(could we suppose such a system of insanity could have continued)
would be two hundred and twenty millions annually: for the capital of
the debt would be 5486 millions, according to the ratio that ascertains
the expense of the wars for the hundred years that are past. But long
before it could have reached this period, the value of bank notes,
from the immense quantity of them, (for it is in paper only that such
a nominal revenue could be collected,) would have been as low or lower
than continental paper has been in America, or assignats in France; and
as to the idea of exchanging them for gold and silver, it is too absurd
to be contradicted.

Do we not see that nature, in all her operations, disowns the visionary
basis upon which the funding system is built? She acts always by
renewed successions, and never by accumulating additions perpetually
progressing. Animals and vegetables, men and trees, have existed since
the world began: but that existence has been carried on by succession
of generations, and not by continuing the same men and the same trees in
existence that existed first; and to make room for the new she removes
the old. Every natural idiot can see this; it is the stock-jobbing idiot
only that mistakes. He has conceived that art can do what nature cannot.
He is teaching her a new system--that there is no occasion for man to
die--that the scheme of creation can be carried on upon the plan of
the funding system--that it can proceed by continual additions of new
beings, like new loans, and all live together in eternal youth. Go,
count the graves, thou idiot, and learn the folly of thy arithmetic!

But besides these things, there is something visibly farcical in the
whole operation of loaning. It is scarcely more than four years ago
that such a rot of bankruptcy spread itself over London, that the whole
commercial fabric tottered; trade and credit were at a stand; and
such was the state of things that, to prevent or suspend a general
bankruptcy, the government lent the merchants six millions in
_government_ paper, and now the merchants lend the government twenty-two
millions in _their_ paper; and two parties, Boyd and Morgan, men but
little known, contend who shall be the lenders. What a farce is this!
It reduces the operation of loaning to accommodation paper, in which
the competitors contend, not who shall lend, but who shall sign, because
there is something to be got for signing.

Every English stock-jobber and minister boasts of the credit of England.
Its credit, say they, is greater than that of any country in Europe.
There is a good reason for this: for there is not another country in
Europe that could be made the dupe of such a delusion. The English
funding system will remain a monument of wonder, not so much on account
of the extent to which it has been carried, as of the folly of believing
in it.

Those who had formerly predicted that the funding system would break
up when the debt should amount to one hundred or one hundred and fifty
millions, erred only in not distinguishing between insolvency and actual
bankruptcy; for the insolvency commenced as soon as the government
became unable to pay the interest in cash, or to give cash for the bank
notes in which the interest was paid, whether that inability was known
or not, or whether it was suspected or not. Insolvency always takes
place before bankruptcy; for bankruptcy is nothing more than the
publication of that insolvency. In the affairs of an individual, it
often happens that insolvency exists several years before bankruptcy,
and that the insolvency is concealed and carried on till the individual
is not able to pay one shilling in the pound. A government can ward off
bankruptcy longer than an individual: but insolvency will inevitably
produce bankruptcy, whether in an individual or in a government. If then
the quantity of bank notes payable on demand, which the bank has issued,
are greater than the bank can pay off, the bank is insolvent: and when
that insolvency is declared, it is bankruptcy.(*)

* Among the delusions that have been imposed upon the
nation by ministers to give a false colouring to its
affairs, and by none more than by Mr. Pitt, is a motley,
amphibious-charactered thing called the _balance of trade_.
This balance of trade, as it is called, is taken from the
custom-house books, in which entries are made of all cargoes
exported, and also of all cargoes imported, in each year;
and when the value of the exports, according to the price
set upon them by the exporter or by the custom-house, is
greater than the value of the imports, estimated in the same
manner, they say the balance of trade is much in their
favour.

The custom-house books prove regularly enough that so many
cargoes have been exported, and so many imported; but this
is all that they prove, or were intended to prove. They have
nothing to do with the balance of profit or loss; and it is
ignorance to appeal to them upon that account: for the case
is, that the greater the loss is in any one year, the higher
will this thing called the balance of trade appear to be
according to the custom-house books. For example, nearly the
whole of the Mediterranean convoy has been taken by the
French this year; consequently those cargoes will not
appear as imports on the custom-house books, and therefore
the balance of trade, by which they mean the profits of it,
will appear to be so much the greater as the loss amounts to;
and, on the other hand, had the loss not happened, the
profits would have appeared to have been so much the less.
All the losses happening at sea to returning cargoes, by
accidents, by the elements, or by capture, make the balance
appear the higher on the side of the exports; and were they
all lost at sea, it would appear to be all profit on the
custom-house books. Also every cargo of exports that is lost
that occasions another to be sent, adds in like manner to
the side of the exports, and appears as profit. This year
the balance of trade will appear high, because the losses
have been great by capture and by storms. The ignorance of
the British Parliament in listening to this hackneyed
imposition of ministers about the balance of trade is
astonishing. It shows how little they know of national
affairs--and Mr. Grey may as well talk Greek to them, as to
make motions about the state of the nation. They understand
only fox-hunting and the game laws,--_Author_.

I come now to show the several ways by which bank notes get into
circulation: I shall afterwards offer an estimate on the total quantity
or amount of bank notes existing at this moment.

The bank acts in three capacities. As a bank of discount; as a bank of
deposit; and as a banker for the government.

First, as a bank of discount. The bank discounts merchants' bills of
exchange for two months. When a merchant has a bill that will become due
at the end of two months, and wants payment before that time, the bank
advances that payment to him, deducting therefrom at the rate of five
per cent, per annum. The bill of exchange remains at the bank as a
pledge or pawn, and at the end of two months it must be redeemed. This
transaction is done altogether in paper; for the profits of the bank,
as a bank of discount, arise entirely from its making use of paper as
money. The bank gives bank notes to the merchant in discounting the bill
of exchange, and the redeemer of the bill pays bank notes to the bank in
redeeming it. It very seldom happens that any real money passes between
them.

If the profits of a bank be, for example, two hundred thousand pounds a
year (a great sum to be made merely by exchanging one sort of paper
for another, and which shows also that the merchants of that place are
pressed for money for payments, instead of having money to spare to lend
to government,) it proves that the bank discounts to the amount of four
millions annually, or 666,666L. every two months; and as there never
remain in the bank more than two months' pledges, of the value of
666,666L., at any one time, the amount of bank notes in circulation at
any one time should not be more than to that amount. This is sufficient
to show that the present immense quantity of bank notes, which are
distributed through every city, town, village, and farm-house in
England, cannot be accounted for on the score of discounting.

Secondly, as a bank of deposit. To deposit money at the bank means to
lodge it there for the sake of convenience, and to be drawn out at any
moment the depositor pleases, or to be paid away to his order. When
the business of discounting is great, that of depositing is necessarily
small. No man deposits and applies for discounts at the same time;
for it would be like paying interest for lending money, instead of for
borrowing it. The deposits that are now made at the bank are almost
entirely in bank notes, and consequently they add nothing to the ability
of the bank to pay off the bank notes that may be presented for payment;
and besides this, the deposits are no more the property of the bank than
the cash or bank notes in a merchant's counting-house are the property
of his book-keeper. No great increase therefore of bank notes, beyond
what the discounting business admits, can be accounted for on the score
of deposits.

Thirdly, the bank acts as banker for the government. This is the
connection that threatens to ruin every public bank. It is through this
connection that the credit of a bank is forced far beyond what it ought
to be, and still further beyond its ability to pay. It is through this
connection, that such an immense redundant quantity of bank notes, have
gotten into circulation; and which, instead of being issued because
there was property in the bank, have been issued because there was none.

When the treasury is empty, which happens in almost every year of every
war, its coffers at the bank are empty also.