coin, it has been in favour of London even with CHAP. thofe places. The computed exchange has generally been in favour of London with Lifbon, Antwerp, Leghorn, and, if you except France, I believe, with most other parts of Europe that pay in common currency; and it is not improbable that the real exchange was fo too. III. Digression concerning Banks of Depofit, particularly concerning that of Amsterdam. T HE currency of a great state, such as France or England, generally confifts almost entirely of its own coin. Should this currency, therefore, be at any time worn, clipt, or otherwife degraded below its standard value, the state by a reformation of its coin can effectually re-establish its currency. But the currency of a small state, such as Genoa or Hamburgh, can feldom confift altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse. Such a state, therefore, by reforming its coin, will not always be able to reform its currency, If foreign bills of exchange are paid in this currency, the uncertain value of any fum, of what is in its own nature so uncertain, must render the exchange always very much against such a state, its currency being, in all foreign states, neceffarily valued even below what it is worth. 1 BOOK In order to remedy the inconvenience to which this difadvantageous exchange must have fubjected their merchants, fuch small, states, when they began to attend to the interest of trade, have frequently enacted, that foreign bills of exchange of a certain value fshould be paid, not in common currency, but by an order upon, or by a transfer in the books of a certain bank, established upon the credit, and under the protection of the state; this bank being always obliged to pay, in good and true money, exactly according to the standard of the state. The banks of Venice, Genoa, Amsterdam, Hamburgh, and Nuremberg, seem to have been all originally established with this view, though fome of them may have afterwards been made subservient to other purposes. The money of fuch banks being better than the common currency of the country, neceffarily bore an agio, which was greater or smaller, according as the currency was supposed to be more or less degraded below the standard of the state. The agio of the bank of Hamburgh, for example, which is faid to be commonly about fourteen per cent. is the fuppofed difference between the good standard money of the state, and the clipt, worn, and diminished currency poured into it from all the neighbouring states. Before 1609 the great quantity of clipt and worn foreign coin, which the extensive trade of Amsterdam brought from all parts of Europe, reduced the value of its currency about nine per cent. below that of good money fresh from the the mint. Such money no fooner appeared than CHAP. it was melted down or carried away, as it always is in fuch circumstances. The merchants, with plenty of currency, could not always find a fufficient quantity of good money to pay their bills of exchange; and the value of those bills, in III. spite of feveral regulations which were made to prevent it, became in a great measure uncertain. In order to remedy these inconveniencies, a bank was established in 1609 under the guarantee of the city. This bank received both foreign coin, and the light and worn coin of the country at its real intrinfic value in the good standard money of the country, deducting only so much as was neceffary for defraying the expence of coinage, and the other neceffary expence of management. For the value which remained, after this small deduction was made, it gave a credit in its books. This credit was called bank money, which, as it represented money exactly according to the standard of the mint, was always of the fame real value, and intrinfically worth more than current money. It was at the fame time enacted, that all bills drawn upon or negotiated at Amsterdam of the value of fix hundred guilders and upwards should be paid in bank money, which at once took away all uncertainty in the value of those bills. Every merchant, in confequence of this regulation, was obliged to keep an account with the bank in order to pay his foreign bills of exchange, which neceffarily occafioned a certain demand for bank : money. Bank BOOK Bank money, over and above both its intrin. fic fuperiority to currency, and the additional value which this demand neceffarily gives it, has likewife fome other advantages. It is secure from fire, robbery, and other accidents; the city of Amsterdam is bound for it; it can be paid away by a fimple transfer, without the trouble of counting, or the risk of transporting it from one place to another. In confequence of those different advantages, it feems from the beginning to have borne an agio, and it is generally believed that all the money originally depofited in the bank was allowed to remain there, nobody caring to demand payment of a debt which he could fell for a premium in the market. By demanding payment of the bank, the owner of a bank credit would lose this premium. As a shilling fresh from the mint will buy no more goods in the market than one of our common worn fhillings, so the good and true money which might be brought from the coffers of the bank into those of a private perfon, being mixed and confounded with the common currency of the country, would be of no more value than that currency, from which it could no longer be readily diftinguished. While it remained in the coffers of the bank, its fuperiority was known and afcertained. When it had come into those of a private perfon, its fuperiority could not well be afcertained without more trouble than perhaps the difference was worth. By being brought from the coffers of the bank, besides, it loft all the other advantages of bank money; its fecu III. rity, its easy and fafe transferability, its use in CHAP. paying foreign bills of exchange. Over and above all this, it could not be brought from those coffers, as it will appear by and by, without previoufly paying for the keeping. Thofe depofits of coin, or those depofits which the bank was bound to restore in coin, conftituted the original capital of the bank, or the whole value of what was reprefented by what is called bank money. At present they are fuppofed to conftitute but a very finall part of it. In order to facilitate the trade in bullion, the bank has been for these many years in the practice of giving credit in its books upon depofits of gold and filver bullion. This credit is generally about five per cent. below the mint price of fuch bullion. The bank grants at the fame time what is called a recipice or receipt, intitling the perfon who makes the depofit, or the bearer, to take out the bullion again at any time within fix months, upon retransferring to the bank a quantity of bank money equal to that for which credit had been given in its books when the depofit was made, and upon paying one-fourth per cent. for the keeping, if the depofit was in filver; and one-half per cent. if it was in gold; but at the fame time declaring, that in default of such payment, and upon the expiration of this term, the depofit should belong to the bank at the price at which it had been received, or for which credit had been given in the transfer books. What is thus paid for the keeping of the depofit may be confidered as a fort of warehoufe 4 |