第65章

In a city where there are public debts for considerable amounts the facility of a Bank enables one to buy and sell capital stock in a moment for enormous sums without causing any disturbance in the circulation. If at London a person sells his South Sea stock to buy stock in the Bank or in the East India Company, or hoping that in a short time he will be able to buy at a lower price stock in the same South Sea Company, he always takes Banknotes, and generally money is not asked for in respect of these notes but only for the interest on them. As one hardly spends one's capital there is no need to change it into coin, but one is always forced to ask the Bank for money for subsistence since cash is needed for small dealings.

If a Landowner who has 1000 ounces of silver pays 200 of them for the interest of public stock and spends 800 ounces of them himself, the thousand ounces will always require coinage. This proprietor will spend 800 and the Owners of the funds will spend 200 of them. But when these Proprietors are in the habit of speculation, selling and buying public stock, no ready silver is needed for these operations, bank notes suffice. If it were necessary to draw hard cash out of circulation to serve in these purchases and sales it would amount to a great sum and would often impede the circulation, or rather it would happen in that case that the stocks could not be sold and bought so often.

It is doubtless the origin of these capitals or money deposited in the Bank and drawn out only on rare occasions, such as when an owner of capital engages in some transaction or needs cash for small purchases, which explains why the Bank keeps in reserve only the fourth or sixth part of the silver against which it issues notes. If the Bank had not the funds of many of these capitals it wonld in the ordinary course of circulation find itself would in the ordinary course of circulation find itself compelled like private banks to keep half its deposits in hand to be solvent. It is true that the Bank books and its dealings do not distinguish those capitals which pass through several hands in the sales and purchases made in Change Alley. These notes are often renewed at the Bank and changed against others in purchases. But the experience of purchases and sales of stock show clearly that the total of them is considerable, and without these purchases and sales the sums deposited at the Bank would be certainly smaller.

This means that when a State is not in debt and has no need of purchases and sales of stock the help of a Bank will be less necessary and less important.

In 1720 the capital of public stock and of bubbles which were snares and enterprises of private companies at London, rose to the value of 800 millions sterling, yet the purchases and sales of such pestilential stock were carried on without difficulty through the quantity of notes of all kinds which were issued, while the same paper money was accepted in payment of interest.

But as soon as the idea of great fortunes induced many individuals to increase their expenses, to buy carriages, foreign linen and silk, cash was needed for all that, I mean for the expenditure of the interest, and this broke up all the systems, This example shows that the paper and credit of public and private Banks may cause surprising results in everything which does not concern ordinary expenditure for drink and food, clothing, and other family requirements, but that in the regular course of the circulation the help of Banks and credit of this kind is much smaller and less solid than is generally supposed.

Silver alone is the true sinews of circulation.