FROM every channel of public intelligence we learn, that there is a disposition in many of the legis­latures of this country, to emit bills of credit by au­thority of government, and to make them in some mea­sure at least, or in some cases, a legal tender for debts already contracted. This is a matter of great deli­cacy and danger. It has occasioned a controversial discussion of the subject in pamphlets and periodical publications. A few plausible things, and but a few that deserve that character, have been published in defence of the measure. Many shrewd and sensible things have been offered against it; but even these last have not been so connected and satisfying, as they might and ought to have been. Some of the pieces have been verbose and declamatory, with ma­ny repetitions; others have been full of antitheses, quaint sayings, and witticisms, which have no great tendency to convince or persuade; and some have been mingled with the local and party politics of particular states. Perhaps these different ways of writing may be very proper for several classes of readers, and have a good effect; but there are certainly others who would require a different treatment, because [...] are owing not to deceitful [...] but [...] erroneous judgment. This has [...] to try what can be [Page 2] done upon the subject by dispassionate reasoning. By this I mean, endeavouring to carry the matter back to its first principles, to explain them in so simple a man­ner, as that the unlearned may understand them; and then to deduce the practical consequences with the general theory full in view.

IT is impossible to reach my purpose, without say­ing many things which in a separate and detached manner have been said by others; but this must be forgiven me; because I mean to lay the whole system before the reader, and every part in its proper order and connection. Let us then begin by considering what gave rise to money, and what is its nature and use? If there were but one man upon the earth, he would be obliged to prepare a hut for his habitation, to dig roots for his sustenance, to provide skins or fig-leaves for his covering, & c. in short, to do every thing for himself. If but one or two more were joined with him, it would soon be found that one of them would be more skilful in one sort of work, and another in a different; so that common interest would direct them, each to apply his industry to what he could do best and soonest; to communicate the sur­plus of what he needed himself of that sort of work to the others, and receive of their surplus in return. This directly points out to us, that a barter of com­modities, or communication of the fruits of industry, is the first principle, or rather indeed constitutes the essence, of commerce. As society increases, the par­tition of employments is greatly diversified; but still [Page 3] the fruits of well directed industry, or the things necessary and useful in life, are what only can be called wealth.

IN establishing a mutual exchange of these, the first thing necessary is a standard of computation, or common measure, by which to estimate the several commodities that may be offered to sale, or may be desired by purchasers. Without this it is easy to see, that the barter of commodities is liable to very great difficulties, and very great errors. This standard or common measure must be something that is well known to both parties, and of general or common use. As the first essays in any thing are generally rude and imperfect; so I think it appears from the monuments of remote antiquity, that in the early stages of society, cattle were the first things made use of as a standard ^*. But it would soon appear that this was a most inaccurate measure; because one ox might be as good as two, from size, fatness, or other circumstances. Therefore in place of this succeeded measures both of dry and liquid, that is, corn, wine, and oil. The first of these was of all others the most proper standard, because universally necessary, and [Page 4] liable to little variation. Men, upon an average, would probably eat nearly the same quantity in the most distant ages and countries. It seems to me, that this circumstance of a standard of computation being necessary in commerce, and the first thing necessary, has been in a great measure overlooked by most wri­ters on money, or rather it has been confounded with the standard value of the sign, although essentially different from it; and the equivocal use of the terms has occasioned great confusion. I must however ob­serve, not only that this must necessarily be taken in, but that if we confine ourselves to a standard of com­putation only, some known commodity, as measured grain, is better, and more intelligible and unalterable than any money whatever, that either has been or will be made. The great alteration in the value of gold and silver is known to every person who has but dipped into history; and indeed is known to many, even by memory, in this country, since its first settle­ment ^*.

[Page 5] BUT after a standard of computation had been a­greed upon, in commerce even of the most mo­derate extent, something farther would be abso­lutely necessary. The actual and immediate barter of commodities could in few instances take place. A man might have the thing that I wanted to pur­chase, but he might not need or desire what I was willing to give for it. Another might want what I had to spare, but not have what I wanted to pur­chase with it. Besides, bulky or perishable commo­dities could not be carried about at an uncertainty, or with safety. Therefore, it became very early neces­sary, that there should be some sign or signs agreed upon, which should represent the absent commodi­ties, or rather should represent the standard of com­putation, in all its divisions and multiplications. These signs must be such as could easily be carried about, and therefore could be readily applied to every kind of transactions, which were connected with the com­mutation of property.

LET us examine the nature and meaning of these signs more particularly. They are of the nature of a tally, that is to say, they are intended to mark and ascertain a fact. Now the fact is, that the person [Page 6] who can shew those signs, having purchased them by his goods or industry, is entitled to receive from somebody, a certain value, or to a certain amount, which they specify, of the standard of computation. They have always a reference to the standard of com­putation, and at last, by that known reference, the distinction between them and the standard of compu­tation is lost, and they become a secondary standard of computation themselves. Thus a piece is intended at first to be of the value of a measure of grain; but at last men come to make their bargain by the num­ber of pieces instead of the number of measures; us­ing the sign for the thing signified. Thus also, some­times at least, an ideal measure, generated by the other two, comes to be the standard of computation; as in England, the pound sterling is the money unit, though there be no coin precisely corresponding to it. This is sufficient to explain the relation of the sign to the standard of computation, and at last, if I may speak so, its consolidation with it.

I HAVE said above, that the person possessing the sign is entitled to receive a certain value from some­body. The reason of this is, because his debtor is not the same in every state of things. If we consi­der the sign as given from one individual to another, it is of the nature of a promissory note, and is a con­fession of having received so much property. Pro­bably there were often such signs or tokens given in the infancy of society; and it would then signify, that if the [...]eller were to come again, at a distance of [Page 7] time, and find the buyer in possession of such goods as he wanted, he would be entitled to receive the a­mount of the sign or token that had been given him. But the convenience of using signs is so great, that it would immediately occasion their being made use of by general consent, express or implied; and at last, the matter would be taken under the direction of the ruling part of the community. In both cases, but especially in this last, the society becomes bound to the person who receives the signs for his goods or industry, that they shall be to him of the value that they specify. I will afterwards show, that this was not the first but the last step taken in the use of signs, and give the reasons for it; but it is proper to men­tion it now, when we are considering the nature and use of signs in that single view.

LET it be observed here, that as it was before said, if we aim at no more than a standard of computation some commodities are not only as good but better than any money, so if we confine ourselves to a sign only separate from a standard, many things that might be named are not only as good, but far better than either the standard itself, or what we call money, because they are much more easily reckoned, trans­ported and concealed. This appears particularly from the state of signs in modern times, after so much experience and improvement has taken place. For if we can guard sufficiently against the dangers to which they are exposed, signs inconceivably faci­litate commerce. We can put any value we ple [...] [Page 8] in an obligation written on a few inches of paper, and can send it over the world itself at very little ex­pence, and conceal it so easily that there shall be no danger of its being taken from us.

BUT it must have appeared, and did speedily ap­pear, that all mere signs labour under an essential de­fect. They depend ultimately on the faith or credit of the persons using or answerable for them. Now whether these be individuals or the multitude by ge­neral custom and implied consent, or even the ruling part of the society, there is very great uncertainty. Therefore something farther is necessary to make a a complete symbol or medium of general commerce, and that is, a pledge or standard of value that may be a security or equivalent for the thing given for it, and at all times be sufficient to purchase a like value of any thing that may be needed by him that holds it. An absent commodity well known, or even an idea well understood, may be a standard of computa­tion and common measure; any thing almost what­ever may be a sign, though, since the art of writing has been known, paper is the best, but both are es­sentially defective; there is wanting a value in the sign, that shall give not only a promise or obligation, but actual possession of property for property.

THE mentioning of these three distinct ends to be [...] by the medium of commerce, and illustrating them separately, was not to convey the idea that [...] three steps of this kind taken at a distance of time from each other, or that men first continued [Page 9] long to deal in gross barter; and after that invented signs, and were content with them for another peri­od; and at last perfected the plan, by getting signs possessed of real value. On the contrary, it was to shew that any thing used as a medium of universal or general commerce, must be able to serve all the three forementioned purposes; and that if there is any production [...] nature or fabrication of art, that can unite the whole, at least as far as they are capable of being united, this must be the great desideratum. Now it has been found in experience, that the pre­cious metals, especially those now called by that name, gold and silver, do answer all the three ends in a great degree. It cannot be denied that they have been used for this purpose in fact from the earliest times, and through every nation in the old world; and indeed also in the new, with such exception only as will confirm the principles of the theory. If any man think that this has happened by accident, or through the whim or caprice of mankind, as one would sus­pect from the language sometimes used in speech and writing, he is greatly mistaken. No effect of whim or accident ever was so uniform or so lasting. The truth is, that these metals do possess in a degree su­perior to every thing else, the qualities necessary for the purposes mentioned above.

THIS will appear to any impartial person who will consider, with a view to the preceding principles, what qualities a medium of general commerce ought to possess. It ought, then, to be (1.) valuable; [Page 10] (2.) rare; (3.) portable; (4.) divisible; (5.) durable. Whoever will examine the matter with attention, must perceive that any one of these qualities being wholly or greatly wanting, the system would be either entirely ruined or remarkably injured. Let us examine them separately.

1. IT must be valuable; that is to say, it must have an intrinsic worth in itself, in substance distinct from the form. By value or intrinsic worth here, must be understood precisely the same thing that gives to every other commodity its commercial value. Do you ask what that is? I answer, its being either ne­cessary or remarkably useful for the purposes of life in a social state, or at least supposed to be so, and therefore the object of human desire. Without this it could be no more than a bare sign; nor indeed so useful in this view as many other signs. But we want something that must be not only a standard of com­putation, but a standard of value; and therefore ca­pable of being a pledge and security to the holder, for the property that he has exchanged for it. It is likely some will say, What is the intrinsic value of gold and silver? They are not wealth; they are but the sign or representative of commodities. Superfi­cial philosophers, and even some men of good under­standing, not attending to the nature of currency, have really said so. What is gold, say some, the value is all in the fancy; you can neither eat nor wear it; it will neither feed, clothe, nor warm you. Gold, say others, as to intrinsic value, is not so good [Page 11] as iron, which can be applied to many more useful purposes. These persons have not attended to the nature of commercial value, which is in a compound ratio of its use and scarceness. If iron were as rare as gold, it would probably be as valuable, perhaps more so. How many instances are there of things, which, though a certain proportion of them is not on­ly valuable, but indispensibly necessary to life itself; yet which, from their abundance, have no commercial value at all. Take for examples air and water. Peo­ple do not bring these to market, because they are in superabundant plenty. But let any circumstances take place that render them rare, and difficult to be obtained, and their value immediately rises above all computation. What would one of those who were stifled in the black hole at Calcutta have given to get but near a window for a little air? And what will the crew of a ship at sea, whose water is nearly expended, give for a fresh supply?

GOLD and silver have intrinsic value as metals, be­cause from their ductility, durability, and other qua­lities, they are exceedingly fit for domestic utensils, and many purposes in life. This circumstance was the foundation of their use as a medium of commerce, and was inseparable from it. No clearer proof of this can be adduced, than that in the earliest times, even when used in commerce, they were weighed be­fore they were divided into smaller pieces, and passed in tale. They must surely then have had intrinsic va­lue; for their value was in proportion to their [...] [Page 12] quantity. This circumstance as a sign made them worse, but as a valuable metal made them better. The same thing appears as clearly from the practice of modern times. Even when they are taken into the management of the rulers of society, and stamped un­der various denominations, there must be an exact regard had to their commercial value. The stamp upon them is the sign, the intrinsic worth of the me­tal is the value. It is now found, and admitted by every nation, that they must give to every piece that denomination and value in legal currency, that it bears in bullion; and if any do otherwise, there is neither authority nor force sufficient to make it pass ^*.

THE author referred to in the note has given us quotations from three persons of name in the literary world in support of a contrary opinion. The first is Dr. Franklin, whom he makes to say, "Gold and silver [Page 13] are not intrinsically of equal value with iron; a me­tal of itself capable of many more beneficial uses to mankind. Their value rests chiefly on the estima­tion they happen to be in among the generality of na­tions, and the credit given to the opinion that estima­tion will continue; otherwise a pound of gold would not be a real equivalent for a bushel of wheat." The second is Anderson on National Industry, who says, "Money, considered in itself, is of no value; but in many civilized nations, who have found how convenient it is for facilitating the barter or exchange of one com­modity for another, it has received an artificial value; so that although useless in itself, it has come to be accepted among all civilized nations, as a token prov­ing that the person who is possessed of it had given something of real value in exchange for it, and is on that account accepted of by another in exchange for something that is of real utility and intrinsic worth." The third is Sir James Stuart, who says, "By money, I understand any commodity which purely in itself is of no material use to man, but which acquires such an estimation from his opinion of it, as to become the universal measure of what is called value, and an adequate equivalent for any thing alienable." The name of any man how great soever, will not have much weight with me, when I perceive that in any instance he has mistaken his subject. This I believe has been the case with all the gentlemen just men­tioned. There is a considerable confusion in the ideas expressed by the last two; but the thing in which [Page 14] they all agree, and for which they are adduced by this author, is, that they seem to deny the intrinsic value of gold and silver, and to impute the estimati­on in which they are held, to accidental opinion. Now I must beg leave to observe, as to the comparison of the intrinsic worth of gold and iron, if it were possible to determine whether, on supposition of iron and gold being in equal quantity, the one or the other would be the most valuable, it would not be worth a single straw in the present question; for if iron were the most valuable, it would in that case be the money, and the gold would be but in the next de­gree. Accidental opinion has nothing to do with it. It arises from the nature of things. As to a pound of gold not being, as to intrinsic value, equivalent to a bushel of wheat, it might with equal truth be affirmed, that to a man perishing with hunger, a mountain of gold would not be equivalent to half a pound of bread. But is this any argument against the intrinsic commercial value of gold, as it has taken place since the beginning of the world.

As to the other two authors, they seem to say, that money is in itself of no value, and of no material use to man. If by money they mean gold and silver, the proposition is directly false; because they are both of material use for the purposes of social life. But what has led them into this error has been their abstracting the idea, and taking money in the single light of a sign, without considering it as a standard. Then no doubt, even gold, while it continues in this [Page 15] form, is of no other use than as a sign of property. But how little is this to the purpose? for it is equally true of every other commodity. A nail, while it continues a nail, is of no other use but joining boards together, or some similar purpose, and can neither be lock nor key; but a quantity of nails, or the iron which they contain, can be easily converted into ei­ther the one or the other. So a guinea, while it continues a guinea, is of no use whatever, but as an instrument of commerce; but the gold of which a guinea consists, can easily be converted into a ring, or any thing which its quantity will reach. This is what is called, with perfect propriety, its intrinsic value.

2. THAT which is the medium of commerce must be rare. It will not be necessary to say much upon this, because it has already received some illustration from what has gone before. It may however be ob­served, that the medium of commerce must not only be so rare, as to bring it within commercial value in ordinary cases, but it must be much more rare than most other things, that its value may be increased, and a small quantity of it may represent goods of considerable variety and bulk. If gold and silver were only twenty times as plentiful as they are at present, they would still have a proper value, could be bought and sold, and applied to many useful purposes, but they would be quite unfit for general circulation.

3. THE circulating medium must be portable. It must be capable of being carried to a distance with [Page 16] little trouble or expence, and of passing from hand to hand with ease and expedition. This is one of the reasons why it must be rare; but it deserves men­tion also by itself, because it is possible to conceive of things that may be both valuable and rare, and yet incapable of being carried about, and passing from one to another. Some precious drugs, and some cu­riosities, may be so rare as to have a high value, and yet may be quite improper for circulation.

4. THE medium of commerce must be divisible. It ought to be capable of division into very small quan­tities. This is necessary in order to answer the divi­sion of many commodities, and the conveniency of persons of different ranks. It is of such importance, that in the calculations of a complex and diversified commerce, we find divisions and fractional parts even of the smallest coins or denominations of money, that have ever yet been brought into use.

5. Lastly, The medium of commerce ought to be durable. It ought to have this quality on two ac­counts; first, that in perpetually passing from hand to hand, it may not be broken or wasted; and, se­condly, that if it is preserved or laid up, as may be sometimes necessary, and often agreeable or profit­able, it may not be liable to be speedily corrupted or consumed.

ALL these particulars are not of equal moment, and they have an intimate relation one to another; yet each of them is singly and separately of importance, perhaps more than will be at first view apprehended. [Page 17] I think it is also plain, that there is nothing yet known to mankind, in which they are all so fully united, as they are in gold and silver; which is the true reason why these metals have been applied as the instruments of commerce, since the beginning of the world, or as far back as history enables us to pe­netrate ^*.

It will probably throw some light upon the above theory, if we take a brief view of the matter, as it has taken place in fact from the beginning of the world. This may be done now to the greater ad­vantage, that the effects of particular causes, and the events that will take place in society in particular cir­cumstances, have been so fully ascertained by the ex­perience of ages, and the progress of science, that we [Page 18] are able to make a better use of the few remains of ancient history, than could have been done by those who lived nearer to the events which are recorded. It appears then, that the discovery and use of metals was one of the earliest attainments of mankind. This might naturally be expected if they were within reach at all, because of their very great utility in all works of industry, and indeed for all the purposes of con­venience and luxury. Therefore, I suppose this fact will not be doubted; but it is a truth neither so ob­vious nor so much known, that gold, silver, and brass, or rather copper, were the most ancient me­tals, and all of them antecedent to iron ^*. These metals being applied to all the purposes of life, came of course to constitute a great part of the wealth of the people of ancient times. I have mentioned brass, because it was one of the metals earliest known, and upon the very principles above laid down, was in the beginning made use of for money by many ancient nations. Its being now in a great measure left out [Page 19] is an illustration and proof of what has been already said. It is left out for no other reason than its having lost one of the necessary qualities, viz. rarity. That it was made use of for money amongst the Hebrews appears from many circumstances. We read of gold, silver and brass brought as contributions to the taber­nacle service in the time of Moses, and to the build­ing of the temple in David's. That brass was made use of as money in the early times of the Greeks and Romans, appears both from the assertions of his­torians, and from the very languages of both nations, for there it is made use of to signify money in gene­ral ^†. That it ceased to serve that purpose afterwards cannot be accounted for in any other way than as above, especially as the neglect of it has been just as universal as the use of it was formerly.

[Page 20] WE are also fully supported by history in affirming, that all these metals were at first estimated and passed in commerce by weight. We see that Abraham gave to Ephron for the cave of Machpelah, four hundred shekels of silver ^*. The Greek money was of different weights from the lower sorts to the ta­lent, which was the largest. The old Roman word Pondo was, as it were, the standard, and the divi­sions of it constituted their different denominations. From this we seem to have derived the English word pound. Very soon however they came to have either coins, or at least small pieces reckoned by number. Abimelech gave to Abraham, as Sarah's brother, one thousand keseph; and Joseph was sold for twen­ty keseph, and he gave to his brother Benjamin three hundred keseph. As the word keseph signifies silver, they must have been reckoned by tale, and are pro­bably very justly translated pieces. Agreeably to all this, the time when the Romans began to coin brass, and some hundred years afterwards silver and gold, is distinctly mentioned by the historians ^†.

[Page 21] IT may be proper to observe here, that several an­tiquaries have mentioned that some barbarous nations made use of baser metals, such as lead, tin, iron, and even leather, shells, and bark of trees for money. This is no way contrary to the above theory, for some nations might indeed use lead, iron and tin as things of value, upon the same principles as others used gold, silver and brass. I think it is said, and indeed is more than probable, that the nails given by our voyagers to the inhabitants of the South-sea islands, passed from hand to hand as instruments of commerce. As to leather, shells, &c. I suspect some part of this is fabulous; but if it did take place in any measure, it has been a rude essay, using the sign separately from the standard, and could not be of any great extent or long duration. We know indeed of one nation, after society had been far ad­vanced, that made use of iron, even when very plen­tiful, for money, viz. the Lacedemonians. But this was not at all from rudeness or ignorance; it was one of Lycurgus's extraordinary institutions, who intended by it (and did not conceal his intention) to banish riches, or real and proper money from the state. He indeed banished industry at the same time, for none of his citizens were allowed even to be husbandmen, or to cultivate their lands. This was [Page 22] left to the slaves. I do not find, therefore, that there is any thing in history deserving credit, that militates against the theory above laid down.

HAVING thus laid down the theory of money, and supported it by history and experience, I proceed to draw a few inferences from it, and apply them to some opinions which have taken place, and some measures which have been adopted or proposed with respect to currency and commerce in this country. In the first place, the above theory will enable every intelligent person to fix in his mind precisely what is or ought to be the meaning of a circulating medium. This phrase is in every body's mouth, and we meet with it continually in the essays published in the news­papers, and the speeches of senators in public assem­blies. We may say of this as controversial divines used to say long ago, that a misconsception of this is the protone pseudos, the radical error. Not long since a writer in one of the papers said it was agreed on all hands that there is at present a scarcity of a circulating medium. To this I answer, that it is not agreed upon on any hand, but among those who are wholly ignorant of the meaning of the expression. The circulating medium is not yours nor mine; it is not the riches of Holland, nor the poverty of Swe­den. It is that indefinite quantity of the precious metals that is made use of among the nations con­nected in commerce. Whether any particular per­son, city, or nation, is rich or poor, has moreover less comparatively of it, is nothing to the purpose. Eve­ry [Page 23] one will receive of the circulating medium that quantity which he is entitled to by his property or industry. It has been shown that rarity is one of the qualities of a circulating medium. If it were more rare than it is, a less quantity would be sufficient to represent a stated measure of property. If it were more plentiful than it is, a greater quantity would be necessary; but the comparative riches or poverty of nations or persons would be altogether the same.

Is any body ignorant that half a century ago in this country, a man might have bought a bushel of wheat for one quarter of a dollar, for which now he must pay a whole dollar. Was not the quarter dol­lar then as good a circulating medium as the whole dollar is now? And was not the man just as rich who had it in his pocket? Undoubtedly. Nay, I must further say, it was a better circulating medium, be­cause it was of less size and weight. Has not the quantity of the precious metals increased greatly since the discovery of the mines of South-America? Is not the quantity now necessary for any considera­ble purchase so great as to be burdensome in the trans­portation? The price of a good horse in silver would at present be a great incumbrance on a long journey. How easy were it to point out places and countries in which there is a greater quantity of the circulating medium than any where else, and yet at the same time greater national and personal poverty, and probably for this very reason. What would it signify to a la­bourer in the mines of Peru if he should get a half [Page 24] johannes, or even two, for a day's work, if at the same time he could hardly purchase with both as much provision as to keep body and soul together? Are not these things true? Are they not known to be so? What then must we say of the extreme ignorance and inattention, to say no worse, of those persons who are continually telling us that there is a want of a circu­lating medium? Are not gold and silver a circulating medium, whose currency is universal? Are these then too scarce for that purpose, when there is hardly a Negroe slave, make or female, without silver buckles in their shoes, and many of them with rings and o­ther ornaments of gold, which five hundred years ago would have denoted a Prince or Princess? Perhaps I have insisted longer on this than was necessary, but I have been induced to it by the frequent complaints upon this subject, and the absurd application of the phrase, a circulating medium. More reflexions will occur, connected with this subject, in the subsequent parts of my discourse. In the mean time I will close by saying to my reader, you and I may be poor men, the state in which we live may be a poor state, we may want property, rents, resources and credit, but a circulating medium we want not.

2. FROM the principles above laid down it will appear, that money having as one of its essential qualities, an intrinsic, that is to say, a commercial value, it must be not only a sign and standard or a medium of commerce, but also itself a commodity, or a subject of commerce. There are many transac­tions [Page 25] respecting money in a trading nation, in which it is considered singly in this view. These it is un­necessary for me to enumerate, but even where it is applied directly or principally as a medium of aliena­tion, its value as a standard doth and must always follow and accommodate itself to its value as a com­modity. Hence it follows necessarily that money must be subject to every rule that other commodities are subject to in buying and selling. One of the chief of these is, that it must rise and fall in price according to the quantity that is brought to market, compared with the demand there is for it. This is an unavoidable consequence, and as necessary in the case of money as in that of any commodity whatever. If a greater quantity of money than before is brought into any country, even though brought by the fair­est and most honourable means, viz. increasing in­dustry and profitable trade, it will have the effect of raising the price of other commodities in general, and of industry, which is the source of all commodi­ties. But we must observe, that men are apt to view this in a wrong light. One commodity may rise or fall by its own plenty or scarceness; but when there is a great and general rise of prices, of all commo­dities, it would be at least as proper, or rather much more so, to say that money had fallen than that goods had risen.

WE had so large experience of this during the war, by the excessive emissions of paper money, that it needs hardly any illustration. It is true, some per­sons [Page 26] did then and do now suppose, that the depreci­ation of the money was owing as much to the disaf­fection of some inhabitants, and the counterfeiting, and other artful endeavours of our enemies to destroy it, as to the increased quantity. But in this they were quite mistaken. Jealousy or suspicion of the money would have had very different effects from a gradual continual rise of prices. If I meet with a suspicious piece of money I do not raise the price of my goods, but refuse to sell them. This was indeed the case with all those who doubted the money of Congress in time of the war. Besides it is plain, that the American cause was most doubtful, and its enemies most numerous in the years 1776 and 1777, and yet the currency of the money was then very general, and its depreciation slow; whereas in the three following years, when, in consequence of the French treaty and other European alliances, the con­fidence of the public in the cause was increased, the depreciation was accelerated in an amazing degree. I must also here make a remark upon another opinion often expressed during the war, that the depreciation must have been owing to other causes than the quan­tity, because it was greater than what they called the natural depreciation, in consequence of the quantity. By this they meant, that it was not regular; but when the quantity had arisen, suppose to five for one, the depreciation was as fifteen or twenty for one. These persons did not understand the depreciation of a commodity [...] consequence of its quantity, for it [Page 27] is not regular and equable, as in arithmetical pro­gression, but rapid and increasing, so as soon to get beyond all computation. If there is in any country but one tenth part more of any commodity than there is any demand for, the price will probably fall more than one half, and if there is double or treble the quantity needed, it will be what merchants call a drug, that cannot be sold at all, but if it be a pe­rishable commodity, must sink in the hand of the possessor.

I HAVE said above that the increase of money, even though in consequence of national prosperity, that is to say, internal industry and profitable trade, will yet necessarily have the effect of raising the price of industry, and its fruits. This, however, must evidently be in a far higher degree, and attended with much more pernicious effects, when it is thrown into circulation without industry; as when silver is found in capacious mines, or paper is issued by the authority of a state, without measure and without end. I verily believe that if as many millions of si­lver dollars had fallen from heaven and been thrown into circulation as there were paper ones issued by the United States, the disorder would have been as great or greater than it was. At least it would have been so at first, the difference would have been, that silver being current over all, it would have soon gone abroad and found its level, so that the alteration would have been ultimately not in the United States, but in the general circulating medium over the whole [Page 28] earth. Those however among whom it was first found, and who received it without industry, would have suffered most by it. Among them it would have produced laziness and luxury. Other nations would have drained it from them only by superior industry. The state of the Spanish monarchy at present ought to be, and indeed in a great measure has been, a lesson to the whole world. At the time when they got possession of South-America they were the most powerful and wealthy state in Europe. Would any man at that time have been reckoned found in his judgment who should have affirmed that they would grow poor by means of the gold and sil­ver mines? Yet it has happened so, and now there is hardly any politician so shallow but he can assign the reason of it. They thought that gold and silver would at once procure them every thing without working; but forgot that the more they had of it they must pay so much the more to those who were willing to work for them.

3. THE above principles will clearly shew, that what is commonly called paper money, that is, bills bearing that the person holding them is entitled to receive a certain sum specified in them, is not pro­perty speaking money at all. It is barely a sign with­out being a pledge or standard of value, and there­fore is essentially defective as a medium of universal commerce. I will afterwards speak of the different kinds of it, and point out their real and proper uses; but in the mean time I observe, that to arm such [Page 29] bills with the authority of the state, and make them a legal tender in all payments, is an absurdity so great that is not easy to speak with propriety upon it. Per­haps it would give offence if I should say, it is an absur­dity reserved for American legislatures; no such thing having ever been attempted in the old countries. It has been found, by the experience of ages, that money must have a standard of value, and if any prince or state debase the metal below the standard, it is utter­ly impossible to make it succeed. How then can it be possible to make that succeed which has no value at all? In all such instances there may be great inju­ries done to particular persons by wiping off debts; but to give such money general currency is wholly impossible. The measure carries absurdity in its very face. Why will you make a law to oblige men to take money when it is offered them? Are there any who refuse it when it is good? If it is necessary to force them, does not this demonstrate that it is not good? We have seen indeed this system produce a most ludicrous inversion of the nature of things. For two or three years we constantly saw and were in­formed of creditors running away from their debtors, and the debtors pursuing them in triumph, and pay­ing them without mercy.

LET us examine this matter a little more fully. Money is the medium of commercial transactions. Money is itself a commodity. Therefore every trans­action in which money is concerned, by being giv­en or promised, is strictly and properly speaking a [Page 30] bargain, or as it is well called in common language, an agreement. To give, therefore, authority or no­minal value by law to any money, is interposing by law in commerce, and is precisely the same thing with laws regulating the prices of commodities, of which, in their full extent, we had sufficient expe­rience during the war. Now nothing can be more radically unjust, or more eminently absurd, than laws of that nature. Among all civilians, the trans­actions of commerce are ranged under the head of contracts. Without entering into the nicer distinc­tions of writers upon this subject, it is sufficient for me to say, that commerce, or buying and selling, is founded upon that species of contracts that is most formal and complete. They are called in the tech­nical language, Onerous contracts, where the proper and just value is supposed to be given or promised on both sides. That is to say, the person who offers any thing to sale, does it because he has it to spare, and he thinks it would be better for him to have the money, or some other commodity, than what he parts with; and he who buys, in like manner, thinks it would be better for him to receive the commodity, than to retain the money. There may be mistakes or fraud in many transactions; but these do not af­fect the argument in the least. A fair and just value is always supposed or professed to be given on both sides.

WELL! is it agreed that all commerce is founded on a complete contract? Let then any person who will, [Page 31] open as many books as he pleases written upon the subject, and tell me whether he does not always find there that one of the essential conditions of a lawful contract, and indeed the first of them, is, that it be free and mutual. Without this it may be some­thing else, and have some other binding force, but it is not a contract. To make laws therefore, regu­lating the prices of commodities, or giving nominal value to that which had no value before the law was made, is altering the nature of the transaction alto­gether. Perhaps a comparison of this with other transactions of a different kind might set this matter in a clear light. Suppose a man were to say to one of our lawgivers upon this subject as follows: When you make a law laying on a tax, and telling me I must pay so much to the public and common expen­ces of the state, I understand this very well. It fall, under the head of authority. You may lay on an improper or injudicious tax that will operate unequal­ly, or not be productive of what you expect; but still this is within your line, and if I have any com­plaint, I can only wish that at the next election we may get wiser men. Again, a Justice of Peace in time of war may give a press-warrant, and take my horses and waggons to transport provisions or bag­gage for an army. I understand this also; writers and reasoners tell me that it falls under the head of what they call the rights of necessity. The meaning of this is, that no civil constitution can be so perfect but that some cases will occur, in which the property [Page 32] of individuals must give way to the urgent call of common utility or general danger. Thus we know, that in cities, in case of a fire, sometimes a house, without the consent of its owner, will be destroyed to prevent the whole from being consumed. But if you make a law that I shall be obliged to sell my grain, my cattle, or any commodity, at a certain price, you not only do what is unjust and impolitic, but with all respect be it said, you speak nonsense; for I do not sell them at all; you take them from me. You are both buyer and seller, and I am the sufferer only.

I CANNOT help observing, that laws of this kind have an inherent weakness in them; they are not on­ly unjust and unwise, but for the most part impracti­cable. They are an attempt to apply authority to that which is not its proper object, and to extend it beyond its natural bounds; in both which we shall be sure to fail. The production of commodities must be the effect of industry, inclination, hope, and in­terest. The first of these is very imperfectly reached by authority, and the other three cannot be reached by it at all. Perhaps I ought rather to have said, that they cannot be directed by it, but they may be greatly counteracted; as people have naturally a strong disposition to resist force, and to escape from constraint. Accordingly we found in this country, and every other society who ever tried such measures found, that they produced an effect directly contrary to what was expected from them. Instead of pro­ducing [Page 33] moderation and plenty, they uniformly pro­duced dearness and scarcity. It is worth while to observe, that some of our legislatures saw so far into these matters as to perceive that they could not re­gulate the price of commodities without regulating the price of the industry that produced them. There­fore they regulated the price of day-labourers. This however, though but one species of industry, was found to be wholly out of their power.

THERE were some instances mentioned at the time when these measures were in vogue, which superficial reasoners supposed to be examples of regulating laws attended with good effects. These were the regulation of the prices of chairs, hackney coaches, and ticket por­ters in cities, public ferries, and some others. But this was quite mistaking the nature of the thing. These instances have not the least connexion with laws regulating prices in voluntary commerce. In all these cases the persons who are employed solicit the privilege, obtain a licence, and come under volunta­ry engagements to ask no higher prices; so that there is as complete a free contract as in buying and selling in open shops. I am so fully convinced of the truth and justice of the above principles, that I think, were it proper at this time, I could shew, that even in the most enlightened nations of Europe there are still some laws subsisting which work in direct oppo­sition to the intention of their makers. Of this kind in general are the laws against forestalling and regrat­ing. They are now indeed most of them asleep, and [Page 34] what the lawyers call in desuetude; but so far as they are executed, they have the most powerful tendency to prevent, instead of promoting, full and reasona­ble markets. As an example of our own skill in that branch, a law was past in Pennsylvania in time of the war precisely upon that principle. It ordained that in all imported articles there should be but one step between the importer and consumer, and there­fore that none but those who bought from the ship should be allowed to sell again. I cite this instance by memory, but am certain that such was the spirit of the law. The makers of it considered that every hand through which a commodity passed must have a profit upon it, which would therefore greatly aug­ment the cost to the consumer at last. But could any thing in the world be more absurd? How could a family at one hundred miles distance from the sea­port be supplied with what they wanted? In oppo­sition to this principle it may be safely affirmed, that the more merchants the cheaper goods, and that no carriage is so cheap, nor any distribution so equal or so plentiful as that which is made by those who have an interest in it, and expect a profit from it.

I HAVE gone into this detail in order to show that tender laws, arming paper, or any thing not valuable in itself with authority, are directly contrary to the very first principles of commerce. This was certain­ly the more necessary, because many of the advocates for such laws, and many of those who are instru­mental in enacting them, do it from pure ignorance, [Page 35] without any bad intention. It may probably have some effect in opening their eyes to observe, that no paper whatever is a tender in any nation in Europe. Even the notes of the bank of England, which are as good as gold, and those of the bank of Holland, which are considerably better ^*, are not armed with any such sanction, and are not a legal tender in the proper sense of that word. That is to say, though I suppose both of them, or any other paper circulat­ing in full credit may be a tender in equity, so far as that the person offering them without suspicion of their being refused, could not be condemned in any penalty or forfeiture; yet if the person who was to receive the money should say, I am going abroad, I want gold or silver; it would lie upon the debtor and not the creditor to go and get them exchanged. We may perhaps even say more, viz. that the coin­age of gold and silver in any country is not so much, if at all, to oblige persons to receive it at a certain [Page 36] value, as to ascertain them that it is of the value stampt upon it. Without this ignorant persons would be continually at a loss to know the fineness and the weight of pieces offered to them. This will appear from the two following remarks. (1.) If by any accident in the coinage, or fraud in the officers of the mint, some of the pieces had not the full quantity, or were not of sufficient fineness, though the stamp were ever so genuine, if I could discover the defect, I should be justified in refusing it. (2.) There is sometimes a fluctuation in the comparative value of gold and silver, and in these cases, though no doubt a debtor, till the error that has crept in be rectified by authority, has a right to pay in any lawful money; yet if I were selling goods, and gold had fallen in its value, I might safely say to the cus­tomer, in what coin are you to pay me? I will give you a yard of this silk for twenty-one sterling silver shillings, but if you give me a guinea I must have another shilling before I will part with it. The whole of this serves to show that nothing shore of real money, which is of standard value, ought [...] be enforced by law in a well regulated society.

4. THE principles above laid down will enable us to perceive clearly what is the nature of paper circu­lating as a medium of commerce, what is its real and proper use, and what are its dangers and defects. As to its nature, it is a sign but not a standard. It is properly an obligation, or to use a modern com­mercial phrase, it is a promissory note. It is not [Page 37] money, as has been shewn above, but it is a promise of some person or body of men to pay money either on demand or at a particular time, or some general undefined future time. Obligations of this nature are of more sorts than one. Sometimes they are given by particular persons, or trading companies, who are considered as persons; and frequently in A­merica they have been given by the legislature of the state. In the general definition I have included all kinds of negotiable paper, but it will not be neces­sary to insist upon more than two of them, viz. the notes of banking companies, and state [...]. Bills of exchange are not supposed to pass through many hands, but to proceed as speedily as may be to the place of their payment. Government securities are only bought and sold like other property, and so any [...] other private obligations may be transferred a often as people are willing to receive them; but the notes of banking companies, and the state emis­sions of this country are intended to be, properly speaking, a circulating medium. They are of various regular denominations, and intended to answer all the purposes of money in the smaller transactions of society as well as the larger, and even to go to market for purchasing the necessaries of life.

As to value, such obligations must plainly depend upon the credit of the subscriber or obligor, and the opinion or expectation of the receiver. These are mutually necessary to their use in commerce. Let the resources of wealth of the subscriber be what [Page 38] they may, it is the public opinion that must ulti­mately give them currency. This opinion however may be in some instances better, and in some worse founded. That paper which may with most certainty and expedition be converted into gold and silver, seems evidently to have the advantage on this account. Therefore the notes of banking companies, while they maintain their credit, and continue to pay on demand, appear to be the best calculated for general use. They seem also to have another advantage, that private persons and companies are upon a footing with the holder of the bills. He can arrest them, and bring them to account, and have justice done upon them; whereas he cannot call the legislature to account, but must wholly depend upon their fide­lity as well as resources. Yet it must be owned there have not been wanting instances formerly in this country, in which paper emissions by the states have obtained full confidence, and met with no impedi­ment in circulation.

LET us now consider what is the proper use of paper currency, or whether it be of any real use at all. Many persons in Europe have declared against it altogether as pernicious. I will endeavour to state this matter with all the clearness I am capable of, and to give the reasons for what I shall advance. We have seen above that nothing can be more absurd than to say that we now want a circulating medium, and that paper is necessary for that purpose. A cir­culating medium we have already, not in too small, [Page 39] but in too great quantity; so that any person who understands the subject may perceive that gold and silver, especially the last, is losing at least one of the qualities necessary for that purpose, and becoming too bulky and heavy for easy and convenient trans­portation. Brass, as has been shown above, was once as just and proper a medium of commerce as gold and silver are now. It has all the qualities necessary for that purpose still, except rarity; so that if it were not too plentiful and too cheap, it would be money to this day. It is probable that this cir­cumstance of the abundance and weight of the pre­cious metals is what gives to many such an inclina­tion for paper money. This will appear strange to some, yet I believe it is at bottom just. The cry with many is, we must have paper for a circulating medium, as there is such a scarcity of gold and silver. Is this just? No. They mistake their own poverty or the nation's poverty, for a scarcity of gold and silver, whereas in fact, gold and silver used as a cir­culating medium are so cheap, and the quantity of a moderate sum is such an incumbrance that we want paper, which can be much more easily carried, and much more effectually concealed. So that, contrary to the vulgur idea, we are obliged to have recourse to paper in several cases, not for want of gold and silver, but their too great abundance.

THIS will appear to be a very uncouth idea to many persons. What, they will say, too great a­bundance of gold and silver! when I go about from [Page 40] day to day, and cannot collect what is due to me; when my creditors are calling upon me and I cannot satis­fy them. There is a scarcity of money every where. What shall be said to satisfy these persons? I must tell them plainly, It is their poverty, or the nation's poverty, and not a want of gold and silver, and if there were an hundred times as much gold and silver in circulation as there is, their poverty and difficulties would be just the same. If these persons read the scriptures, they may there learn, that in Solomon's time the silver was as plentiful as stones in Jerusalem; probably they will think that all the people in Jeru­salem at that time must have lived like Princes, but they must be told, that it was added as a necessary consequence, that it was nothing accounted of in the days of Solomon.

IF paper then is not needed as a circulating medi­um, what benefit arises from it? I answer, the uses of paper substituted for money may be summed up under the two following heads. (1.) It is useful for facilitating commerce. (2.) It is useful for antici­pating property or extending credit. First, it is useful for facilitating commerce. Nothing can be more advantageous for that purpose than bills of ex­change, which, without the actual transportation of money or goods, can transfer property even to the most distant places with the most perfect facility. There have been many persons who have doubted whether any other sort of paper currency is not upon the whole hurtful, but the benefit of this is beyond [Page 41] all question. We shall afterwards compare the ad­vantages and disadvantages of paper money; but at present let us leave out the consideration of the evil that it does, and it is manifest that there is so great a facility and safety in the transportation of paper above that of gold and silver, that it must greatly expedite all mercantile transactions, internal and external. Suppose one hundred thousand pounds were to be transported but three hundred miles, if it were to be carried in silver, what an immense load would it be? But besides the weight, as it could not be concealed, there would be a very great risk of inviting robbers to share in it. Let it be carefully observed, that this good effect of paper is not from the additional quantity thrown into circulation, but from its possessing some advantages superior to gold and silver, provided that the credit of it is supported. Nor must it be forgotten, that it is in great and ex­tensive negotiations only, that this advantage is pos­sessed by paper; for in smaller bargains and that in­tercourse between man and man that is carried on every hour, it possesses no advantage at all; on the contrary, it is liable to wear and waste, and there­fore the smaller coins are in all respects to be pre­ferred.

2. ANOTHER use of paper in commerce is to ex­tend credit. Though in very large transactions the ad­vantage of paper may be great, as it facilitates com­merce; yet when we consider paper as generally cir­culating, [Page 42] and doing the office of gold and silver, it is by the extension of credit only, or chiefly, that it can be of any advantage. It is unnecessary for me, and perhaps not in my power, to mention all the ways in which credit may be increased or facilitated by pa­per. Some will probably be mentioned afterwards; at present my business is to shew, that giving credit is one of the advantages, and indeed in my opinion it is the principal advantage, to be derived from paper circulation of any kind. There are many people whose industry is damped or limited by want of stock or credit, who if they were properly assisted in these respects, might do signal service to themselves, and the community of which they are members. It has been generally said, and I believe with truth, that the institution of the banks in Scotland has improved the country in the course of little more than half a century to a degree that is hardly credible. It is also probable, that the manufactures and commerce of England have been greatly promoted by the easy and regular methods of obtaining credit from the public and private banks. I am sensible that some very in­telligent persons in Britain have condemned the pa­per circulation even there, and affirmed that it does more harm than good. It is not necessary for me to enter into the arguments on either side of that question. All that I am concerned to prove is▪ that if it does good upon the whole, or whatever good it does in any degree, arises from the credit which it [Page 43] is the occasion of extending; and this I think can hardly be denied ^*.

LET us next consider the evil that is done by paper. This is what I would particularly request the reader to attend to, as it was what this discourse was chiefly intended to evince, and what the public seems but little aware of. The evil is this: All paper intro­duced into circulation, and obtaining credit as gold and silver, adds to the quantity of the medium, and thereby, as has been shown above, increases the price of industry and its fruits ^†. This consequence is unavoidable, and follows as certainly from good pa­per as bad, or rather more certainly, for the medium is increased only by that which obtains credit. At [Page 44] the same time this consequence is local, because the paper does not pass among other nations, and there­fore it works against the interest of the people who use it, and necessarily draws off their gold and silver, which must be made use of in all foreign payments. Men may think what they please, but there is no contending with the nature of things. Experience has every where justified the remark, that wherever paper is introduced in large quantities, the gold and silver vanishes universally. The joint sum of gold, silver, and paper, current, will exactly represent your whole commodities, and the prices will be according­ly. It is therefore as if you were to fill a vessel brim full, making half the quantity water and the other oyl, the last being specifically lightest will be at the top, and if you add more water, the oyl only will run over, and continue running till there is none left. How absurd and contemptible then is the reasoning which we have of late seen frequently in print, viz. the gold and silver is going away from us, therefore we must have paper to supply its place. If the gold and silver is indeed going away from us, that is to say, if the balance of trade is much against us, the paper medium has a direct tendency to increase the evil, and send it away by a quicker pace.

[Page 45] I HAVE said, that this consequence follows from all paper, as such, good and bad, so far as it enters into circulation; but every one must perceive that there is a peculiar, and indeed a different evil to be feared from paper of a doubtful kind, and especially from that which being doubtful is obliged to be sup­ported by coercive laws. This must raise general suspicion, and consequently bring on a stagnation of commerce, from universal and mutual distrust. For the same reason it must annihilate credit, and make every cautious person lock up his real money, that is, gold and silver, as he cannot tell but he may be cheated in the repayment. This evil is very exten­sive indeed, for it makes people suspicious, not only of what is, but what may be. Though the injury should be but partial, or inconsiderable at present, it may become wholly ruinous by some unknown fu­ture law.

HENCE it may be seen, that the resolution of the question, whether it is proper to have paper money at all or not, depends entirely upon another, viz. whether the evil that is done by augmenting the cir­culating medium, is or is not overbalanced by the fa­cility given to commerce, and the credit given to particular persons, by which their industry and ex­ertions are added to the common stock. As it is upon this that the question depends, we shall find, that as the circumstances of a nation may be different, it may be for or against its interest to use a paper medium. If any nation were in such circumstances [Page 46] as that credit were either not necessary or easily ob­tained; if the country were fully settled, and the inhabitants fully employed in agriculture, manufac­tures, and internal commerce, with little foreign trade, any addition to the true money would be un­necessary or pernicious. This is probably the state of [...] present, perhaps in some degree also of France. On the contrary, if a nation had an exten­sive and complicated commerce, and much land to settle and improve, the facilitating of commerce, and extending of credit, might be highly beneficial. I do not pretend to so exact a knowledge of the state of this country, or the different parts of it, as to judge with absolute certainty of what is necessary or would be useful to it, but am inclined to think that there must be something in the state of things in America that makes it either more necessary or more expedient to have paper here than in the European states. We are assured that in former times many of the states, then colonies, thought it a privilege to be allowed to strike paper money; and we are told by persons of good understanding, that it contributed to their growth and improvement. If this was the case, I am confident it was chiefly because it was emitted in the way of a loan-office, and by giving credit to husbandmen, accelerated the settlement and improve­ment of the soil. This question I do not take upon me to decide, and therefore in what follows, desire I may be considered as speaking only hypothetically, the rather, that at present the inclination after paper [Page 47] of some kind or another seems to be so strong, that it would be in vain to withstand it.

If therefore paper is to be employed in circula­tion, we may see from what has been said above, what are the principles on which it ought to be con­ducted, the ends that ought to be aimed at, and the evils that ought to be avoided. The ends to be aimed at are, the facilitating of commercial transactions, and extending of credit to those who are likely to make a proper use of it. The plan should be so con­ceived, as that the increase of the circulating medium should be as little as possible, consistently with these ends. It should be perfectly secure, so as to create an absolute confidence. And as it is of the nature of an obligation▪ no force whatever should be used, but the reception of it left entirely to the inclination and interest of the receiver. It may be safely affirm­ed, that any deviation from these principles, which are deduced from the theory above laid down, will be an essential defect in the system. If we enquire what sort of paper will best answer this description, we find that there is no other sort used in Europe than that of banking companies. The government stamp­ing paper to pass current for coin is unknown there. Notwithstanding the immense sums which have been borrowed by the English government, they always prefer paying interest for them, to issuing paper with­out value for money. The only thing resembling it in the English history is, James the Second coining base metal, and affixing a price to it by proclama­tion; [Page 48] a project contemptible in the contrivance, and abortive in the execution. This seems to be a con­siderable presumption, that the measure is upon the whole not elegible ^*.

THE paper of banking companies has many advan­tages. It is considered as perfectly safe, because it can be exchanged for gold and silver at any time upon demand. Having this security at bottom, it is per­fectly convenient for transportation, which indeed is common to it with all paper. In addition to this, it is considered as the the principal business of all banks to give credit, which, though directly only in favour of commercial, is ultimately useful to ma­ny different classes of men. I may upon this observe, that it is the duty of banking companies so to con­duct their operations as to extend their regular credit as far as is fafe for themselves. If instead of this, as has been supposed at least to have been done by some banks in Britain, they circulate their notes by agents, making purchases in different and distant places, that the sum issued may very far exceed the sum necessary to be kept for probable demands; they are in that case not serving the public at all, but using the mo­ney [Page 49] of other people to their own profit. It is also to be observed, that the denomination of their notes should never be very small, it should indeed be as high as is consistent with such a general use as will bring in a sufficient profit. Very small denominations of paper do the greatest injury by entering into uni­versal circulation, and chiefly affecting the industrious part of the community. It was a very great com­plaint against some banks in Scotland, that they brought down the denominations of their notes as far as ten shillings, and some of them even five shillings. If this was an evil, what shall we say of paper, as has been seen in this country, as low as one shilling, six-pence, or even three-pence value. It is a rule that will hardly admit of any exception, that the higher the denominations of paper bills, the greater the benefit and the less the evil; and on the contrary, the smaller the denominations, the greater the evil and the less the benefit. High sums in paper obli­gations may perhaps change hands once a week, but a shilling or six-penny ticket may be in fifty hands in one day.

I MUST mention here what has been often objected against banks in America, which, if just, would, from the reasoning in the preceding part of this dis­course, tend to their condemnation. It is, that they have destroyed credit instead of extending it, and have introduced or given occasion to excessive usury. I am not sufficiently informed to say how far this is really the case, but cannot help observing, that treat­ing [Page 50] the matter theoretically, as I have all along done, and considering the nature of the thing, this does not appear to be a necessary consequence. One would rather think that the regular credit which is or ought to be given by banks should prevent usury, by supplying all those who deserve to be trusted. Agreeably to this it was found in fact, that the in­stitution of banks in Scotland lowered the interest of money, which indeed seems to be the natural effect of every such institution, from the increased circula­tion. But if any instances more than before have happened of this kind, it may be by persons in ex­treme necessity applying to others who have credit with the bank, and who have so little consci­entious scruple as to take advantage of their neigh­bour's poverty. If this is the case, it is only a par­ticular abuse, or occasional bad consequence of a thing otherwise good and useful. It is not a just objection against any thing, that it may be or has been in some instances abused. Besides, as it is the duty of every banking company to guard against this evil as much as possible, even by personal resentment, against those who make this use of their confidence, so it is an evil not out of the reach of legal punish­ment or general infamy. Wise and well executed laws against usury, would at least so far restrain it, as to make it an evil of little consequence.

BUT in examining the nature and operation of different kinds of paper, I must consider an objection of much greater importance, upon the principles of [Page 51] this discourse, against the paper of banks, or at least, a defect in their system, that seems to call for other measures in addition to it. This is, that banking companies give credit only so as to be serviceable to merchants, and those immediately connected with them, but do not extend it to husbandmen, or those who improve the soil, by taking mortgages for a considerable time; yet according to the theory above laid down, this is not only one of the advantages, but perhaps the chief advantage to be derived from a paper circulation of any kind. Now, I admit, that the settlement and cultivation of the soil is the radi­cal source of the prosperity of this country. It is indeed the source of the prosperity of every country, but comparatively more so of that of this country than most others. I also admit that credit, properly extended, to industrious persons in this way would be exceedingly beneficial. For this reason, and for this alone, Dr. Franklin and others perhaps judged right when they said, the country received great benefit from the loan-office paper of former times. I am al­so sensible, that it is not practicable nor proper for banking companies to give credit upon mortgages on distant lands. They being bound to prompt pay­ment, must expect the same; therefore they are not to be blamed for refusing it in this form ^*. For all [Page 52] these reasons, I do not take upon me wholly to con­demn a measure in America, which would be unne­cessary or improper in Europe. We hear from every quarter, that is to say, from almost every state, a loud cry for paper money. Now, when there is a great and universal complaint, it is seldom without some foundation; and though I have taken much pains in the preceding discourse to show that they mistake their own wants, that they do not want a circulating medium, but use that phrase without un­derstanding its meaning; yet they certainly do want something. They want particularly credit; and they look back with desire to the former times when they had paper money, which, by its name itself, pointed out its nature and use, the notes being then called bills of credit. I will therefore proceed keeping a steady eye upon the principles above laid down, to state in what manner a loan-office may be establish­ed ^* within moderate bounds, that shall render a [Page 53] service probably greater than the evils necessarily consequent upon it.

I WOULD therefore propose, that any state that thinks it necessary, should emit a sum of suppose one hundred thousand pounds, and that the follow­ing rules should be laid down in the law, and invari­bly adhered to. (1.) That not a shilling of that money should issue from the loan-office treasury, but upon mortgage of land to the amount of double the sum in value. (2.) That it should not be a legal tender for any debts contracted or to be contracted, but receivable in all taxes within the state, and pay­able for the wages of Council and Assembly, and the fees and perquisites of all public officers, after it has been so received. (3.) That at the end of twelve calender months, a sum precisely equal to the interest that had accrued or become due in that time, should be consumed by fire, and public intimation given of its being done. The same thing should be done eve­ry subsequent year. (4) That at no time any part of this money should be made use of in the payment of the public debts, but that which had been first levied in taxes. It would not be proper even to borrow from the stock for this purpose by anticipa­tion. ^*

[Page 54] IF these rules were observed, credit would be given to some persons, who needed and deserved it, to the amount of the whole sum. The bills current would be diminished in quantity every year so as not to load the circulation, which would have a sensible effect upon the public opinion, and indeed, from the na­ture of the thing, would increase their value, or ra­ther confirm it from year to year ^*. At the end of fourteen or fifteen years they would be wholly taken out of circulation, and that not by any tax laid on for the purpose, but by the hire or use of the money itself and after all, the principal sum would be still due to the state in good money, which might bear interest for ever. It would be an important addition to this scheme, if no bills less than two dollars, or perhaps three, or five, should be emitted, as this would still keep silver at least in circulation. On the above principles, all the good that can be produced by pa­per [Page 55] would be effected, viz. facilitating commerce, and giving credit; and as little of the evil as possible, because the quantity would be fixed and moderate at first, and continually decreasing, so as at last to va­nish altogether; and then another emission of the same kind might be made, if the utility of the first should recommend it.

PERHAPS it will be said, that this money not being a legal tender, would not answer the purpose of bor­rowers by paying their debts, nor get at all into cir­culation. To this I answer, that it would not [...]ver the purpose of those who want to pay their debts with half nothing, and cheat their creditors; nor do I wish to see any thing attempted that would produce that effect. But I affirm, that it would get better into circulation than by a tender law, which creates general and just suspicion. Tender laws, as has been already proved, may be made use of by deceitful persons to do particular acts of injustice, but are not sufficient to procure general circulation, nor to excite and reward industry, without the opinion and appro­bation of the public. Such money as I have de­scribed would excite no alarm, it might easily be tried. It would, in my opinion, certainly be tried, for all would know that it would pay every tax to government, and even borrowers of large sums might make trial of it, without any risk [...], because, if it would not answer their end, they might, after a few months, repay it, and take up their mortgage. But I cannot help thinking that the principles of it [Page 56] are so just, and the plan so certain, that all under­standing persons would perceive and approve it.

I MUST here take the occasion and the liberty of saying, that it were greatly to be wished that those who have in their hands the administration of affairs in the several states of America, would take no mea­sures, either on this, or any other subject, but what are founded upon justice, supported by reason, and warranted to be safe by the experience of former ages, and of other countries. The operation of political ca [...] is as uniform and certain as that of natural ca [...]s. And any measure which in itself has a bad tendency, though its effects may not be instantly discernable, and their progress may be but slow, yet it will be infallible; and perhaps the danger will then only appear when a remedy is impossible. This is the case, in some degree, with all political measures, without exception, yet I am mistaken if it is not eminently so with respect to commercial dealings. Commerce is excited, directed, and carried on by interest. But do not mistake this, it is not carried on by general universal interest, nor even by well in­formed national interest, but by immediate, apparent, and sensible personal interest. I must also observe, that there is in mankind a sharp-sightedness upon this subject that is quite astonishing. All men are not philosophers but they are generally good judges of their own profit in what is immediately before them, and will uniformly adhere to it. It is not uncommon to see a man who appears to be almost as [Page 57] stupid as a stone, and yet he shall be as adroit and dextrous in making a bargain, or even more so, than a man of the first rate understanding, who, probably for that very reason, is less attentive to trifling cir­cumstances, and less under the government of mean and selfish views. As to currency, which has been our general subject, if coins of any particular spe­cies happen, as is sometimes the case, to pass at a rate, ever so little higher, in one country, or corner of a country than another, thither they will immedi­ately direct their course; and if the matter [...] not attended to, nor the mistake rectified, they [...] be all there in a very short time, and the place which receives them must bear the loss.

I WILL now sum up, in single propositions, the substance of what has been asserted, and I hope suf­ficiently proved, in the preceding discourse.

(1.) IT ought not to be imputed to accident or caprice, that gold, silver, and copper, formerly [...] and the two first continue to be, the medium of com­merce; but to their inherent value, joined with other properties, that fit them for circulation. Therefore, all the speculations, formed upon a contrary sup [...] ­tion, are inconclusive and absurd.

(2.) GOLD and silver are far from being in too small quantity at present for the purpose of a circu­lating medium, in the commercial nations. The last of them, viz. silver, seems rather to be in too gr [...] quantity, so as to become inconvenient for transpor­tation.

[Page 58] (3.) THE people of every nation will get the quan­tity of these precious metals, that they are entitled to by their industry, and no more. If by any acci­dent, as plunder in war, or borrowing from other nations, or even finding it in mines, they get more, they will not be able to keep it. It will, in a short time, find its level. Laws against exporting the coin will not prevent this. Laws of this kind, though they are still in force in some nations, supposed to be wise, yet are in themselves ridiculous. If you import more than you export, you must pay the ba­lance or give up the trade.

(4.) THE quantity of gold and silver at any time in a nation, is no evidence of national wealth, unless you take into consideration the way in which it came there, and the probability of its continuing.

(5.) No paper of any kind is, properly speaking, money. It ought never to be made a legal tender. It ought not to be forced upon any body, because it cannot be forced upon every body.

(6.) GOLD and silver, fairly acquired, and likely to continue, are real national, as well as personal wealth. If twice as much paper circulates with them, though in full credit, particular persons may be rich by possessing it, [...] the nation in general is not.

(7.) THE [...] the scarcity of money, is gene­rally putting [...] for the cause. No business can be done, [...], because money is scarce. It may be said with [...] truth, money is scarce, be­cause little business is done. Yet their influence, [Page 59] like that of many other causes▪ and effects, is reci­procal.

(8.) THE quantity of current money, of whate­ver kind, will have an effect in raising the price of industry, and bringing goods dearer to market, there­fore the increase of the currency in any nation, by paper, which will not pass among other nations, makes the first cost of every thing they do greater, and of consequence, the profit less.

(9.) IT is however possible, that paper obligations may so far facilitate commerce, and extend credit, as by the additional industry, that they excite, to over­balance the injury which they do in other respects. Yet even the good itself may be overdone. Too much money may be emitted even upon loan, but to emit money any other way, then upon loan, is to do all evil, and no good.

(10.) THE excessive quantity of paper emitted by the different states of America, will probably be a lo [...] to the whole. They cannot however take advantage of one another in that way. That state which e­mits most will lose most, and vice versa.

(11.) I can see no way in which it can do good but one, which is, to deter other nations from trust­ing us, and thereby lessen our importations; and I sincerely wish, that in that way, it may prove in some degree a remedy for its own evils.

(12.) THOSE who refuse doubtful paper, and thereby disgrace it, or prevent its circulation, are not enemies, but friends to their country.

[Page 60] To draw to a conclusion, it is probable that those who perceive, which it will be easy to do, that the author of this tract is not a merchant or trader by profession, will be ready to say, what has this gen­tleman to do with such a subject? Why should he write upon what he has no practical knowledge of, money and commerce? To these I answer, that I have written, not as a merchant, but as a scholar. I profess to derive my opinions from the best civilians of this and the last age, and from the history of all ages, joined with a pretty considerable experience and attention to the effects of political causes, within the sphere of my own observation. It is not even too much to say, that one of the mercantile profes­sion, unless his views were very enlarged indeed, is is [...]ot so proper to handle a general subject of this [...] as some others. His attention is usually con­fined to the business, and to the branch of that busi­ness [...] which he is employed. In that his discern­ment will be clear, and he will find out, if possible, where he can buy cheapest and sell dearest. But as to the theory of commerce, or the great objects of national interest or connexion, he can have no advan­tage at all over a person given to study and reflexion, who has some [...]ntance with public life. With these remarks, [...] way of apology, and having no interest in the [...] but what is common to every citizen, I freely [...] the whole to the judgment of the impartial public.