us it is fingular to find fuch a payment denominated again in compu aion. We look alfo with the greatest apprehenfion to confequences whi. h may be attempted to be deduced from this doctrine of Mr. Thornton; and although there are many things in the works of Dr. A. Smith, the defence of which we would by no means undertake; yet we think it were to have bun withed, that when Mr. T. confidered what he faid on feignorage in his fourth look, he had joined with it what he had previou fly laid down in the fifth chapter of the first, as a mat e. of faki; tha in confequence of an impofition of that tax - 8. per cent. the French coin, when exported, was faid to turn home again of its own accord. If Mr. 1h. had d: ly confidered this allegation, he would either have proyed i falfity, or not have laid down an unlimited principle, from which the contrary may be inferred; that foreigners will not refufe to fling fuch coin into the melting pot, on account of the fathion", confidered merely as fuch.

With us the average price of bullion for long periods is higher than the mint price, as is shown in this Article; and, when foreigners get poffeffion of our guineas, and want to make payments here, there may be fome gain expected from throwing them into the melting-pot. But what is true of coin not bearing a feignorage, is by no means applicable to that which does; as, for example, that of France, when there was a duty of 81. per cent. on the coinage. For coin, compared with bullion, is an article of relative neceffity; and, if it cannot be obtained in any market for a lefs difference of price, that neceflity will fupport it, on the average, at 81. per cent. higher there, although a temporary demand for bullion may raife it more nearly to a level during the period of its exilt

ence.

Now fuppofe France to have had a vibrating balance with any flate which at a certain period had been against her, and fhe had been under a neceffity to export a quantity of her coin to pay her debt; if the coin had been melted down, the bullion produced will purchafe in France commodities in value as 100 only, or difcharge a debt to that amount; whereas, if the new bullion had been fuffered to have continued in the form of coin, the quantity of commodities it would have purchased, or the amount of debt it would have paid, would have been as 108; and from this property, it will be of a fomewhat higher value than bullion, even in paying a balance. Besides, when a feignorage takes place, the exifting amount of the coin of a flate is preferved much more equal, and all irregular vibrations in its amount introduce confufion in the markets;

they

they are not fubject to the fudden ebbs and flows from the operations of the mint and the melting-pot.

In the fixth chapter, are added fome further observations to what had been before faid, on the impracticability of increasing the fund of gold in the Bank; during a period of alarm, or that of the existence of an unfavourable balance; and, having gone through thefe topics, Mr. T. examines whether the Governors of the Bank are not cenfurable for not having fupplied themfelves with a fufficient quantity of gold, at a period antecedent to the fufpenfion of cash payments. He begins with the admiffion, that our national bank is, from its very nature, liable to that accident; and to this he adds, that "it has lately, for the first time, befallen it." P. 146. We confefs the addition excited our furprife. furprife. In J. Poftiethwayt's Hiftory of the Revenue, we find, in the fupply for the year 1697, an account of the loffes fuflained in the grants thereof; the third article of which is, "on 25,040l. in bank bills, when their discount was 151. per cent. 3,7561.; and by the 10th William III. c. 22, it was enacted, that " bank bills may be received in all payments to the King, from May 1, 1699, unto the end of the next feffions" **" if it be found fafe provided that they be not at any difcount". This extract is from the grants of the year 1699. How long prior to the discount of 151. per cent. the notes had fallen below par, cannot be from hence determined; but if the Bank had not flopped payment, no rate of discount could have taken place. About nine years after, during the victorious war of Anne, Fourbin, with whom the Chevalier de St. George embarked, flipped out of Dunkirk with a fquadron, having 5000 French troops aboard; and, although he failed of effecting a landing in the Firth of Edinburgh, as he intended, yet his near approach to the coaft occafioned a violent run upon the Bank, which threatened the ruin of public credit; and though the Treafury, and fome noblemen of wealth, tendered their affiftance, the evil ceafed only with the terrors of the nation. The difficulties of that great company, when the rebels advanced to Derby in 1745, are alfo ftill well remembered by many; as well as the agreement of the whole body of merchants in London, which at that period was necessary for the fupport of its credit. In the war of 1755, no danger threatened it. At the termination of the next, occafioned by the revolt of the colonies, it was found to be reduced to extreme difficulties; the greateft preffure of which took place three months after the peace, and the greatest exhauftion of their coin in about eight, when its amount was Tt

BRIT. CRIT. VOL. XXIV. DEC. 1804.

much

much lefs than at the actual fufpenfion of payment in Febru

ary, 1797.

Here we fee the juice of Mr. Th.'s admiflion, that banks of advance are by their nature fubject to temporary fufpenfions of payment: it is hence evident alfo, that the credit of their notes may be obliged to lean frequently on external fupport in war. Of the fix firfl wars after its foundation, in the fir, its notes fell to a great difcount; in the fecond, third, and fixth, they were fupported either by voluntary efforts and aflociations, or by Parliament; and at the end of the fifth, its flate was hazardous. In the firft, the danger of invafion was great; and the defcent of an enemy, actual or apprehended, has always rendered external fupport neceffary to their currency, as appears by the example of that war, and of the fecond, third, and fixth. It follows from this, that no measure could have been wifer than the fufpenfion of 1797; for, if the currency of the bank notes had been then entrusted to the fupport of a voluntary affociation, in a very short time it was to be feared, that the more timid members would have fallen off; their apprehenfions would have infected, and their example have countenanced, the withdrawing of the weak clafs, whofe confidence exceeded their's but by a fingle degree; and the affociation would have been very foon diffolved: therefore, the only meafure apparently remaining to be taken was, to give to the no es a modified but effective legality, as tender in payment. We here add, that banks of advance have one capital advantage over thofe of depofit, as they accelerate the increase of product and population with greater celerity; but

There is a different account of the cause of this great distress, in the Lords' Report on the Sufpenfion, p. 31, where it is afcribed to the return of peace; and nothing can carry a more fpecious appearance of truth; but it is, in fact, a ftrong argument against the ready admiffion of any conclufions on abftract principles, until the juftice of their application has been confirmed by actual accounts. This drain of cafh", it is faid, "proceeded from the great extenfion of commerce following the peace; which occafioned fuch an export of commodities, that the circulation was hardly fufficient to support it." From Mr. Chalmers's extracts from the Infpector's ledger it appears, that the great increase of the exports of that year was 1,672,000l. only; but an equal, or rather greater increafe had taken place in the preceding, or the laft year of the war; its amount having been 1,677,000l. But in the loweft ebb of its coffers, it feems the appre henfions of the Bank were much leffened, by the expectation of a favourable turn of exchange, and an "influx of wealth from the return of the amount of the exports"; but the ledger balance of 1783 fell fhort of that of 1782 by more than one half, they having been 1,237,000l. and 2,823,000l. respectively.

it

it were to be wifhed, that means were found to make them equally affiftant to the population of the country, as to that of the cities and manufacturing places; but, as political machines, facilitating the exertions of national power, we have, in another place*, fhown, that the preference afcribed to them over bank of depofit does not reft on any very ftrong ground. With refpect to the quantity of gold coin which has of late years been kept in ftore by the Bank, Mr. Thornton appears difpofed to admit it may have been too fmall; and thus the profits that company has made have been fomewhat more than neceffary: but if we attend to the mode he has laid down to determine thofe profits, the amount of its difpofeable effects being given, we fhall be induced to think, that he exprofes himself with a referve tempered with indulgence on this head; for he takes their amount, for fome years antecedent to the fufpenfion of cash payments, at 19 millions. This, and all other fuppofitions which he makes in the procefs, we fhall here proceed upon as extremely near the truth; and in particular, taking it as granted, that there is no latent error in any one unfavourable to the Bank.

The

The capital on which the dividends are formed is 11,626,cool. in the 3 per cents, the intereft of which we will with him take at 350,000l. which fum forms an integral part of the profit and of the dividends of the company. From the employment of their difpofeable effefs the expences of them must be paid, and their remaining profits derived. The charge of the former, or the expence of management, and an annual referve for the occafional renewals of their charter, Mr. Thornton here fuppofes to be nearly 200,000l. or the intereft of a loan of 4 millions. From a part of their loans, therefore, to this amount, no profit accrues to the Bank proprietors remaining 15 millions was therefore, in thofe years, the fum of their profitable loans and gold; the fum of the dividends at 3 per cent. being 350,000l. if the intereft of their profitable loans amounted to 116,6661, the Bank profit would be 41. per cent. and the amount of thefe loans (being all at 51. per cent.) 2 millions; but the remainder of their effects (15-24) 124 millions, would be in gold; and the addition of a fecond fum of 2 millions to thefe loans, and the diminution of the gold by the like amount, would add 11. per cent. more to the Bank profits. Therefore, taking the amount of the difpofeable effects, with Mr. Th. at 19 millions, the profits of the Bank being given, the difpofition of thefe effects, or the correspondent

* See Brit. Crit. for February, 1804, vol. xxiii. p. 126; note.

amount of their loans and their flore of gold, may be determined from the following table.

Mr. Thornton informs us, that 7 or 81. per cent. OR A IIITLE MORE, feems likely to be that profit which the Bank has in point of fact been gaining; but an admiffion which he makes almoft inflantly after, appears to discover it to be his opinion, that its amount was gl. per cent.; for he fays, the dividend had for fome time been increafed to 71. per cent.; and he fuppofes a yearly addition of 21. per cent. or 232,000l. had, during the laft years preceding 1797, been made to the capital, as the accumulation was then rapid. P. 150. He thinks, however, that perfons not engaged in great banking tranfactions should refrain from giving any opinions on fuch a subject. Notwithstanding this, we fhall not be deterred from following the train of reafoning, and flating the confequences of the facts laid down by Mr. Th. from which we are led to conclude, that the increafe of dividend, and rapid accumulation of capital, taking place, at the fame time that the gold poffeffed by the Bank bore a lefs proportion to its paper than it had done in former periods; as alfo to the mafs of their difpofeable effects; and their fecurities bearing intereft a much greater, whereby a high annual profit was obtained, had a strong tendency to produce fufpenfions, from fhocks which would otherwife have paffed off without effect.

In fhort, this fact brought forward by Mr. Thornton, points out a ftrong concurring caufe, if not the exclufive cause, of that diftrefs for coin which brought on the fufpenfion of payment in 1797; for the coffers of the Bank at that time were very low; but the addition of two millions to its coin would have made an abundance. In the confidence, moreover, which the poffeffion of that fum would have given them, they would have increased their notes to an amount which would have removed the obstruction to the London payments, which much augmented the demand of coin upon them from the rest of the kingdom; the alarm from the petty defcent, miftaken for an invafion in diftant parts of the country, would have been diffipated in two or three pofts; and, with overflowing coffers, and a diminished preffure, the danger would probably have blown over. In order to this, it was not neceflary to reduce their dividend, but

merely