpofaBank，aseasilyandconvenientlyasitiscollectedtodayinEnglandwiththehelpoftheBankofEngland。
IftheclearingsatLyonsinoneofitsfourfairsamountto80millionsoflivres，iftheyarebegunandfinishedwithasinglemillionofreadymoney，theyaredoubtlessofgreatconvenienceinsavingthetroubleofaninfinityoftransportsofsilverfromonehousetoanother。Butwiththatexceptionitseemsthatwiththissamemillionofcashwhichbeganandendedtheseclearingsitwouldbequitefeasibletoconductinthreemonthsallthepaymentsof80millions。
TheParisbankershaveoftenobservedthatthesamebagofmoneyhascomebacktothem4or5timesinthesamedaywhentheyhadagooddealtopayoutandreceive。
IthinkpubicbanksofverygreatutilityinsmallStatesandthosewheresilverisratherscarce，butoflittleserviceforthesolidadvantageofagreatState。
TheEmperorTiberius，aPrincestrictandeconomical，hadsavedupintheImperialTreasury2700millionsofsesterces，equalto25millionssterlingor100millionouncesofsilver，anenormoussumincoinforthosetimesandevenfortoday。ItistruethatintyingupsomuchmoneyheembarrassedthecirculationandthatsilverbecamescarceratRomethanithadbeen。
Tiberius，whoattributedthisscarcitytothemonopolyofContractorsandFinancierswhofarmedtheImperialrevenues，orderedbyanedictthattheyshouldbuylanduptoatleasttwothirdsoftheircapital。ThisEdict，insteadofanimatingthecirculationthrewitcompletelyintodisorder。AlltheFinanciershoardedandcalledintheircapitalunderthepretextofputtingthemselvesintoapositiontoobeytheEdictbybuyingland，whichinsteadofrisinginvaluesunktoamuchlowerpriceowingtothescarcity，ofsilverincirculation。Tiberiusremediedthisscarcitybylendingtoindividualsongoodsecurityonly300
millionsesterces，aninthpartofthemoneywhichhehadinhisTreasury。
IftheninthpartoftheTreasurysufficedatRometore-establishthecirculationitwouldseemthattheestablishmentofageneralBankinagreatKingdomwhereitsutilitywouldnevercorrespondtothetenthpartofthemoneyincirculationwhenitisnothoarded，wouldbeofnorealandpermanentadvantage，andthatconsideredinitsintrinsicvalueitcanonlyberegardedasanexpedientforgainingtime。
Butarealincreaseinthequantityofcirculatingmoneyisofadifferentnature。WehavealreadyspokenofitandtheTreasureofTiberiusgivesusagainoccasiontosayawordofithere，Thistreasureof2700millionsofsesterces，leftatthedeathofTiberius，wassquanderedbytheEmperorCaligulahissuccessorinlessthanayear。MoneywasneverseensoabundantatRome，Whatwastheresult？ThismassofmoneyplungedtheRomansintoluxuryandintoallsortsofcrimestopayforit。
Morethan60，000poundssterlinglefttheEmpireeveryyearforthemerchandiseoftheIndies，andinlessthan30yearstheEmpiregrewpoorandsilverbecameveryscarcetherewithoutanydismembermentorlossofaProvince。
ThoughIconsiderageneralBankisinrealityofverylittlesolidserviceinagreatStateIallowthattherearecircumstancesinwhichaBankmayhaveeffectswhichseemastonishing。
InacitywheretherearepublicdebtsforconsiderableamountsthefacilityofaBankenablesonetobuyandsellcapitalstockinamomentforenormoussumswithoutcausinganydisturbanceinthecirculation。IfatLondonapersonsellshisSouthSeastocktobuystockintheBankorintheEastIndiaCompany，orhopingthatinashorttimehewillbeabletobuyatalowerpricestockinthesameSouthSeaCompany，healwaystakesBanknotes，andgenerallymoneyisnotaskedforinrespectofthesenotesbutonlyfortheinterestonthem。Asonehardlyspendsone’scapitalthereisnoneedtochangeitintocoin，butoneisalwaysforcedtoasktheBankformoneyforsubsistencesincecashisneededforsmalldealings。
IfaLandownerwhohas1000ouncesofsilverpays200ofthemfortheinterestofpublicstockandspends800ouncesofthemhimself，thethousandounceswillalwaysrequirecoinage。Thisproprietorwillspend800andtheOwnersofthefundswillspend200ofthem。ButwhentheseProprietorsareinthehabitofspeculation，sellingandbuyingpublicstock，noreadysilverisneededfortheseoperations，banknotessuffice。Ifitwerenecessarytodrawhardcashoutofcirculationtoserveinthesepurchasesandsalesitwouldamounttoagreatsumandwouldoftenimpedethecirculation，orratheritwouldhappeninthatcasethatthestockscouldnotbesoldandboughtsooften。
ItisdoubtlesstheoriginofthesecapitalsormoneydepositedintheBankanddrawnoutonlyonrareoccasions，suchaswhenanownerofcapitalengagesinsometransactionorneedscashforsmallpurchases，whichexplainswhytheBankkeepsinreserveonlythefourthorsixthpartofthesilveragainstwhichitissuesnotes。IftheBankhadnotthefundsofmanyofthesecapitalsitwonldintheordinarycourseofcirculationfinditselfwouldintheordinarycourseofcirculationfinditselfcompelledlikeprivatebankstokeephalfitsdepositsinhandtobesolvent。ItistruethattheBankbooksanditsdealingsdonotdistinguishthosecapitalswhichpassthroughseveralhandsinthesalesandpurchasesmadeinChangeAlley。ThesenotesareoftenrenewedattheBankandchangedagainstothersinpurchases。Buttheexperienceofpurchasesandsalesofstockshowclearlythatthetotalofthemisconsiderable，andwithoutthesepurchasesandsalesthesumsdepositedattheBankwouldbecertainlysmaller。
ThismeansthatwhenaStateisnotindebtandhasnoneedofpurchasesandsalesofstockthehelpofaBankwillbelessnecessaryandlessimportant。
In1720thecapitalofpublicstockandofbubbleswhichweresnaresandenterprisesofprivatecompaniesatLondon，rosetothevalueof800millionssterling，yetthepurchasesandsalesofsuchpestilentialstockwerecarriedonwithoutdifficultythroughthequantityofnotesofallkindswhichwereissued，whilethesamepapermoneywasacceptedinpaymentofinterest。
Butassoonastheideaofgreatfortunesinducedmanyindividualstoincreasetheirexpenses，tobuycarriages，foreignlinenandsilk，cashwasneededforallthat，Imeanfortheexpenditureoftheinterest，andthisbrokeupallthesystems，ThisexampleshowsthatthepaperandcreditofpublicandprivateBanksmaycausesurprisingresultsineverythingwhichdoesnotconcernordinaryexpenditurefordrinkandfood，clothing，andotherfamilyrequirements，butthatintheregularcourseofthecirculationthehelpofBanksandcreditofthiskindismuchsmallerandlesssolidthanisgenerallysupposed。
Silveraloneisthetruesinewsofcirculation。
ChapterVIII
OftheRefinementsofCreditofGeneralBanksThenationalBankofLondoniscomposedofalargenumberofshareholderswhomakechoiceofDirectorstogovernitsoperations。TheirprimitiveadvantageconsistedinmakingayearlydistributionoftheprofitsmadebyinterestonthemoneylentoutoftheBankdeposits。Laterthepublicdebtwasincorporatedwithit，onwhichtheStatepaysanannualinterest。
InspiteofsuchasolidfoundationwhentheBankhadmadelargeadvancestotheStateandtheholdersofnoteswereapprehensivethattheBankwasindifficulties，arunontheBankhasbeenseenandholdersofnoteswentincrowdstotheBanktodrawoutmoney。ThesamethinghappenedonthecollapseoftheSouthSeaCompanyin1720。
TherefinementsintroducedtosupporttheBankandmoderateitsdiscreditwerefirsttosetupanumberofclerkstocountoutthemoneytothosebringingnotes，topayoutlargeamountsinsixpencesandshillingstogaintime，topaysomeparttoindividualholderswhohadbeenwaitingwholedaystotaketheirturn；butthemostconsiderablesumswerepaidtofriendswhotookthemawayandbroughtthembacksecretlytotheBanktorepeatthesamemanoeuvrethenextday。InthiswaytheBanksaveditsappearanceandgainedtimeuntilthepanicshouldabate。ButwhenthatdidnotsufficetheBankopenedasubscriptionengagingtrustyandsolventpeopletojoinasguarantorsoflargeamountstomaintainthecreditandcirculationoftheBanknotes。
ItwasbythislastrefinementthatthecreditoftheBankwasmaintainedin1720whentheSouthSeaCompanycollapsed。Assoonasitwaspubliclyknownthatthesubscriptionlistwasfilledbywealthyandpowerfulpeople，therunontheBankceasedanddepositswerebroughtinasusual。
IfaMinisterofStateinEngland，seekingtolowertherateofinterestorforotherreasons，forcesupthepriceofpublicstockinLondonandifhehasenoughcreditwiththeDirectorsoftheBank（undertheobligationofindemnifyingthemincaseofloss）togetthemtoissueaquantityofbanknoteswithoutbacking，beggingthemtousethesenotesthemselvestobuyseveralblocksandcapitalsofthepublicstock，thisstockwillnotfailtoriseinpricethroughtheseoperations，Andthosewhohavesoldstock，seeingthehighpricecontinue，willperhapsdecide（soasnottoleavetheirbanknotesidleandthinkingfromtherumoursspreadaboutthattherateofinterestwillfallandthestockgoupfurtherinprice）tobuyitbackatahigherpricethantheysolditfor，IfseveralpeopleseeingtheagentsoftheBanksbuythisstockstepinanddolikewisethinkingtoprofitlikethem，thepublicfundswillincreaseinpricetothepointwhichtheMinisterwishes。AnditmayhappenthattheBankwillcleverlyresellatahigherpriceallthestockithaspurchasedattheMinister’srequest，andwillnotonlymakealargeprofitonitbutwillretireandcancelalltheextraordinarybanknoteswhichithadissued。
IftheBankaloneraisesthepriceofpublicstockbybuyingit，itwillbysomuchdepressitwhenitresellstocancelitsexcessissueofnotes。ButitalwayshappensthatmanypeoplewishingtofollowtheAgentsoftheBankintheiroperationshelptokeepuptheprice。Someofthemgetcaughtforwantofunderstandingtheseoperations，inwhichthereenterinfiniterefinementsorrathertrickerywhichlieoutsidemysubject。
ItisthenundoubtedthataBankwiththecomplicityofaMinisterisabletoraiseandsupportthepriceofpublicstockandtolowertherateofinterestintheStateatthepleasureofthisMinisterwhenthestepsaretakendiscreetly，andthuspayofftheStatedebt。ButtheserefinementswhichopenthedoortomakinglargefortunesarerarelycarriedoutforthesoleadvantageoftheState，andthosewhotakepartinthemaregenerallycorrupted。Theexcessbanknotes，madeandissuedontheseoccasions，donotupsetthecirculation，becausebeingusedforthebuyingandsellingofstocktheydonotserveforhouseholdexpensesandarenotchangedintosilver。ButifsomepanicorunforeseencrisisdrovetheholderstodemandsilverfromtheBankthebombwouldburstanditwouldbeseenthatthesearedangerousoperations。