the other three cannot be reached by it at all. Perhaps I ought rather to have faid, that they cannot be directed by it, but they may be greatly counteracted; as people have naturally a ftrong difpofition to refift force, and to escape from reftraint. Accordingly, we found in this country, and every other fociety, whoever tried fuch measures, found, that they produced an effect directly contrary to what was expected from them. Inftead of producing moderation and plenty, they uniformly produced dearnefs and fcarcity. It is worth while to obferve, that fome of our legislatures faw fo far into these matters, as to perceive, that they could not regulate the price of commodities, without regulating the price of the induftry, that produced them. Therefore, they regulated the price of day-labourers. This, however, though but one fpecies of indaftry, was found to be wholly out of their power. There were fome inftances mentioned at the time, when thefe meafures were in vogue, which fuperficial reafoners supposed to be examples of regulating laws, attended with good effects. Thefe were the regulation of the prices of chairs, hackney-coaches, and ticket porters, in cities, public ferries, and fome others. But this was quite miftaking Thefe in the nature of the thing. stances have not the leaft connexion with laws regulating prices in voluntary commerce. In all thefe cafes, the perfons who are employed, folicit the privilege, obtain a licence, and come under voluntary engagements, to ask no higher prices; fo that there is as complete a free contrac, as in buying and felling, in open shops. I am fo fully convinced of the truth and juftice of the above principles, that I think, were it proper at this time, I could fhew, that even in the moft enlightened nations of Europe, there are ftill fome laws fubfifting, which work in neral, are the laws against foreftalling confidered, that every hand, through I have gone into this detail in or- fect, in opening their eyes, to obferve, that no paper whatever is a tender in any nation in Europe. E. ven the notes of the bank of England, which are as good as gold, and thofe of the bank of Holland, which are confiderably better*, are not armed with any fuch fanction, and are not a legal tender, in the proper fenfe of that word. That is to fay, though I fuppose both of them, or any other paper, circulating in full credit, may be a tender in equity, fo far as that the perfon offering them without fufpicion of their being refused, could not be condemned in any penalty or forfeiture; yet, if the perfon who was to receive the money, fhould fay, I am going abroad, I want gold or filver-it would lie upon the debtor, and not the creditor, to go and get them exchanged. We may, perhaps, even fay more, viz. that the coinage of gold and filver, in any country, is not fo much, if at all, to oblige perfons to receive it at a certain value, as to afcertain them that it is of the value ftampt upon it. Without this, ignorant perfons would be continually at a lofs to know the fineness and the weight ΝΟΤΕ. Perhaps it may be proper to inform fome readers, what this expreffion refers to. It refers to the agio of the bank of Holland. A bill of that bank generally goes for a little more in payment, with any dealer, than the fum it fpecifies; and this advance of difference is called the agio of the bank, and rifes or falls like the rate of exchange. This, probably, arifes from its perfect fecurity, and the very great advantage in point of eafe and expedition, in transferring, reckoning, and concealing of paper above gold and filver. It gives occafion to the vul. gar faying, in that country-that money goes into the bank, but never comes out. of pieces offered to them. This will appear, from the two following remarks. 1. If, by any accident in the coinage, or fraud in the officers of the mint, fome of the pieces had not the full quantity, or were not of fufficient fineness, though the ftamp were ever fo genuine, if I could difcover the defe, I should be justified in refusing them. 2. There is fometimes, a fluctuation in the comparative value of gold and filver, and in these cafes, though, no doubt, a debtor, till the error that has crept in, be rectified by authority, has a right to pay in any lawful money; yet, if I were felling goods, and gold had fallen in its value, I might fafely fay to the customer, in what coin are you to pay me? I will give you a yard of this filk, for twentyone fterling filver fhillings; but if you give me a guinea, I must have another fhilling, before I will part with it. The whole of this ferves to fhew, that nothing fhort of real money, which is of standard value, ought to be enforced by law, in a well-regulated fociety. 4. The principles above laid down, will enable us to perceive clearly, what is the nature of paper circulating as a medium of commerce; what is its real and proper ufe; and what are its dangers and defects. As to its nature, it is a fign, but not a standard. It is properly, an obligation; or, to ufe a modern commercial phrafe, it is a promiffory note. It is not money, as has been fhewn above; but it is a promife, of fome perfon, or body of men, to pay money, either on demand, or at a particular time, or fome general undefined future time. Obligations, of this nature, are of more forts than one. Sometimes they are given, byparticular perfons, or trading companies, who are confidered as perfons; and, frequently, in America, they have been given by the legislature of the ftate. In the general definition, I are have included all kinds of negociable paper; but it will not be neceffary to infit on more than two of them, viz. the notes of banking companies, and ftate emiffions. Bills of exchange are not fuppofed to pass through mamy hands, but to proceed, as fpeedily as may be, to the place of their pay-` ment. Government fecurities only bought and fold, like other property; and fo, any bonds, or other private obligations, may be transferred as often as people are willing to receive them; but the notes of banking-companies, and the flate-emiffions of this country, are intended to be, properly speaking, a circulating medium. They are of various regular denominations, and intended to anfwer all the purpofes of money, in the smaller tranfactions of fociety, as well as the larger, and even to go to market for purchafing the neceffaries of life. As to value, fuch obligations muft plainly depend upon the credit of the fubfcriber or obligor, and the opinion or expectation of the receiver. Thefe are mutually neceffary to their ufe in commerce. Let the refources er wealth of the fubfcriber be what they may, it is the public opinion that muft ultimately give them currency. This opinion, however, may be, in fome inftances, better, and, in fome, worse founded. That paper which may with moft certainty and expedition be converted into gold and filver, feems evidently to have the advantage on this account. Therefore the notes of banking-companies, while they maintain their credit, and continue to pay on demand, appear to be the best calculated for general ufe. They feem alfo to have another advantage, that private perfons and companies are upon a footing with the holder of the bills. He can arreft them; whereas he cannot call the legislature to account, but muft wholly depend upon their fidelity as well as refources. Yet it must be owned, there have not been wanting inftances formerly in this country, in which paper-cmiffions by the ftates, have obtained full confidence, and net with no impediment in circulation. Let us now confider, what is the proper use of the paper-currency, or whether it be of any real ule at all. Many perfons in Europe have declared against it altogether, as pernicious. I will endeavour to ftate this matter, with all the clearness I am capable of, and to give the reasons for what I fhall advance. We have feen, above, that nothing can be more abfurd than to fay we now want a circulating medium, and that paper is neceffary for that purpose. A circulating medium we have already, not in too fmall, but in too great a quantity; fo that any perfon who underftands the fubject, may perceive that gold and filver, especially the laft, is lofing at least one of the qualities neceffary for that purpose, and becoming too bulky and heavy for eafy and convenient tranfportation. Brafs, as has been fhewn above, was once as juft and proper a medium of commerce, as gold and filver are now. It has all the qualities neceflary for that purpofe ftill, except rarity; fo that, if it were not too plentiful and too cheap, it would be money to this day. It is probable that this circumstance of the abundance and weight of the precious metals, is what gives to many, fuch an inclination for papermoney. This will appear strange to fome, yet, I believe, it is, at bottom, juft. The cry with many, is, we muft have paper for a circulating medium, as there is fuch a fcarcity of gold and filver. Is this juft.? No. They miftake their own poverty or the nation's poverty, for a scarcity of gold and filver; whereas, in fact, gold and filver, ufed as a circulating medium, are fo cheap, and the quantity of a moderate fum is fuch an encumbrance, that we want paper, which can be much more easily carried, and much more effectually concealed. So that, contrary to the vulgar idea, we are obliged to have recourfe to paper, in feveral cafes, not for want of gold and filver, but their too great abundance. This will appear to be a very uncouth idea to many perfons. What, they will fay, too great abundance of gold and filver! when I go about from day to day, and cannot collect what is due to me; when my creditors are calling upon me, and I cannot fatisfy them. There is a fcarcity of money every where. What fhall be faid to fatisfy thefe perfons? I must tell them plainly, it is their poverty, or the nation's poverty, and not a want of gold and filver; and if there were an hundred times as much gold and filver in circulation as there is, their poverty and difficulties would be just the fame. If thefe perfons read the fcriptures, they may there learn, that in Solomon's time the filver was as plentiful as ftones in Jerufalem; probably, they will think, that all the people in Jerufalem, at that time, must have lived like princes, but they must be told, that it was added, as a neceffary confequence, that it was nothing accounted of, in the days of Solomon. If paper, then, is not needed, as a circulating medium, what benefit arifes from it? I answer, the ufes of paper, fubftituted for money, may be fummed up, under the two following heads. 1. It is useful for facilitating commerce. 2. It is ufe ful for anticipating property, or extending credit. First, it is ufeful for facilitating commerce. Nothing can be more advantageous, for that purpose, than bills of exchange, which, without the actual transportation of money or goods, can transfer property, even to the moft diftant places, with the most perfect facility. There have been many perfons, who have doubted, whether any other fort of paper-currency is not, upon the whole, hurtful; but the benefit of this is beyond all queftion. We fhall afterwards compare the advantages and difadvantages of papermoney; but, at prefent, let us leave out the confideration of the evil that it does, and it is manifeft, that there is fo great a facility and safety in the tranfportation of paper, above that of gold and filver, that it must greatly expedite all mercantile transactions, internal and external. Suppofe one hundred thousand pounds were to be tranfported, but three hundred miles-if it were to be carried in filver, what an immenfe load would it be? But, befides the weight, as it could not be concealed, there would be a very great risk of inviting robbers to share in it. Let it be carefully observed, that this good effect of paper, is not from the additional quantity, thrown into circulation; but from its poffeffing fome advantages fuperior to gold and filver, provided, that the credit of it be fupported. Nor muft it be forgotten, that it is in great and extenfive negociations only, that this advantage is poffeffed by paper; for, in fmaller bargains, and that intercourfe between man and man, that is carried on every hour, it poffeffes no advantage at all; on the contrary, it is liable to wear and wafte, and therefore the fmaller coins are, in all refpects, to be preferred. 2. Another ufe of paper, in commerce, is, to extend credit. Though in very large tranfactions, the advantage of paper may be great, as it facilitates commerce; yet, when we confider paper, as generally circulating and doing the office of gold and filver, it is by the extenfion of credit only, or chiefly, that it can be of any advantage. It is unneceffary for me, and, perhaps, not in my power, to mention all the ways in which credit may be encreased or facilitated, by paper. Some will, probably, be mentioned afterwards; at prefent, my business is to fhew, that giving credit is one of the advantages, and, indeed, in my opision, it is the principal advantage, o be derived from paper-circulation, of any kind. There are many people, whofe induftry is damped or limited, by want of stock or credit, who, if they were properly affifted, in these refpects, might do figDal service to themselves, and the community of which they are members. It has been generally faid, and I believe with truth, that the inftitution of the banks in Scotland, has improved that country, in the courfe of ittle more than half a century, to a degree that is hardly credible. It is alfo probable, that the manufactares and commerce of England, have been greatly promoted by the eafy and regular methods of obtaining credit from the public and private banks. I am fenfible, that some very intelligent perfons, in Britain, have condemned the paper circulation, even there, and affirmed, that it does more harm than good. It is not neceffary, for me, to enter into the arguments on either fide of that queftion. All that I am concerned to prove, is, that if it does good upon the whole, or whatever good it does in any degree, arifes from the credit which it is the occafion of extending and this, I think, can hardly be denied.* NOTE. That I may ftate the matter with fairness and fullness, I will juft obferve, that the enemies of paper fay, the improvement was only coeval with the banks, but not caufed by them, in whole, nor in any great degree. The banks happened to be nearly coeval with the revolution, and the union of England and Scotland; both which important events are fuppofed to have been caufes of improvement to Scotland. However, Vol. II. No. I. Let us next confider the evil that is done by paper. This is what I would particularly requeft the reader to attend to, as it was what this difcourfe was chiefly intended to evince, and what the public feems but little aware of. The evil is this: all paper, introduced into circulation, and obtaining credit, as gold and filver, adds to the quantity of the medium, and thereby, as has been fhewn above, increases the price of industry, and its fruits. This confequence is unavoidable, and follows as certainly from good paper, as bad, or rather more certainly, for the medium is increafed only by that which obtains credit. At the fame time, this confequence is local, because the paper does nct pafs among other nations, and therefore, it works againit the intereft of the people who ufe it, and neceffarily draws off their gold NOTES. the experience of the last thirty or forty years appears to be confiderably in favour of banks, and dealers in money and bills, which I confider as effentially the fame. This will, perhaps, be mifapprehended, by fome readers. They will fay, a high price for our industry! This is juft what we want, and what all defire. But the price, I mean here, is not the price which you get for your industry, but that which you pay for it. A high price, by a great demand from foreign nations, is your profit; but the coft which you pay for fervants, tools, rent of land, &c. leffens that profit, and it is that which is increased, by increafing the circulating medium, and not the other. Make us much money as you pleafe, this will not make foreign nations call for any more of your grain, fish, lumber, tobacco, rice, &c. but it will just as certainly make them coft you more, before you can bring them to the market, as adding two to three will make five. H |