Feb. 1762. Of the abridging of the bank cafh-accounts. than mere levity, in his conduct. For our parts, we heartily with he had made no impreffion on the heart of the delicate Celia, which, we think, ought to have been kept facred to him who was alone A worthy to poflefs fuch an ineftimable =treafure. C. WE are not to confider this comedy as an exertion of the whole force of Mr Whitehead's genius. It is formed on a : plan of M. de Fontenelle's; and, like most of the French productions of this kind, is rather a converfation-piece than a comedy. The converfation is, how ever, natural, decent, and moral; and if the work does not abound with all that : variety of bufinefs, plot, fcenery, charafter, and humour, which are requifite to gratify the tale of an English audience, it is, nevertheles, not an uninterefting performance; and may certainly rank among thole which are diftguithed by the appellation of genteel comedy. M. It is fomewhat remarkable, that the come dy of the French, though they are the lighteft and gayeft people in the world, is of a graver and more folemn caft than that of the English. The levity of our comic pieces would not be endured on their ftage. Their comedies, in general, are certainly the most chafte and regular performances; but those of the English are undoubtedly more diverting; though lefs delicate, and, we are afraid, lefs moral: an imputation, however, from which the present production is entirely free. Confiderations relating to the order for abridging the bank cafb-accounts, continued. [41.] From this fhort view of the nature and importance of the banks of Scotland, it will appear, that nothing can influence the profperity of this country in a greater degree, than the proper management of thele fountains of money and credit: and as it is of the highest confequence, that every one should perceive how much may depend upon the conduct of thofe who are trufted with the direction of our banks, I will beg leave to figure fome cafes of improper management, and point out the confequences which fuch management, if it ever fhould exift, might produce, both as a warning against it, and as an argument to prove the importance of the truft which is repofed by the proprietors of bank-ftock, in the directors of the bank. If it could be fuppofed to be poffible, that men of narrow and contracted views fhould ever be admitted to the direction of the banks of Scotland, their conduct would have a direct tendency to check the progrefs of industry, or even to overwhelm the commerce of this nation in its infant ftate. Such men, in place of allowing every perfon who can find undoubted fecurity, the benefit of converting his ftock into money, by which alone the trade and manufactures of a country can be extensively carried on; fuch men, it may be fuppofed, would be afraid to lend even upon the beft fecurity: they would limit the extent to which they were to lend, not in proportion to their bank-ftock, but in proportion to their fears: and though the more they lend, on proper security, their stock must increase the fafter, and their danger become the lefs, yet would they be apt to tremble at that very increase, and, by looking at a great object, their heads would become giddy; without being able to conceive, that, to an extenfive mind, a great ob ject is equally harmless, and often more eafily conducted, than a fmall one. Such men could not be expected to perceive, that, by promoting the trade of a country, they would ftudy their own advantage the moft; not only because, in the midst of general wealth, and ge neral fuccefs, bankruptcies are fewer in number, and fooner recovered; but that, by fuch means, the circulation of papermoney must be greatly increased; for the more trade there is, the greater must be the number of tranfactions, and a greater quantity of circulating cash required in the course of these transactions. But fo. far would fuch men be from entering into these views, that, in place of increafing the circulating quantities of cafh, as they found the trade of a country to increase, they would rather keep to their original abfurd, limited maxims; or even, perhaps, attempt to decrease the circulation of their paper-money or notes. But the capital occafion in which fuch men would difcover the narrowness of their minds, and the fhortness of their views, would be upon the establishment of any rival bank. No fuch rival bank could indeed arife, while the managers of the established banks are supposed to have performed their duty; but if, on the o❤ ther hand, it is fuppofed that they have not furnished money to all who offered good fecurity; if they have not increased the circulation of their notes, according to the demands of trade; if they have not established a branch for cath-accounts in the the most remarkable trading towns, which, on account of their distance, could not otherwife have the benefit of that ufeful invention; if they have not followed these obvious methods of rendering their banks as useful as they were capable of becoming; they will, no doubt, be in hazard of feeing a rival bank contend with them for the favour and protection of the public. Such rival bank, it may be expected, will be undertaken by men of more enterprife, and more extenfive views. All who have been refused by the former banks, will apply to the new. Thole whofe trade has been cramped, and their induftry checked, by the limited views of the firft banks, will here find a ready and plentiful fupply; the effect of which will be inftantly perceived over the whole extent of a country; and, in proportion to the former weaknefs, folly, and partiality, of the first banks, will be the fuccefs of the new, and the effects it will produce. This fuccefs, in place of hurting the firft banks, might be of advantage even to them, and the increase of trade and tranfactions would still give circulation to a greater number of old notes than the first banks formerly ventured to iffue: and from the refpect which their long eftablishment might give to the firft banks, they would naturally be preferred, in a great measure, to the rival bank. That this propofition is true, may be proved by the experience of this very country: for it is well known, that the circulation of the Old Bank of Scotland was not hurt by the erection of the New Bank; but that, en the contrary, its circulation has, fince that time, increased greatly. Perhaps the erection of that bank may alfo tend to illuftrate some of the other particulars we have just now mentioned. But there is reafon to believe, that the idea of receiving advantage, in place of injury, from arival bank, would be beyond the reach of fuch men; and that they would immediately believe themselves ruined, unless they were to be fupported by enjoying a monopoly. They would act with the narrow-mindedness of an ignorant trader, who, notwithstanding the 1mited nature of his own tranfactions, never could be perfuaded that another might carry on the fame branch, without taking the bread from his mouth. Every method would therefore be pured by fuch men, not to increase their own circulation, but to distress and interrupt that of their rival; nay, if they had the power, they would not hesitate, with facrilegious hands, to annihilate that new and extensive support of the country: and yet, perhaps, they would never think of endeavouring, by their own circulation, to fupply thofe whofe trade and fuccess depended on the other. It appeared of importance to expose the mifchiefs which might arise to this country, thould the direction of our banks ever fall into improper hands; and also to point out the advantages which might, in fuch cafe, arife from a rival bank: but, in general, it would appear, that the multiplicity of banks is dangerous to a country, if the neceffity of rivalship, to check the defire of monopoly, and to remedy the weakness of a bad adminiftration, did not fometimes require it. If a fingle bank could be fuppofed at all times under the direction of men actuated by public and extenfive views, capable of exact attention, and free from those prejudices and partialities which are incident to human rature, it would be infinitely more defireable, that the whole circulation of Scotland fhould proceed from that fingle bank, whofe credit would stand upon a firmer and more extensive footing, and whofe power would be greater of supporting and extending trade. This, perhaps, is never to be expected. But the number of banks fhould only be increased fo far as is neceflary to fupply the defects and correct the mistakes of the principal banks: for if the number of banks is too much augmented, the danger that fome of them may fail, becomes very confiderable; and fuch a failure would always be dreadful in its confequences to any country. The perfons whofe views and habits of thought render them chiefly fitted for the direction of public banks, feem to be those who are accuftomed to extenfive trade. It is not very probable, however, that fiich men will ever be admitted to the direction of any of the established banks of a country, on account of thofe ideas which may be expected to prevail in the direction of an old established inftitution. They can only ferve their country, there fore, by erecting a rival bank. But, in doing this, it is their duty to guard againft the poffibility of a bankruptcy, the confequences of which might prove deftructive to thousands: the most effectual means of doing which feems to be, to en gage Feb.1762. Of the abridging of the bank cash-accounts. It is the duty of fuch a bank, thus firmly established, to prevent the pollibi hty of farther inftitutions of the fame kind, by fupplying plentifully the demands of the nation: and it is the duty of the merchants of a country to fupport and encourage fuch a bank, and to difcourage the establishment of all other inftitutions of the fame kind, until the direction of this new establishment falls in to the fame anskilful hands which limited the usefulness of the others. 91 gage in the copartnery as great a number of cafh he knows he can command: if this of landed gentlemen, as can be admitted is fuddenly diminished, it must neceffariwithout controlling and imbarralling the ly affect, in a fenfible manner, every management. tranfaction in trade; and, if carried to a height, might occafion a total bankrupt cy: if done gradually, it will still have bad effects; because it muft oblige every man to contract the extent of his dealings; and thereby not only diminishes the actual wealth of the nation, but puts a ftop to the increase of it by trade. The eminent author I have already mentioned, may be referred to as an authority upon this point: "We find," fays he [35,6.], "that in every kingdom into which money begins to flow in greater abundance than formerly, every thing takes a new face; labour and industry gain life, the merchant becomes more enterprising, the manufacturer more diligent and skilful, and even the farmer follows his plough with greater alacrity and attention. A nation whofe money decreases, is actually, at that time, much weaker, and more miferable, than another nation, who poffeffes no more money, but is on the increafing hand." It is worth obferving, that though perhaps in general no bank can be conducted with proper spirit, or rendered extenfively useful, unless it be under the direction of merchants; yet, at the fame time, the risk and hazard to which the fortunes of merchants are continually expoled, renders it improper that the credit of any bank hould depend folely upon them. A bank, by not extending its circulation in proportion to the demands of a country, may check the progrefs of trade and manufactures: but it cannot prove deftructive, except in one of two ways; either by becoming bankrupt; or, which is more frequent, by fuddenly diminithing the quantity of its circulation. The bankruptcy of a bank under proper regulations is not very much to be apprehended; it can only happen when the expence of management, and annual lofs by bad debts, exceeds the annual profit, and does not leave fufficient to pay the lowest usual intereft on the original stock. The failure of a bank does not depend upon the failure of the particular part Ders. The bank-stock lodged will be transferred, while the bank yields any profit, to the creditors of the particular partners, without lofs or injury to the bank. But though the risk of bankruptcy is not confiderable, and, under proper maagement, amounts to nothing; yet a bank, without becoming bankrupt, may be the fource of inconceivable mitchief to a trading country: and this mifchief muft always arife when a bank attempts to diminish its circulation, especially if it does it fuddenly. This has the fame effect that the fudden annihilation of fo Ruch cash would have in a country. Every man who engages in trade, muft regulate his undertakings by the quantity I cannot help confidering the late step taken by the two banks at Edinburgh, in recalling their cash-accounts [54.], as having the strongest tendency of this kind: and therefore it may be proper to confider what motives may have occafioned it, and what fecurity to the public may be devifed against the confequences of any future fteps of the fame nature. Of late, the exchange upon remitting money from Edinburgh to London has rifen to a great height [54]: and the banks at Edinburgh have found the demand upon them for fpecie, in exchange for notes, to increase very much; and, at the fame time, have found greater difficulty in being fupplied with call. To remedy this inconveniency, they have judged it proper to recall one fourth of the cath-accounts; and if this fhall not prove effectual, they will, perhaps, in a little time, recall the whole. It is a proper object of inquiry, in what manner the high exchange occafions a greater demand of fpecie upon the banks; and whether the ftep lately taken will diminish the exchange, or the demands upon the banks for fpecie. The rate of exchange between any two countries is regulated by two circumftances: 1. The degree in which the payments to be made by the one country, exceed those to be made by the other: and, and, 2. The degree of risk and expence which attends the carrying of fpecie from the one country to the other. Exchange can never regularly exceed the expence and risk of carrying the money from the one country to the other, but it may fall greatly below it; and when the payments to be made by each country are nearly equal, it will often be at par. If the buyers and fellers of bills of exchange upon London were only Scotchmen, bank-notes would anfwer all tranfactions of that fort, equally with money: but when a bill on London can fell at Edinburgh at 2 or 3 per cent. premium, and can be bought in the adjoining country of England at par, it will always be a practice to purchase bills on London at par, and fell them here for as high a premium as they will yield, and to carry away the fpecie to England, in order to purchase more bills: and as little fpecie is to be got in this country but from the banks, thefe demands will ultimately terminate there. When the exchange rises to a height, it will alfo be a frequent practice, for those who have large fums to pay in London, to carry the fpecie itself either the whole journey, or at least to the first town of England where bills on London can be purchased at par; and this muft occafion another drain of fpecie from the banks. It may therefore be confidered as a maxim undeniably true, That whenever the exchange is high, an unusual demand for fpecie will be occafioned alfo. The exchange between two countries may be diminished by every means which leffens the demands which the one country has upon the other, or which facilitates the tranfporting of coin from the one to the other. To diminish the demands which Eng. land has upon this country, must be the effect of the increase of our own trade, and the promoting the confumption of home manufactures; which is a flow remedy, and requires time; but there is reason to believe it will at last prove effectual. The facilitating the exportation of our fpecie is in our own power; the distance between Newcastle and Edinburgh is fo fmall, that the expence of carrying money there cannot exceed one fourth per cent.; and therefore, if it was not for our own misconduct, the exchange ought never to exceed that rate, or a little more. I know it will feem ftrange to say, that, by making it easy to transport our cath, we fhould devise the most certain means of keeping it at home; but nothing can be more certain in matters of exchange. If a law were made, prohibiting, under pain of death, all coin or fpecie to be carried from Scotland to England, the exchange might rife, perhaps, to 50 per cent.; and yet a much greater quantity of fpecie would be carried out than if no obstruction were thrown in the way; because the high exchange is a premium of the most tempting fort, to make all men endeavour to elude the law The attempts which are made to keep fpecie in a country, put one in mind of the tricks of a juggler, where the harder you grafp what is put into your hands, you are the more certain to lofe it. But as we ought to facilitate the exportation of our specie, in order to keep down the exchange; fo we must take the most effectual precautions, at the fame time, to bring regularly back at least as great a quantity as we find is carried off. This can never be difficult, if proper attention is given to keep down the exchange: for, in the first place, very little fpecie will, in that cafe, be carried away; and, fecondly, when the exchange is low, it can be brought back at a fmall expence. It will be faid, perhaps, That though the exchange may be railed, by the difficulty with which payments in cash are obtained from the bank; yet that this reluctance of theirs, and the tedious ob ftructions they have usually thrown in the way of fuch payments, has difcouraged greatly the trade which was attempted to be carried on from Newcastle, of fending London bills to be fold here, and then carrying away cash in return. But, in the first place, it may be doubted whether this method of proceeding is altogether juft, or confiftent with the very nature of a bank, whofe notes are current upon the faith and confidence that the money they pass for may be had upon demand: and if it were thought that there is no injustice in treating a Newcastleman in this manner, will it be faid, that, with refpect to our own countrymen, who chuse to carry their money elsewhere, there is no injuftice in thus counteracting the public faith of the banks? for, in this refpect, all men of every country have been treated alike. Independent, however, of the point of morality Feb.1762. Of the abridging of the bank cafh-accounts. morality and juftice, this method is ineffectual, and it is alfo impolitic. That it has proved unfuccessful, though carried to a great height, appears from the neceffity our banks have thought themselves under of recalling one fourth of the cafhaccounts. And indeed it is plain, that while the exchange is high, the trade of carrying the cafh out of the kingdom must take place and though great companies perhaps may defift, after being ill treat ed, yet the infinite number of finall dealers will never be deterred; and, while high profit excites them, they will perfift fo long as a fixpence of fpecie remains in the kingdom. The greater the obftruction that arifes from the bank, the higher the exchange will arife, and the greater will be the incitement to fuch dealers to perfevere. I will not pretend to fay, that, after things have been allowed to come to fuch extremities, we have it in our power to remedy them, by the fame means which would have ferved to prevent the evil. Perhaps the exporting the whole fpecie of Scotland would not be fufficient now to bring the exchange to par; and no proper precautions have been taken to supply the place of what shall be carried away: but I will venture to affirm, that if the banks had in proper time fecured large fums of cafh in England when exchange was low, and had lent that money to the public companies there at intereft, they might have recalled it gradually from time to time, as the course of exchange required; and by that means, and by offer ing no obftruction to the exportation of fpecie, they might have prevented the exchange from ever rifing high. As they have neglected this precaution, it is juft they fhould fuffer; but not that they fhould on that account bring deftruction upon the trade and manufactures of this country. I am farther of opinion, that it is in their power ftill to bring down the exchange, by employing their credit in England, and drawing bills of exchange upon that country at a moderate rate; and what they now draw for, they may pay back at a convenient time, which cannot now be very diftant: and if they fhall follow this courfe, it will be equally unneceflary and improper to obftruct the exportation of our fpecie. Let us now examine what effect the recalling the cafh-accounts can have upon the exchange, or upon the exportation of ar fpecie. VOL. XXIV. 93 The effect of this step muft be, to diminifh the quantity of circulating cash; and that must have the effect to diminish our trade; but it cannot in any degree diminish the furplus of payments to be made by us to England, but rather the contrary; neither can it have any effect to facilitate the exportation of our coin. So long as great fums are required to be paid at London, and specie cannot be carried from hence but with much trouble, expence, and risk, the rate of exchange must neceffarily continue high, and the diminishing the circulation of bank-notes can have no tendency to diminish it; though by decreafing our trade, and thereby increafing the balance due to England, it may have the oppofite effect. No ftep, therefore, it would feem, was ever more dangerous or lefs effectual than that which was lately taken by the two banks: and what seems to render it without excufe, is, that it has been publicly faid, that both banks had it in their power to be fupplied with as much fpecie as their utmost demands could require, and at liberty too to increafe, inftead of diminishing their circulation, by a contract for years, upon payment only of L. 1600 or 1800 per annum for each bank. But the late unufual rife of exchange had given them, it seems, an alarm; and in place of tracing out the causes of this, and endeavouring to counteract them, a defperate and ineffectual step has been taken. They feem to have been led into this, by a notion, that if they could diminish the circulating paper-money of the kingdom, perfons would not be found to purchafe the Newcastle bills on London which are brought here to be fold. But it is very plain, that no perfon would buy Newcastle bills unless there was a demand for money at London, which these bills ferve to fupply; and the bringing these bills to market must tend to diminifli in place of heightening the exchange. While that demand continues, thefe bills' muft neceflarily be ftill purchafed, though the circulating cafh is diminished in Scotland. Neither will this step induce our countrymen to bring down the money they have in England. If the profits upon their mo ney there had not been high, the profit of the exchange would have induced them to bring it down; but as that has had no effect, the prefent ftep taken by the banks will only induce them to find other means in Scotland of fupplying the circulating cafh of the country. The |