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It is in this condition of
emptiness that the minister has recourse to emissions of what are called
exchequer and navy bills, which continually generates a new increase of
bank notes, and which are sported upon the public, without there being
property in the bank to pay them. These exchequer and navy bills (being,
as I have said, emitted because the treasury and its coffers at the bank
are empty, and cannot pay the demands that come in) are no other than
an acknowledgment that the bearer is entitled to receive so much money.
They may be compared to the settlement of an account, in which the
debtor acknowledges the balance he owes, and for which he gives a note
of hand; or to a note of hand given to raise money upon it.

Sometimes the bank discounts those bills as it would discount merchants'
bills of exchange; sometimes it purchases them of the holders at the
current price; and sometimes it agrees with the ministers to pay an
interest upon them to the holders, and keep them in circulation. In
every one of these cases an additional quantity of bank notes gets into
circulation, and are sported, as I have said, upon the public, without
there being property in the bank, as banker for the government, to pay
them; and besides this, the bank has now no money of its own; for the
money that was originally subscribed to begin the credit of the bank
with, at its first establishment, has been lent to government and wasted
long ago.

"The bank" (says Smith, book ii. chap. 2.) "acts not only as an ordinary
bank, but as a great engine of State; it receives and pays a greater
part of the annuities which are due to the creditors of the _public_."
(It is worth observing, that the _public_, or the _nation_, is always
put for the government, in speaking of debts.) "It circulates" (says
Smith) "exchequer bills, and it advances to government the annual amount
of the land and malt taxes, which are frequently not paid till several
years afterwards." (This advancement is also done in bank notes,
for which there is not property in the bank.) "In those different
operations" (says Smith) "_its duty to the public_ may sometimes have
obliged it, without any fault of its directors, _to overstock the
circulation with paper money_."--bank notes. How its _duty_ to _the
public_ can induce it _to overstock that public_ with promissory bank
notes which it _cannot pay_, and thereby expose the individuals of that
public to ruin, is too paradoxical to be explained; for it is on
the credit which individuals _give to the bank_, by receiving and
circulating its notes, and not upon its _own_ credit or its _own_
property, for it has none, that the bank sports. If, however, it be the
duty of the bank to expose the public to this hazard, it is at least
equally the duty of the individuals of that public to get their money
and take care of themselves; and leave it to placemen, pensioners,
government contractors, Reeves' association, and the members of both
houses of Parliament, who have voted away the money at the nod of
the minister, to continue the credit if they can, and for which their
estates individually and collectively ought to answer, as far as they
will go.

There has always existed, and still exists, a mysterious, suspicious
connection, between the minister and the directors of the bank, and
which explains itself no otherways than by a continual increase in bank
notes. Without, therefore, entering into any further details of the
various contrivances by which bank notes are issued, and thrown upon the
public, I proceed, as I before mentioned, to offer an estimate on the
total quantity of bank notes in circulation.

However disposed governments may be to wring money by taxes from the
people, there is a limit to the practice established by the nature of
things. That limit is the proportion between the quantity of money in a
nation, be that quantity what it may, and the greatest quantity of taxes
that can be raised upon it. People have other uses for money besides
paying taxes; and it is only a proportional part of the money they can
spare for taxes, as it is only a proportional part they can spare
for house-rent, for clothing, or for any other particular use. These
proportions find out and establish themselves; and that with such
exactness, that if any one part exceeds its proportion, all the other
parts feel it.

Before the invention of paper money (bank notes,) there was no other
money in the nation than gold and silver, and the greatest quantity of
money that was ever raised in taxes during that period never exceeded a
fourth part of the quantity of money in the nation. It was high taxing
when it came to this point. The taxes in the time of William III. never
reached to four millions before the invention of paper, and the quantity
of money in the nation at that time was estimated to be about sixteen
millions. The same proportions established themselves in France. There
was no paper money in France before the present revolution, and the
taxes were collected in gold and silver money. The highest quantity of
taxes never exceeded twenty-two millions sterling; and the quantity of
gold and silver money in the nation at the same time, as stated by M.
Neckar, from returns of coinage at the Mint, in his Treatise on the
Administration of the Finances, was about ninety millions sterling. To
go beyond this limit of a fourth part, in England, they were obliged to
introduce paper money; and the attempt to go beyond it in France, where
paper could not be introduced, broke up the government. This proportion,
therefore, of a fourth part, is the limit which the thing establishes
for itself, be the quantity of money in a nation more or less.

The amount of taxes in England at this time is full twenty millions;
and therefore the quantity of gold and silver, and of bank notes, taken
together, amounts to eighty millions. The quantity of gold and silver,
as stated by Lord Hawkes-bury's Secretary, George Chalmers, as I have
before shown, is twenty millions; and, therefore, the total amount
of bank notes in circulation, all made payable on demand, is sixty
millions. This enormous sum will astonish the most stupid stock-jobber,
and overpower the credulity of the most thoughtless Englishman: but were
it only a third part of that sum, the bank cannot pay half a crown in
the pound.

There is something curious in the movements of this modern complicated
machine, the funding system; and it is only now that it is beginning
to unfold the full extent of its movements. In the first part of its
movements it gives great powers into the hands of government, and in the
last part it takes them completely away.

The funding system set out with raising revenues under the name of
loans, by means of which government became both prodigal and powerful.
The loaners assumed the name of creditors, and though it was soon
discovered that loaning was government-jobbing, those pretended loaners,
or the persons who purchased into the funds afterwards, conceived
themselves not only to be creditors, but to be the _only_ creditors.

But such has been the operation of this complicated machine, the funding
system, that it has produced, unperceived, a second generation of
creditors, more numerous and far more formidable and withal more
real than the first generation; for every holder of a bank note is a
creditor, and a real creditor, and the debt due to him is made payable
on demand. The debt therefore which the government owes to individuals
is composed of two parts; the one about four hundred millions bearing
interest, the other about sixty millions payable on demand. The one is
called the funded debt, the other is the debt due in bank notes.

The second debt (that contained in the bank notes) has, in a great
measure, been incurred to pay the interest of the first debt; so that in
fact little or no real interest has been paid by government. The whole
has been delusion and fraud. Government first contracted a debt, in the
form of loans, with one class of people, and then run clandestinely into
debt with another class, by means of bank notes, to pay the interest.
Government acted of itself in contracting the first debt, and made a
machine of the bank to contract the second. It is this second debt that
changes the seat of power and the order of things; for it puts it in
the power of even a small part of the holders of bank notes (had they no
other motives than disgust at Pitt and Grenville's sedition bills,) to
control any measure of government they found to be injurious to their
interest; and that not by popular meetings, or popular societies, but
by the simple and easy opera-tion of withholding their credit from that
government; that is, by individually demanding payment at the bank
for every bank note that comes into their hands. Why should Pitt and
Grenville expect that the very men whom they insult and injure,
should, at the same time, continue to support the measures of Pitt and
Grenville, by giving credit to their promissory notes of payment? No new
emissions of bank notes could go on while payment was demanding on the
old, and the cash in the bank wasting daily away; nor any new advances
be made to government, or to the emperor, to carry on the war; nor any
new emission be made on exchequer bills.

"_The bank_" says Smith, (book ii. chap. 2) "_is a great engine of
state_." And in the same paragraph he says, "_The stability of the bank
is equal to that of the British government_;" which is the same as to
say that the stability of the government is equal to that of the bank,
and no more. If then the bank cannot pay, the _arch-treasurer_ of the
holy Roman empire (S. R. I. A.*) is a bankrupt. When Folly invented
titles, she did not attend to their application; forever since the
government of England has been in the hands of _arch-treasurers_, it has
been running into bankruptcy; and as to the arch-treasurer _apparent_,
he has been a bankrupt long ago. What a miserable prospect has England
before its eyes!

* Put of the inscription on an English guinea.--_Author_.

Before the war of 1755 there were no bank notes lower than twenty
pounds.



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