foreign bills of exchange of a certain value trinsic superiority to currency, and the addishould be paid, not in common currency, but tional value which this demand necessarily by an order upon, or by a transfer in the books gives it, has likewise some other advantages. of a certain bank, established upon the credit, It is secure from fire, robbery, and other acand 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, Hamburg, and Nuremberg, seem to have been all originally established with this view, though some of them may have afterwards been made subservient to other purposes. The money of such banks, being better than the common currency of the country, necessarily 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 Hamburg, for example, which is said to be commonly about fourteen per cent. is the supposed difference between the good standard money of the state, and the clipt, worn, and diminished currency, poured into it from all the neighbouring states. cidents; the city of Amsterdam is bound for it; it can be paid away by a simple transfer, without the trouble of counting, or the risk of transporting it from one place to another. In consequence of those different advantages, it seems from the beginning to have borne an agio; and it is generally believed that all the money originally deposited in the bank, was allowed to remain there, nobody caring to demand payment of a debt which he could sell for a premium in the market. By demanding payment of the bank, the owner of a bank credit would lose this premium. As a shil ling fresh from the mint will buy no more goods in the market than one of our common worn shillings, so the good and true money which might be brought from the coffers of the bank into those of a private person, being mixed and confounded with the common currency of the country, would be of no more Before 1609, the great quantity of clipt and value than that currency, from which it could worn foreign coin which the extensive trade no longer be readily distinguished. While it of Amsterdam brought from all parts of Eu- remained in the coffers of the bank, its superope, reduced the value of its currency about riority was known and ascertained. When it nine per cent, below that of good money fresh had come into those of a private person, its from the mint. Such money no sooner ap.. superiority could not well be ascertained peared, than it was melted down or carried without more trouble than perhaps the differaway, as it always is in such circumstances. ence was worth. By being brought from the The merchants, with plenty of currency, could coffers of the bank, besides, it lost all the onot always find a sufficient quantity of good ther advantages of bank money; its security, money to pay their bills of exchange; and the its easy and safe transferability, its use in payvalue of those bills, in spite of several regula-ing foreign bills of exchange. Over and a-· tions which were made to prevent it, became bove all this, it could not be brought from in a great measure uncertain. those coffers, as will appear by and by, without previously paying for the keeping. In order to remedy these inconveniencies, a bank was established in 1609, under the gua- Those deposits of coin, or those deposits rantee of the city. This bank received both which the bank was bound to restore in coin, foreign coin, and the light and worn coin of constituted the original capital of the bank, or the country, at its real intrinsic value in the the whole value of what was represented by good standard money of the country, deduct- what is called bank money. At present they ing only so much as was necessary for defray- are supposed to constitute but a very small ing the expense of coinage and the other ne- part of it. In order to facilitate the trade in cessary expense of management. For the bullion, the bank has been for these many value which remained after this small deduc-years in the practice of giving credit in its tion 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 same real value, and intrinsically worth more than current money. It was at the same time enacted, that all bills drawn upon or negociated at Amsterdam, of the value of 600 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 consequence of this regulation, was obliged to Keep an account with the bank, in order to pay his foreign bills of exchange, which necessarily occasioned a certain demand for bank books, upon deposits of gold and silver bullion. This credit is generally about five per cent. below the mint price of such bullion. The bank grants at the same time what is called a recipice or receipt, entitling the person who makes the deposit, or the bearer, to take out the bullion again at any time within six months, upon transferring to the bank a quantity of bank money equal to that for which credit had been given in its books when the deposit was made, and upon paying one-fourth per cent. for the keeping, if the deposit was in silver; and one-half per cent. if it was in gold; but at the same time declaring, that in default of such payment, and upon the expiration of this term, the deposit should belong to the bank, Bank money, over and above both its in-at the price at which it had been received, or money. for which credit had been given in the trans- the six months, or by neglecting to pay one fer books. What is thus paid for the keeping fourth or one half per cent, in order to obtain of the deposit may be considered as a sort of a new receipt for another six months. This, warehouse rent; and why this warehouse rent however, though it happens seldom, is said to should be so much dearer for gold than for sil-happen sometimes, and more frequently with ver, several different reasons have been assigned. regard to gold than with regard to silver, on The fineness of gold, it has been said, is more account of the higher warehouse rent which difficult to be ascertained than that of silver. is paid for the keeping of the more precious Frauds are more easily practised, and occasion metal. a greater loss in the most precious metal. Sil The person who, by making a deposit of ver, besides, being the standard metal, the bullion, obtains both a bank credit and a restate, it has been said, wishes to encourage ceipt, pays his bills of exchange as they bemore the making of deposits of silver than come due, with his bank credit; and either those of gold. sells or keeps his receipt, according as he Deposits of bullion are most commonly judges that the price of bullion is likely to made when the price is somewhat lower than rise or to fall. The receipt and the bank credit ordinary, and they are taken out again when seldom keep long together, and there is no it happens to rise. In Holland the market occasion that they should. The person who price of bullion is generally above the mint has a receipt, and who wants to take out bulprice, for the same reason that it was so in lion, finds always plenty of bank credits, or England before the late reformation of the bank money, to buy at the ordinary price, gold coin. The difference is said to be com- and the person who has bank money, and monly from about six to sixteen stivers upon wants to take out bullion, finds receipts always the mark, or eight ounces of silver, of eleven in equal abundance. parts of fine and one part alloy. The bank The owners of bank credits, and the holdprice, or the credit which the bank gives for ers of receipts, constitute two different sorts the deposits of such silver (when made in fo- of creditors against the bank. The holder of reign coin, of which the fineness is well known a receipt cannot draw out the bullion for and ascertained, such as Mexico dollars), is which it is granted, without re-assigning to twenty-two guilders the mark: the mint price the bank a sum of bank money equal to the is about twenty-three guilders, and the market price at which the bullion had been received. price is from twenty-three guilders six, to If he has no bank money of his own, he must twenty-three guilders sixteen stivers, or from purchase it of those who have it. The owner two to three per cent. above the mint price. of bank money cannot draw out bullion, withThe proportions between the bank price, the out producing to the bank receipts for the mint price, and the market price of gold bul-quantity which he wants. If he has none of lion, are nearly the same. A person can ge- his own, he must buy them of those who have nerally sell his receipt for the difference be- them. The holder of a receipt, when he purtween the mint price of bullion and the market chases bank money, purchases the power of price. A receipt for bullion is almost always taking out a quantity of bullion, of which the worth something, and it very seldom happens, mint price is five per cent. above the bank therefore, that anybody suffers his receipts to price. The agio of five per cent. therefore, expire, or allows his bullion to fall to the bank which he commonly pays for it, is paid, not at the price at which it had been received, ei- for an imaginary, but for a real value. The ther by not taking it out before the end of owner of bank money, when he purchases a * The following are the prices at which the bank of receipt, purchases the power of taking out a Amsterdam at present (September 1775) receives bullion quantity of bullion, of which the market price is commonly from two to three per cent. above the mint price. The price which he pays for it, therefore, is paid likewise for a real value. The price of the receipt, and the price of the bank money, compound or make up between them the full value or price of the bullion. and coin of different kinds: SILVER. Mexico dollars French crowns English silver coin Guilders. B-22 per mark. Mexico dollars, new coin21 10 Ducatoons~~~ 30 28 Bar silver, containing 11-12ths fine silver, 21 per mark, and in this proportion down to 1-4th fine, on which 5 guilders are given. Fine bars, 28 per mark. GOLD. Louis d'ors, new New ducats B-310 per mark. 300 Upon deposits of the coin current in the country, the bank grants receipts likewise, as well as bank credits; but those receipts are frequently of no value, and will bring no price in the market. Upon ducatoons, for example, which in the currency pass for three guilders three stivers each, the bank gives a credit of three guilders only, or five per 4 19 8 per ducat. Bar or ingot gold is received in proportion to its fineness, compared with the above foreign gold coin. Upon fine bars the bank gives 340 per mark. In general, however, something more is given upon coin of a known cent. below their current value. It grants fineness, than upon gold and silver bars, of which the fineness cannot be ascertained but by a process of melt a receipt likewise, entitling the bearer to ing and assaying. take out the number of ducatoons depos. ited at anytime within six months, upon | buy at the market price, which generally corpaying one fourth per cent. for the keeping. responds with the price at which he can sell This receipt will frequently bring no price in the coin or bullion it entitles him to take out the market. Three guilders, bank money, of the bank. generally sell in the market for three guilders It might be otherwise during a public cathree stivers, the full value of the ducatoons, lamity; an invasion, for example, such as that if they were taken out of the bank; and be- of the French in 1672. The owners of bank fore they can be taken out, one-fourth per money being then all eager to draw it out of cent. must be paid for the keeping, which the bank, in order to have it in their own would be mere loss to the holder of the re-keeping, the demand for receipts might raise ceipt. If the agio of the bank, however, their price to an exorbitant height. The should at any time fall to three per cent. such holders of them might form extravagant expecreceipts might bring some price in the mar- tations, and, instead of two or three per cent. ket, and might sell for one and three-fourths demand half the bank money for which credit per cent. But the agio of the bank being now had been given upon the deposits that the regenerally about five per cent. such receipts ceipts had respectively been granted for. The are frequently allowed to expire, or, as they enemy, informed of the constitution of the express it, to fall to the bank. The receipts | bank, might even buy them up, in order to which are given for deposits of gold ducats prevent the carrying away of the treasure. In fall to it yet more frequently, because a higher warehouse rent, or one half per cent. must be paid for the keeping of them, before they can be taken out again. The five per cent. which the bank gains, when deposits either of coin or bullion are allowed to fall to it, may be considered as the warehouse rent for the perpetual keeping of such deposits. The sum of bank money, for which the receipts are expired, must be very considerable. It must comprehend the whole original capital of the bank, which, it is generally supposed, has been allowed to remain there from the time it was first deposited, nobody caring either to renew his receipt, or to take out his deposit, as, for the reasons already assigned, neither the one nor the other could be done without loss. But whatever may be the amount of this sum, the proportion which it bears to the whole mass of bank money is supposed to be very small. The bank of Amsterdam has, for these many years past, been the great warehouse of Europe for bullion, for which the receipts are very seldom allowed to expire, or, as they express it, to fall to the bank. The far greater part of the bank money, or of the credits upon the books of the bank, is supposed to have been created, for these many years past, by such deposits, which the dealers in bullion are continually both making and withdrawing. such emergencies, the bank, it is supposed, would break through its ordinary rule of mak ing payment only to the holders of receipts. The holders of receipts, who had no bank money, must have received within two or three per cent. of the value of the deposit for which their respective receipts had been granted. The bank, therefore, it is said, would in this case make no scruple of paying, either with money or bullion, the full value of what the owners of bank money, who could get no receipts, were credited for in its books; paying, at the same time, two or three per cent, to such holders of receipts as had no bank money, that being the whole value which, in this state of things, could justly be supposed due to them. It Even in ordinary and quiet times, it is the interest of the holders of receipts to depress the agio, in order either to buy bank money (and consequently the bullion which their receipts would then enable them to take out of the bank) so much cheaper, or to sell their receipts to those who have bank money, and who want to take out bullion, so much dearer; the price of a receipt being generally equal to the difference between the market price of bank money and that of the coin or bullion for which the receipt had been granted. is the interest of the owners of bank money, on the contrary, to raise the agio, in order No demand can be made upon the bank, either to sell their bank money so much dearbut by means of a recipice or receipt. The er, or to buy a receipt so much cheaper. To smaller mass of bank money, for which the prevent the stock-jobbing tricks which those receipts are expired, is mixed and confounded opposite interests might sometimes occasion, with the much greater mass for which they the bank has of late years come to the resolu are still in force; so that, though there may tion, to sell at all times bank money for curbe a considerable sum of bank money, for rency at five per cent. agio, and to buy it in which there are no receipts, there is no speci- again at four per cent. agio. In consequence fic sum or portion of it which may not at any of this resolution, the agio can never either time be demanded by one. The bank cannot rise above five, or sink below four per cent. ; be debtor to two persons for the same thing; and the proportion between the market price and the owner of bank money who has no re- of bank and that of current money is kept at ceipt, cannot demand payment of the bank all times very near the proportion between till he buys one. In ordinary and quiet times, their intrinsic values. Before this resolution be can find no difficulty in getting one to, was taken, the market price of bank money used sometimes to rise so high as nine per the bank; and allowing them to have, one cent. agio, and sometimes to sink so low as with another, the value of L. 1500 sterling lypar, according as opposite interests happened ing upon their respective accounts (a very to influence the market. large allowance), the whole quantity of bank The bank of Amsterdam professes to lend money, and consequently of treasure in the out no part of what is deposited with it, but, bank, will amount to about L.3,000,000 sterfor every guilder for which it gives credit in ling, or, at eleven guilders the pound sterling, its books, to keep in its repositories the value 33,000,000 of guilders; a great sum, and sufof a guilder either in money or bullion. That ficient to carry on a very extensive circulait keeps in its repositories all the money or tion, but vastly below the extravagant ideas bullion for which there are receipts in force, which some people have formed of this treafor which it is at all times liable to be called sure. The upon, and which in reality is continually go- The city of Amsterdam derives a considering from it, and returning to it again, cannot able revenue from the bank. Besides what well be doubted. But whether it does so like-may be called the warehouse rent above menwise with regard to that part of its capital for tioned, each person, upon first opening an acwhich the receipts are long ago expired, for count with the bank, pays a fee of ten guilders; which, in ordinary and quiet times, it cannot and for every new account, three guilders be called upon, and which, in reality, is very three stivers; for every transfer, two stivers; likely to remain with it for ever, or as long as and if the transfer is for less than 300 guildthe states of the United Provinces subsist, ers, six stivers, in order to discourage the mul may perhaps appear more uncertain. At Am-tiplicity of small transactions. The person sterdam, however, no point of faith is better who neglects to balance his account twice in established than that, for every guilder circu- the year, forfeits twenty-five guilders. lated as bank money, there is a correspondent person who orders a transfer for more than is guilder in gold or silver to be found in the upon his account, is obliged to pay three per treasures of the bank. The city is guarantee cent. for the sum overdrawn, and his order is that it should be so. The bank is under the set aside into the bargain. The bank is supdirection of the four reigning burgomasters, posed, too, to make a considerable profit by the ho are changed every year. Each new set sale of the foreign coin or bullion which someof burgomasters visits the treasure, compares times falls to it by the expiring of receipts, it with the books, receives it upon oath, and and which is always kept till it can be sold delivers it over, with the same awful solemnity, with advantage. It makes a profit, likewise, to the set which succeeds; and in that sober by selling bank money at five per cent. agio, and religious country, oaths are not yet dis- and buying it in at four. These different emoregarded. A rotation of this kind seems alone luments amount to a good deal more than a sufficient security against any practices which what is necessary for paying the salaries of cannot be avowed. Amidst all the revolutions officers, and defraying the expense of mawhich faction has ever occasioned in the go-nagement. What is paid for the keeping of vernment of Amsterdam, the prevailing party bullion upon receipts, is alone supposed to has at no time accused their predecessors of amount to a neat annual revenue of between infidelity in the administration of the bank. 150,000 and 200,000 guilders. Public utiNo accusation could have affected more deeply lity, however, and not revenue, was the orithe reputation and fortune of the disgraced ginal object of this institution. Its object was party; and if such an accusation could have to relieve the merchants from the inconvebeen supported, we may be assured that it nience of a disadvantageous exchange. The would have been brought. In 1672, when revenue which has arisen from it was unforethe French king was at Utrecht, the bank of seen, and may be considered as accidental. Amsterdam paid so readily, as left no doubt But it is now time to return from this long of the fidelity with which it had observed its digression, into which I have been insensibly engagements. Some of the pieces which were led, in endeavouring to explain the reasons then brought from its repositories, appeared why the exchange between the countries which to have been scorched with the fire which hap- pay in what is called bank money, and those pened in the town-house soon after the bank which pay in common currency, should genewas established. Those pieces, therefore, must have lain there from that time. What may be the amount of the treasure in the bank, is a question which has long employed the speculations of the curious. Nothing but conjecture can be offered concerning it. It is generally reckoned, that there are about 2000 people who keep accounts with rally appear to be in favour of the former, and against the latter. The former pay in a species of money, of which the intrinsic value is always the same, and exactly agreeable to the standard of their respective mints; the latter is a species of money, of which the intrinsic value is continually varying, and is almost always more or less below that standard. . PART II-Of the Unreasonableness of those extraordinary Restraints, upon other Principles. In the foregoing part of this chapter, I have endeavoured to show, even upon the principles of the commercial system, how unnecessary it is to lay extraordinary restraints upon the importation of goods from those countries with which the balance of trade is supposed to be disadvantageous. dealings. If these should annually amount to L. 100,000, for example, or to L. 1,000,000, on each side, each of them will afford an annual revenue, in the one case, of L. 100,000, and, in the other, of L. 1,000,000, to the inhabitants of the other. If their trade should be of such a nature, that one of them exported to the other nothing but native commodities, while the returns of that other consisted altogether in foreign goods; the balance, in this case, would still be supposed even, commodities being paid for with commodities. They would, in this Nothing, however, can be more absurd than case too, both gain, but they would not gain this whole doctrine of the balance of trade, equally; and the inhabitants of the country upon which, not only these restraints, but al- which exported nothing but native commodimost all the other regulations of commerce, ties, would derive the greatest revenue from are founded. When two places trade with one the trade. If England, for example, should another, this doctrine supposes that, if the ba- import from France nothing but the native lance be even, neither of them either loses or commodities of that country, and not having gains; but if it leans in any degree to one such commodities of its own as were in deside, that one of them loses, and the other mand there, should annually repay them by gains, in proportion to its declension from the sending thither a large quantity of foreign exact equilibrium. Both suppositions are false. A trade, which is forced by means of bounties and monopolies, may be, and commonly is, disadvantageous to the country in whose favour it is meant to be established, as I shall endeavour to show hereafter. But that trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both. By advantage or gain, I understand, not the increase of the quantity of gold and silver, but that of the exchangeable value of the annual produce of the land and labour of the country, or the increase of the annual revenue of its inhabitants. goods, tobacco, we shall suppose, and East India goods; this trade, though it would give some revenue to the inhabitants of both countries, would give more to those of France than to those of England. The whole French capital annually employed in it would annually be distributed among the people of France; but that part of the English capital only, which was employed in producing the English commodities with which those foreign goods were purchased, would be annually distributed among the people of England. The greater part of it would replace the capitals which had been employed in Virginia, Indostan, and China, and which had given revenue and maintenance to the inhabitants of those disIf the balance be even, and if the trade be- tant countries. If the capitals were equal, or tween the two places consist altogether in the nearly equal, therefore, this employment of exchange of their native commodities, they the French capital would augment much more will, upon most occasions, not only both gain, the revenue of the people of France, than that but they will gain equally, or very nearly of the English capital would the revenue of equally; each will, in this case, afford a mar- the people of England. France would, in this ket for a part of the surplus produce of the case, carry on a direct foreign trade of conother; each will replace a capital which had sumption with England; whereas England been employed in raising and preparing for would carry on a round-about trade of the the market this part of the surplus produce of same kind with France. The different effects the other, and which had been distributed of a capital employed in the direct, and of among, and given revenue and maintenance one employed in the round-about foreign trade to, a certain number of its inhabitants. Some of consumption, have already been fully ex part of the inhabitants of each, therefore, will plained. directly derive their revenue and maintenance There is not, probably, between any two from the other. As the commodities exchanged, countries, a trade which consists altogether in too, are supposed to be of equal value, so the the exchange, either of native commodities two capitals employed in the trade will, upon on both sides, or of native commodities on most occasions, be equal, or very nearly equal; and both being employed in raising the native commodities of the two countries, the revenue and maintenance which their distribution will afford to the inhabitants of each will be equal, or very nearly equal. This revenue and maintenance, thus mutually afforded, will be greater or smaller, in proportion to the extent of their one side, and of foreign goods on the other. Almost all countries exchange with one another, partly native and partly foreign goods. That country, however, in whose cargoes there is the greatest proportion of native, and the least of foreign goods, will always be the principal gainer. If it was not with tobacco and East India |