Chap. XIII : Continuation of the Same Subject; and of the Principles upon which Banks ought to borrow Abroad, and give c

In every question relative to this subject, we must return to principles. This is the only sure method of avoiding error. The more intelligent reader, therefore, must excuse short repetitions, and consider them as a sacrifice he is making to those of slower capacities, to whom they are useful.

The principle of banking upon mortgage, is to lend paper money, and to give credit to those who have property, and a desire to melt it down. This is calculated for the benefit of trade, and for an encouragement to industry. If such banks, therefore, borrow, it must be done consistently with the principles upon which their banking is founded. If the borrowing should tend to destroy those advantages which their lending had procured, then the operation is contrary to principles, and abusive. So much for recapitulation.

While trade flourishes and brings in a balance, banks never have occasion to borrow; it is then they lend and give credit. This, I believe, we may take for granted.

When the country where the bank is established begins to owe a balance to other nations, the bank, as we have seen in the last chapter, is obliged to pay it off in coin or in bills. We have there shewn, that in such cases it is inconsistent with their principles and interest, to withhold lending and giving credit, as far as is necessary for keeping up the fund of domestic circulation to that standard which alienation and ready-money demands require.

To refuse credit, and at the same time to borrow at home, must then, at first sight, appear to be doubly inconsistent. But in order to set this point in the clearest light I am capable, I shall reason upon a supposition analogous to the situation of the Scotch banks, and by this means avoid abstract reasoning as much as I can.

Let me then suppose that Scotland, during the last years of the war, ended in 1763, and ever since (I write in 1764), from the unavoidable distress of the times, was obliged, first, to import considerable quantities of grain in some bad years; secondly, to refund the English loans of money settled there in former times; thirdly, to furnish some of the inhabitants with funds, which they thought fit to place in England; fourthly, to pay the amount of additional taxes imposed during the war; while, at the same time, several of the ordinary resources were withdrawn; such as, first, a great part of the industrious inhabitants who went to supply the fleets and armies; secondly, the absence of the ordinary contingent of troops; and thirdly, the cutting off of several beneficial articles of commerce. Let me suppose, I say, that from the total of these losses incurred, and advantages suspended, Scotland has lost annually, for eight years past, two hundred thousand pounds. I am no competent judge of the exactness of this estimate, it is of no consequence to the argument; but I think I have carried it, as I wish to do, rather beyond the truth.

On the other hand, let me suppose that the sum of currency in paper, sufficient (with the little coin there was) to circulate the whole of the alienations in Scotland (that is to say, the whole domestic circulation, supposing no balance to be owing to England or other countries) to be one million sterling. I am persuaded I am here below the true estimate, but no matter.

Is it not evident, from this supposition, and from the principles we have been deducing, that unless the banks of Scotland had borrowed every year 200,000 l. sterling, and alienated annually in favour of England, a fund for paying the interest of two hundred thousand pounds capital; the million of Scots currency would have been diminished in proportion to the deficiency: and would not the consequence of this be, caeteris paribus, to bring the currency below the demand for it; and, consequently, to hurt trade, industry, and alienation?

Now supposing the banks, instead of borrowing in England a fund equal to this grand balance (as I have said they should do), to remain in consternation and inactivity, giving the whole of their attention to the providing of coin and bills to supply the demand of exchangers, whose business it is to send out this annual balance; what would the consequence be?

I answer, that if the banks, in such a case, do not follow the plan I have proposed, the consequence will be, that two hundred thousand pounds of their paper will be, the first year, taken out of the domestic circulation of Scotland; will be carried to the bank, and coin demanded for it. If the coin is found in the bank, it is well: it goes away, and leaves the paper circulation of Scotland at 800,000 l. This void must occasion applications to the bank for credits to supply it. Is it not then the interest of the bank to supply it? We have said in the former chapters that it is. But now let us suppose it to be objected, that if banks should issue notes at such a time, their cash having been exhausted, they would be obliged to stop altogether, upon a return of those notes issued upon additional credits.

To this I repeat again, because of the importance of the subject, that notes issued to support the demand of circulation never can return upon the bank, so as to form a demand for coin; and if they do return, it must be in order to extinguish the securities granted by those who have credit in banks (I except always that regular demand for coin, at all times necessary for circulating the paper for domestic uses); and if those notes return of themselves, without being called in, this phaenomenon would be a proof that circulation is diminishing of itself: but supposing such a case to happen, it is plain that such return can produce no call for coin; because when the notes return it is not for coin, but for acquitting an obligation or mortgage, as has been often repeated.

Notes are paid in, I say, because circulation has thrown them out. Now if circulation has thrown them out as superfluous, it never can have occasion for coin in their stead; because coin answers the same purpose.

But then it is urged that they do not return, because circulation has thrown them out, but because coin is wanted: be it so. Then we must say, that circulation is not diminished, as we at first supposed; but that the return of another year's balance, makes a new demand for coin necessary.

Now I ask, how the withholding of this 200,000 l. from circulation, after the first year's drain, can prevent the balance from returning? There are by the supposition still 800,000 l. of notes in the country; will not exchangers get hold of two hundred thousand out of this fund, as well as out of the million? For he who owes, must pay, that is, must circulate. It is the circulation of the industrious only, and of the rich; in short, it is buying, that is to say, voluntary circulation, which is stopped for want of currency: paying, that is, involuntary circulation, never can be stopped; debtors must find money, as long as there is any in the country, were they to give an acre for a shilling, or a house for half a crown. Now those who owe this foreign balance are debtors; consequently, they must draw 200,000 l. out of circulation, the second year as well as the first, whether the standard million be filled up or not. The withholding, therefore, the credits demanded upon the first diminution, has not the least effect in preventing the demand for coin the year following: it only distresses the country, raising exchange, and the interest of money, by rendering money scarce; and, what is the most absurd of all, it deprives the bank of 10,000 l. a year interest, at 5 per cent upon 200,000 l. which it may issue anew.

Suppose again, that a second year's demand for a balance of 200,000 l. comes upon the bank: if the coin is out, as we may suppose that after the first year's drain it will not be in great plenty, expedients must be fallen upon. In such a case, if the bank do not at once fairly borrow at London (without any obligation to repay the capital) a sum of 200,000 l. and pay for it a regular interest, according to the rate of money, as government does, half yearly, on the change of London, it will be involved in expedients which will create a monstrous circulation of coin in the bank, perhaps double of the sum required, and all these operations will end (as to the bank) in paying this sum out of the mass of its securities or stock. If the bank should borrow this 200,000 l. in London, in the manner we have said, the circulating fund of coin will be noise diminished; there will be no call extra-ordinary for coin, no rising of exchange; the bank will have this in its hands; and if it rise, it will be the bank, not the exchangers who will profit by it.

But let us suppose that instead of this, it should have recourse to temporary credits upon which the capital is constantly demandable, or to other expedients still less effectual for answering the call which is to come upon it for the second year's balance; what will be the consequence? To this I answer, that those merchants, or others who owe the balance, will apply to exchangers for bills, for which they must pay a high exchange: these bills will be bought from the exchangers with notes (taken out of circulation), and will reduce this to 600,000 l. the exchangers ill carry these to the bank and demand coin. If the bank should make use of an optional clause, to pay in six months, with interest at 5 per cent the exchangers ill obtain six months' credit at London, and in consequence of this, their bills will be honoured and paid. This credit, however, costs them money, which is added to the exchange: the bank, at the end of six months, must pay 200,000 l. sterling in coin, which in the interval it must provide from London. It must pay also six months, interest upon the paper formerly presented by the exchanger: add to the account, that bringing down the coin must cost the bank at least 12 shillings per hundred pounds, and as much more to the exchanger who receives it in order to send it back again; and after all these intricate operations which have cost so much trouble, ill blood, stagnation and diminution of circulation, expence in exchange to the debtors of the balance, stress of credit upon exchangers for procuring so large advances with commission, etc. expence to the bank in providing coin, expence to the exchangers in returning it: after all, I say, the operation ends in this; that 200,000 l. of notes, taken out of the circulation of Scotland returns to the bank, who must have provided at last, either coin, or credit at London for them. This return of 200,000 l. of notes does not diminish the mass of those obligations lodged in the bank, in virtue of which they are creditors upon the proprietors of Scotland: consequently the bank has constituted itself debtor to England for those funds which have been torn from it in the manner above described: consequently, had it, by a permanent loan, constituted itself voluntarily debtor to England from the beginning, it would have paid no more, nay less than it has been obliged to pay; circulation would not have lost 200,000 l. and the bank would have had the interest of 200,000 l. added to its former securities, which would compensate (pro tanto at least) the expence of borrowing this sum in England upon a permanent fund. Instead of which it compensates the interest taken out interest of a temporary loan, with the same sum of of the securities in its hand. If, therefore, from an ill-grounded fear of issuing as much paper as is demanded, it shall withhold it, there will result to itself a loss equal to the interest of what it refuses to lend; that is to say, there will be a lucrum cessans to the bank of the interest of this 200,000 l. at 5 per cent or 10,000 l. a year; which other banking companies will fill up, and thereby extend their circulation.

If, besides refusing credits, it should call in any part of those credits already given, it will still more diminish circulation: but then by this operation it will diminish the mass of its securities, and so diminish the sum of the interest annually paid to itself. If it go farther and borrow money at home, such loans will be made in its own paper, which will diminish farther the mass of circulation; and if it go on recalling its credits and mortgages, it will soon draw every bit of its paper out of circulation, and remain creditor upon Scotland for the balance only it has paid to England on her account. Such are the consequences, when a bank which lends upon private security withholds credit, at a time when a national balance is due, and when applications are made to it for new credits, to fill up the void of circulation occasioned by the operations used for the payment of the balance: such also are the additional fatal consequences, when to this it adds so inconsistent an operation as that of borrowing its own notes, or recalling the credits it had formerly given.

By the first step, namely, by refusing credit, it appears passive only in allowing natural causes to destroy both the bank and the nation, as I think has been proved.

By the second, namely, by borrowing its own notes, it is active in destroying both itself and the country.

What benefit can ever a bank which lends upon private security reap by borrowing within the country of which it is the centre of circulation; nay, what benefit can it ever reap from withholding its notes from those who can give good security for them!

Every penny it borrows, or calls in, circumscribes its own profits, while it distresses the country. After considering all circumstances, I can discover but one motive which (through a false light) may engage a bank to this step, to wit, jealousy of other banks.

As this speculation is designed to illustrate the principles of circulation, from circumstances relative to the present state of the Scotch banks, let us call things by their names.

The banks of Edinburgh resemble, more than any other in Scotland, a national bank. Let me then suppose all that can be supposed, viz. that the abundance of their paper has given occasion to smaller banks to pick up from them every shilling of coin which these smaller banks have ever had; and that these have had the address also to throw the whole load of the balance upon those of Edinburgh: let this be supposed, more cannot, and let us allow farther, that this must ever continue to be the case. In these circumstances, what motive can the banks of Edinburgh have for withholding credit from those who are able to give security? What motive can they have for borrowing their own notes?

Indeed I can account for this plan of management in no other way than by supposing, that, disgusted at the long continuance of an unfavourable balance of trade against their country, and vexed to find the whole load of it thrown upon themselves, they have taken the resolution to abandon the trade, and are taking this method to recall their paper altogether.

Let me suppose the contrary, and I shall not be able to discover how it is possible that such a conduct can turn to their own advantage, throwing out all consideration for the public good, which for some time, no doubt, must be greatly hurt by it.

As long as any considerable quantity of their notes is in circulation, and while the principal exchangers reside at Edinburgh, they never can avoid the loss of paying the balance; consequently, by refusing to fill up the void occasioned by the return of their notes, they deliver the whole profit of replacing them to the other banks, their rivals.

Let me next estimate the loss they sustain by furnishing coin to the other banks for the payment of the balance; and then compare this with what they lose by not keeping circulation full.

I shall suppose the balance to cost them two hundred thousand pounds per annum; and I shall suppose that all the smaller banks put together have occasion for two hundred thousand pounds in their chests: Is not this computation far above what can possibly be supposed?

Will it be allowed that if the banks of Edinburgh willingly submit to pay the whole of the bills of exchange demanded on London, for this balance, they will have at least the preference in replacing this sum to circulation?

If they pay the balance of 200,000 l. a like sum of their notes must come in to them, without diminishing one shilling of the interest paid upon the securities lodged in their banks; consequently, the only loss incurred is the difference between the interest they receive, which is 5 per cent and what it would cost them to borrow a like sum in London, and to remit the interest of this sum twice a year.

Now the value of a 4 per cent is at present about 96; so in paying 40 s. half yearly on the change of London, the Edinburgh banks may have at London a capital of 96 l. Let me call it only 94 l. supposing their credit not to be quite so good as that of the funds. I think it as good to the full; and I am sure it is so. At this rate, the 200,000 l. will cost them an interest of 8510 l. instead of the 10,000 l. which they will receive for the like sum added to their former securities. Now let me suppose that they shall have recourse to exchangers to remit this interest, and that they shall pay for it 5 per cent (which is an absurd supposition, as they will have the exchange entirely in their own hands) and that they give all the bills for the 200,000 l. at par (also a ridiculous supposition); the 5 per cent on 8510 l. is 425 l. 10 s. which added to the interest, makes 8935 l. 10 s. so that after all, they will have upon the whole transaction 1064 l. 10 s. of profit.

Next, as to the loss incurred in furnishing 200,000 l. to the other banks: If this coin be demanded of them by those banks, the demanders must, for this purpose, draw 200,000 l. of Edinburgh notes out of the circulation of Scotland; which I have supposed may be replaced in some little time by the Edinburgh-banks; consequently, if this sum also be borrowed at London, there will result upon this operation, as well as upon the last, a profit of 1064 l. 10 s. But then indeed they must be at the expence of bringing down the coin borrowed, at 12 s. per 100 l. because those banks will insist upon having coin, and refuse bills on London. This will cost 1200 l. from which deduct the profit of 1064 l. 10 s. gained by the first operation, remains of loss upon this last transaction 135 l. 10 s. no great sum.(4*) Does it not follow from this reasoning, that the banks of Edinburgh will have the whole business of exchange in their own hands? What exchanger then will enter into competition with them? The domestic transactions with the merchants and manufacturers of Scotland will be their only business. Farther:

What prevents the banks of Edinburgh to have offices in every trading town in Scotland, where their notes may be regularly paid on presentation, and new credits given as circulation demands them?

The only objection I can find to this plan of banking, is the difficulty of finding credit at London to borrow such large sums.

This, I think, may also be removed, from the plain principles of credit. If the banks of Edinburgh enter into a fair coalition, as they ought to do, I think, in order to form really a national bank, totally independent of that of England; may they not open a subscription at London, and establish a regular fund of their own, as well as any other company, such as the India, or South Sea? By borrowing in the beginning at a small advance of interest above the funds, and paying as regularly as government does, will not all those who make a trade of buying and selling stock fill their loan, rather than invest it in any other carrying a less interest? And if the whole land securities, and stocks of those banks at Edinburgh be pledged for this loan, will it not stand on as good a bottom as any fund upon earth? And can it be doubted but parliament will encourage such a scheme, upon laying the affairs of Scotland and the banks properly before them?

By this means they will really become a national bank: because England seems at present to be to Scotland, what all the rest of the world is to England. Now, the bank of England has no such fund of credit on the continent, that I know; and were that country to fall into as great distress, by a heavy balance, as Scotland has, she would find as many difficulties in extricating herself by domestic borrowings, bank circulation, etc. as Scotland has found by the like domestic expedients. She would then be obliged, for her relief, to have recourse to a fund opened in Holland, Spain, or Portugal, like to what I propose for Scotland with respect to England.

I have heard it alleged, that the whole distress occasioned to the banks and circulation of Scotland, was occasioned by a false step taken by them, some years ago; at the time when the lowness of the English funds, and a prospect of a peace, occasioned great remittances from Scotland, and a withdrawing of the large capital of, perhaps, 500,000 l. owing in Scotland to English persons of property.

At that time, it is said, the banks imprudently launched out in giving extensive credits to the debtors of those capitals, and to those who wanted to remit the funds they had secured in the hands of people who could not pay them; that this threw a load of paper into circulation, which it could not vent, being far beyond the extent of it; and that, consequently, the paper came back upon the bank, produced a demand for coin, which soon exhausted, in a manner, all that was in Scotland; and that the country has never been able to recover itself since.

This representation is plausible, and has an air of being founded on principles: in order therefore to serve as a further illustration of the subject of circulation, I shall point out where the fallacy of it lies.

It is said the banks did wrong in giving those credits. I say, they did right; but they did wrong in not providing against the consequences.

Had they refused the credits, the English and other creditors would have fallen directly upon their debtors, and obliged them to pay, by a sale of their lands, at an under value; which, I think, would have been an infinite loss to Scotland. In this way the price would have been paid in bank paper, taken out of circulation; for we have said, that he who owes must pay, be the consequence what it will. This paper would have come upon the banks at any rate: and being a balance due to strangers, must have been paid by the banks. The banks therefore did right to supply the credits demanded; but then they might have foreseen that the whole load of paying those debts would fall upon them; which they being in no capacity to do, should have immediately pledged in England, the interest of the credits they had given out, after supplying the want of Scots circulation, and when the notes came in, they would have had at London the capital of that interest prepared for paying them off, and no inconvenience would have been found.

The only thing then the banks seem to have misjudged, was the granting those credits too hastily, and to people who perhaps would not have invested their funds in England, had it not been from their facility in giving credit.

Banks therefore should well examine the state of circulation, and of the grand balance, in difficult times, before they give credit. If circulation be full, they may, with justice, suspect that the credits are demanded with a view of expediency, to transport property out of the country, which otherwise may remain. But in favour of circulation, or in favour of what may be exacted by foreign creditors, banks never can misjudge it in giving credit; because, if they should refuse to do it, they in the first place incur a loss themselves; and in the second place, they diminish the fund of circulation, and thereby hurt the country. Now when, at such times, a credit is asked or given, that demand is a warning to banks to prepare; and by preparing they are ready, and nO loss is incurred.

Upon the whole, it is an unspeakable advantage to a nation to have her foreign debts paid by her bank, rather than to remain exposed to the demands of private foreign creditors; because, when a bank pays them, I suppose her to do it upon a loan in the funding way, where the capital is not demandable by the creditor; whereas when private citizens are debtors to strangers, the capitals are always demandable; and when a call comes suddenly and unexpectedly, the country is distressed. What would become of Great Britain, were all her debts to strangers demandable at any time? It is the individuals who owe, in effect, all that is due to foreigners; because they pay the interest: but they pay this interest to the public; and the public appears as the debtor to all strangers, who have no right to exact the capital, although the state may set itself free by making payment of it whenever it is convenient.

I have said above, that after all my reasonings, I could discover but one motive to induce a bank to withhold credit at a time when it was demanded for the use of domestic circulation, viz. jealousy of other banks. What my combinations could not then discover, my inquiries have since unfolded.

It is said, that the banks finding so great a propensity in the inhabitants of Scotland to consume foreign manufactures and produce, fell upon this expedient for calling in the old, and for refusing new credits, in order to cut off such branches of hurtful luxury and expence.

Could the execution of such a plan prove a remedy against the vice complained of, this circumstance alone would more clearly demonstrate the utility of banks upon mortgage, than all I have been able to say in favour of this establishment.

Let us therefore have recourse to our principles, in order to discover what influence a bank can have in this particular.

We have distinguished between necessary and voluntary circulation: the necessary has the payment of debts; the voluntary has buying for its object.

We have said that he who owes is either a bankrupt, or must pay, as long as there is a shilling in the country.

But he who buys, or inclines to buy, must have money, or he can buy nothing; for if he buys on credit, he then falls immediately into the former category, and must pay.

By withholding money for the uses of circulation, which banks may do for some time, buying may be stopped; paying never can.

Now if the mass of money in circulation be brought so low, as that the higher classes of the people, who consume foreign productions, cannot find money to buy with, what are we to suppose will be the case with manufacturers, and with the merchants who buy up their work? Could this operation of the bank affect the higher classes only, by curbing their anti-patriot expences, without affecting the lower classes, by curbing their industry, I should think it an admirable discovery. If it even could be made to affect those merchants and shopkeepers only, who deal in foreign commodities, so as to discourage them from carrying on that business, there would result from it a notable advantage.

But alas! wherein are they hurt? They trade in such commodities, not because they are bad citizens, but because they are freemen, and seek for profit wherever the laws permit.

Perhaps, they find more difficulty than other people in forcing coin from the bank, as matters stand: perhaps, they are loaded with opprobrious appellations for extorting such payments from the bank: perhaps, their credits with the bank are recalled. But must not those who buy from them, pay them? And must not the bank give coin, or bills, for the notes they receive, when presented for payment? Why, therefore, throw difficulties in the. way? All the world knows, that no human engine can prevent a merchant from laying all the expences of his trade upon the consumer. Correct the taste of the consumers, and you may stop the trade: no other restraint will be of any consequence. But in order to correct the taste of consumers, do not deprive them absolutely of money; because the money the extravagant landlord receives, comes from the industrious farmer, for the price of his grain, etc. Would it be a good scheme for preventing soldiers from drinking brandy, to cut off their subsistence-money? Give a drunkard but a penny a day, it will go for liquor; and those who are fond of foreign clothing, will take the price of it from their bellies, to put it on their backs.

If this scheme of the bank's withholding credit, prove, at present, any check to those dealers in English goods, it will be but for a very short time. They have been taken by surprize; and perhaps, thrown into inconveniences from an unexpected change of bank management; but as long as there is a demand for such commodities, there will be a supply of them; and when people owe, they must pay. No operation of a bank can prevent this.

I must, therefore, according to principles, disapprove of this public-spirited attempt in the banks of Edinburgh; because, if it should succeed, it will have the effect of ruining all the trade and industry of Scotland, in order to prevent the sale of English goods: and if it does not succeed, which is more than probable, from the assiduity of other banks in supplying credit, it will have the effect of ruining the banks of Edinburgh themselves.

This step, of calling in the bank credits, and opening a subscription for a loan, is represented by others in a light somewhat different.

By these it is alleged, that in the beginning of the year 1762, when the Edinburgh banks withdrew 1/4 of all their cash accompts, and opened a subscription for borrowing their own notes, at an interest of 4, and even 5 per cent the demand for money, to send to England, was not occasioned by the great balance owing by Scotland, but to the high premium money then bore at London; because says the author of a letter to J... F...... Esq; published at that time,

'This demand arises from a profit on carrying money to London, as a commodity, and not as a balance of trade.'

It is not easy to comprehend how there could be much profit in carrying money to London at 3 per cent loss by exchange, from Scotland, where it bore 5 per cent interest.

It is true, that at certain times, there were considerable profits made upon stock-jobbing; by which some won, and others were ruined. I agree, that the country was greatly hurt by the folly of those who played away their own property, and by the roguery of others, who borrowed that of their neighbours, with an intention of gaming at their risk. But is this a vice which any bank can correct, while it has a note in circulation?

Had it therefore been a sentiment of patriotism which moved the banks to such a plan of conduct, I say they thereby did more hurt to industry, by contracting circulation, than good to Scotland, by attempting a thing which was beyond their power to accomplish.

If they were moved to it by a principle of self-preservation, I say they lost their aim, by cutting off their own profits, which would have done much more than indemnify them for the loss of borrowing at London, at the time when money there was hardest to be got: for whatever exorbitant expence of exchange gamesters may incur, to procure ready money to play with, the rate of the stocks at that time never was so low, as to afford a profit upon money remitted at 3 per cent loss by exchange, while that money was bearing 5 per cent interest at home.

The lowest rate of stocks was in January 1762. Towards the end of that month 3 per cents fell to 63 1/4: this makes the value of money to be about 4 l. 12 s. per cent. In these funds, certainly, no body could invest, with profit, money sent from Scotland.

After the new subscription had been open for some time, scrip indeed, or 4 per cent fell in this month so low as 74 1/2, that is, money rose to 5.4 per cent whereas had scrip stood at the proportion of the 3 per cents it should have been worth about 84: but at the beginning of a war with Spain, when the minds of men were depressed, and filled with apprehensions, and when a new loan was perhaps expected at a higher interest than ever government had given, was it natural for people to be fond of investing in a 4 per cent stock, which was to fall to 3 per cent in a few years?

Besides, let us examine the profit to be made by investing even in this fund. 100 l. produced in Scotland 5 l. interest, this capital remitted to London at 3 per cent exchange, was reduced to 97 l. now if 74.5 l. produced 4 l. the produce of 97 l. would be about 5 l. 4 s. Would any man for the sake of 1/5 per cent advance of interest on money remitted, ever think of sending large sums to London to be invested in a falling stock?

I allow that, upon opening subscriptions, great profit was sometimes made by those who contracted with government, and who received the subscriptions at prime cost. But this profit depended entirely upon the subsequent rise of the subscription, when the original subscribers brought it first to market; as also from the small sums they had advanced: this operation was over before the end of January 1762. The smallness of the sum advanced, upon which the profit was made, and the ministerial interest which was necessary to obtain a share in those subscriptions, rendered it extremely difficult for people in Scotland to share in the profit by remitting large sums in the proper point of time.

Farther, might not the banks, in the short period during which such large profits were made, had they had the exchange in their hands, have raised it so high as to frustrate the attempts of our Scots gamesters? If it be said, that exchangers would have disappointed them, by giving it, lower. I answer in the negative: because with this set of men exchange will rise, of itself, in proportion to the value of money in the place to which people incline to remit it. And could money at any time bring in, at London, 20 per cent interest, exchange upon that place would rise universally in proportion.

The only motive, not already mentioned, for sending money to London at this time, under so great disadvantages, was the prospect of a great rise upon the stocks, in the event of a peace. Upon which I observe, that the value of that probability was included in the then price of stock; and had the probability of a peace, in January 1762, been great, stocks would have risen in proportion: he, therefore, who vested his money in stock, by remitting from Scotland at that time, upon an expectation peculiar to himself, I consider as a gamester, and as an ignorant gamester too; because he was giving odds upon an equal bett. This every man does, who, without any prospect of a profit peculiar to himself, pays a high exchange to bring money to a market, where he buys at the same price with those who pay no exchange at all.

From these considerations, I am led to differ from the ingenious author of the letter to J. F. Esq; who says, 'That in the present case' (the circumstances operating in January 1762,) 'the demand' (for money to remit to London) 'is unlimited, and no provision the banks can make can be of use; on the contrary, could they find a treasure, suppose of a million, it would only serve to increase it; because this demand arises on a profit on carrying money to London as a commodity, and not as the balance of trade.'