countries of similar climates produce similar commodities; and if Scotland would manufacture no printed goods, or any other commodity, for England or for any other nation, but would yet send her money for English hardware and china, England would send back this money for Scotch corn or Scotch cattle, which could be purchased more cheaply than the corn or cattle of England, in consequence of the change of prices resulting in both countries from the alteration of their respective currencies.

But

We are not sure that in what we have here urged we may not justly incur the imputation of having laboured at a truism. It seems an absurdity, proved by the mere statement, that a nation can ever exhaust itself of its own money by a universal spirit of prodigality; — in short, that a nation will ever buy with money from one country, without selling for money to some other. glaring as the error seems, when stated in its naked nature, it lay at the bottom of the whole commercial system which for ages held commerce bound in fetters (a system which even yet has only loosened, not lost, its hold); and it forms the staple theme in the letters of Mr. Malachi Malagrowther.

Auxiliary to this topic are two others, upon the strength of which much reliance is placed. The first is, the immense advantage which Scotland has gained by means of the cash accounts allowed by the bankers, which are supposed to be quite incompatible with the circulation of sovereigns; and the second is, the singular security against runs and failures which is alleged to exist in the Scotch system of banking.

The manner in which cash credits are conducted is thus stated: 'A person, either professional, engaged in commerce or manufactures, or otherwise so situated as to render an occasional command of money convenient, obtains a cash account to an extent proportioned to his funds, either by pledging his house, shop, or other real property, or by giving the bank two sufficient sureties to be answerable for the balance, if any, which shall be due to the company when the account is closed. The holder of the cash credit is then entitled to draw on the banker for such sums as he may occasionally need, within its limits. Hẹ lodges, on the other hand, with the bank, such cash as he may from time to time receive from the returns of his business, or otherwise. Interest is calculated on the advances drawn from the bank at five per cent., on the customer's deposits at three per cent. only, and the account is finally balanced twice a-year. The interest varies according to the general rate of the money-market. I have stated it upon the general and legal rate, which it never does or can exceed.'.

The great benefits, to trade, of this practice, are obvious enough, and were long ago explained by Adam Smith, in a passage of his work so remarkably resembling the extract we have just made, in substance and almost in language, that if Mr. Malagrowther shall ever read it, we are sure he will be quite startled at the coincidence between his views, thus far, of Scotch banking, and those of the great founder of political economy. But according to Adam

Smith, the benefits of cash credits have some reasonable limits; according to the author before us, these benefits are all but boundless. Of this practice he says:

The facility which it has afforded to the industrious and enter-* prising agriculturist or manufacturer, as well as to the trustees of the public in executing national works, has converted Scotland, from a poor, miserable, and barren country, into one, where, if Nature has done less, Art and Industry have done more than in perhaps any country: in Europe, England herself not excepted. Through means of the credit which this system has afforded, roads have been made, bridges built, and canals dug, opening up to reciprocal communication the most sequestered districts of the country — manufactures have been established, unequalled in extent or success wastes have been converted into productive farms the productions of the earth for human use have been multiplied twenty-fold, while the wealth of the rich, and the comforts of the poor, have been extended in the same proportion. And all this in a country where the rigour of the climate and sterility of the soil seem united to set improvement at defiance. Let those who remember Scotland forty years since bear witness if I speak truth or falsehood.

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There is no doubt that this change has been produced by the facilities of procuring credit, which the Scottish banks held forth, both by discounting bills, and by granting cash accounts. Every undertaking of consequence, whether by the public or by individuals, has been carried on by such means; at least exceptions are extremely rare.'— pp. 21-23.

We dare say that many of that class of honest people who talk prose half their lives without knowing it, have laid down these Letters, after an attentive perusal, with the sober belief, that the Scotch banks, by some art magic, have actually supplied the funds by which all these great improvements have been made, and without expending one shilling of their own capital, have saved the speculators from spending a shilling of theirs. Such is most certainly the sum of Mr. Malagrowther's argument, stripped of rhetoric and poetry, and dressed in plain English. Is it necessary to attempt seriously the dispersion of these visions of a fervid and creative fancy?

Let us, however, examine briefly the advantages really afforded by the accommodation, and see how far the substitution of sovereigns for small notes can interfere with the continuance of this practice.

It is important to distinguish here between the accommodation given by bankers in the discounting of bills, and that which is allowed by the cash accounts. It is not pretended that the former is to vanish from Scotland upon the appearance of gold; and yet the facilities afforded to trade by means of cash accounts, compared with those which result from the discounting of bills, are as a few drops of water to the ocean. The sums belonging to every trader, which pass through his hands, may be considered as divided into two portions; one, that part of the returns of his capital which he

re-invests in the purchase of the commodities in which he deals; the other, that portion which he is obliged to keep by him for the purpose of answering daily or hourly demands. The former usually comes to him in the shape of bills, given by those to whom he has sold the articles of his trade. These bills he turns into cash at his banker's, with infinite advantage to himself and to the community, resulting from the increased rapidity with which capital is thus made to circulate: but the other portion, which he retains to meet occasional demands, must be subtracted altogether from his commercial dealings; and as far as this portion is concerned, the system of cash accounts affords great and valuable accommodation; but to this portion that species of accommodation must be confined (so long as the issues of the banks do not surcharge the circulation); and the whole advantage to the trade consists simply in this: that he pays the banks 5 per cent. for the perpetual use of their notes, in lieu of this portion of his own money, and that, to this amount, he is enabled to extend his speculations in trade. His gain is precisely the difference between 5 per cent. and the regular profits of his capital on that amount which he would otherwise be compelled to hold, unproductive, for the purpose of defraying the daily or weekly expenses of his concern.

What proportion this part of a trader's capital may bear to his whole stock in trade must vary according to the nature of his dealings. The proportion which the whole amount of the sums so Occupied throughout the whole community bears to the whole stock or capital of the community must be small indeed, when it is con→ sidered that these sums cannot comprise any large proportion of the circulating medium. The circulating medium has been by some supposed to be one-thirtieth of the amount of a nation's capital. Some have rated it higher, and some lower. But it needs no calculation to perceive that the amount of capital represented by the sums which are lent on cash accounts, when compared with the whole stock of the nation, even should such cash accounts disappear for ever, must be too small to allow those who give the subject one moment's calm attention to sympathise with the prophetic fears of Mr. Malagrowther.

But why should these cash accounts cease upon the introduction of sovereigns as a substitute for one and two pound notes? The reason given for an apprehension of this event is a curious one. It is assumed that all profits on such accommodation must be destroyed by this change in the currency. The small notes now in circulation amount, it is said, to 1,500,000l.; and if the gain of five per cent. upon this be taken from the bankers, they must be compelled to close their cash accounts against the public. If the whole circulation were about to be made metallic, or if small notes only were advanced upon cash accounts, there might be some plausibility in this reasoning. But a very large portion of the sums lent in this way must necessarily consist of notes of 57. and upwards; and it is most

certain that the issues of these larger notes will be increased, when the smaller ones are removed to give way to coin. The smaller denominations of the currency are, for a variety of reasons, far more frugally used when they are metallic, than when they consist of bank notes; and we believe we are within the mark in saying, that with a metallic circulation of sovereigns, the gold will be seldom more than as one to four to the paper. Whether or not, under such circumstances, the competition among bankers be likely to ensure a continuance of cash accounts, even including sovereigns in the loans, we would willingly leave it to any "practical man" to determine.

On the security of the Scotch system of banking there can be little difference of opinion, if the terms be once understood. The essence of that system is, that it admits the establishment of large companies with extensive capital, conducting business upon principles fixed and known, and having in many distant parts of the country agencies and correspondents, by means of which the general state of credit throughout the community becomes known to the directors. This, and this only, is the real essence of the system; but by a confusion of ideas, not very uncommon upon these subjects, the adjunct is confounded with the substance, and because the Scotch banks have for a long course of years issued paper money, a paper currency is now said to form an essential part of the Scotch system of banking. We shall not here go over the ground which we have so lately travelled, nor repeat the reasons why no system of banking can secure a currency which consists wholly of paper, from the two great mischiefs incident to it,

ruinous

fluctuations in its value while the money dealers are solvent, and total loss of value from time to time, of portions of the currency, by their failure. That this last calamity is less likely under the Scotch system than any other that can be devised, may be fully conceded by those who are still forced to believe, that even under that system the calamity is possible. And it must not be forgotten, that the same causes which contribute to guard against it are such as would make the convulsion more terrible whenever it might occur. It is mere wildness to say, that the spirit of the people, or the interests of all classes in supporting the banks, can preserve Scotland from panics and runs, and failures among those, who in a commercial community deal in things so variable as paper money and commercial credit. There is one appalling fact, which, argue as people may upon mutual credit and ramified interests, recurs to the mind at every step of this discussion; namely, that Scotland, with a paper currency of three or four millions, payable in gold, can never, as matters now are, contain gold sufficient to pay one-fortieth part of that currency. To our understandings this single fact is decisive of the question. It is said that the Scotch banks invariably support each other in the hour of peril, and that those who apply to a tottering house never refuse the paper of another establishment.

But if the use of gold in England should ever introduce into Scotland a distaste for paper credit at a period of general alarm, and Edinburgh and Glasgow should become the seat of a delirious fit in the nation similar to that which London has so recently suffered, we ask, and with the question we may close our brief remarks upon the Letters of Mr. Malachi Malagrowther, what bank in Scotland would remain for one week with open doors?

ART. XI. Mission to the East Coast of Sumatra, in 1823, under the Direction of the Government of Prince of Wales Island: including Historical and Descriptive Sketches of the Country, an Account of the Commerce, Population, and the Manners and Customs of the Inhabitants, and a Visit to the Batta Cannibal States in the Interior. By John Anderson, Esq., late Agent to the Government of Prince of Wales Island, and Deputy-Secretary to Government, and Malay Translator. 8vo. pp. 424. Blackwood, Edinburgh; Cadell, London.

1826.

LITTLE was known in this country of the island of Sumatra until the year 1778, when Mr. Miller published an account of a particular district of it in the Philosophical Transactions. He was succeeded by Mr. Marsden, who published in 1783 a copious history of the island, which, from its great fertility, its abundance of gold mines, and its general beauty, he considered to be the Ophir of Solomon. It is divided by the equator into almost equal parts, the one extremity being in 5° 53' N., and the other in 5° 56' S. latitude. Its northern extremity is in longitude 95° 34′ E., and stretches into the Bay of Bengal. To the north-east it is divided by the straits of Malacca from the peninsula of that name; to the east it is divided by a narrow channel from the island of Banca; to the south it is divided from the island of Java by the straits of Sunda, and the south-western coast is exposed to the Indian ocean. It is 900 miles in length, and its breadth varies only from 100 to 150 miles.

Some commercial intercourse had always existed between Sumatra and Prince of Wales Island, and from the time that the East India Company acquired possession of the latter (1786) it has been their policy to extend that intercourse by every means in their power. In order to accomplish that object, and also to explore the eastern coast of the island, of which Mr. Marsden has given a very loose and imperfect sketch, missions were sent thither in 1806, 1807, 1808, 1818, and 1820, none of which were attended with the desired success. In 1822 a survey of the whole of the east coast was made under the directions of Lieutenants Rose and Morseby, which contributed to promote a more intimate correspondence between that island and Pinang. This excited the jealousy of the Dutch, who were anxious to divert the whole of the trade, if possible, to their own settlement at Malacca, and, it is understood,