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usual expedient by which a real public bankruptcy has been
disguised under the appearance of a pretended payment。 If a
sixpence； for example； should either by act of parliament or
royal proclamation be raised to the denomination of a shilling；
and twenty sixpences to that of a pound sterling； the person who
under the old denomination had borrowed twenty shillings； or near
four ounces of silver； would； under the new； pay with twenty
sixpences； or with something less than two ounces。 A national
debt of about a hundred and twenty millions； nearly the capital
of the funded debt of Great Britain； might in this manner be paid
with about sixty…four millions of our present money。 It would
indeed be a pretended payment only； and the creditors of the
public would be defrauded of ten shillings in the pound of what
was due to them。 The calamity too would extend much further than
to the creditors of the public； and those of every private person
would suffer a proportionable loss； and this without any
advantage； but in most cases with a great additional loss； to the
creditors of the public。 If the creditors of the public indeed
were generally much in debt to other people； they might in some
measure compensate their loss by paying their creditors in the
same coin in which the public had paid them。 But in most
countries the creditors of the public are the greater part of
them wealthy people； who stand more in the relation of creditors
than in that of debtors towards the rest of their
fellow…citizens。 A pretended payment of this kind； therefore；
instead of alleviating； aggravates in most cases the loss of the
creditors of the public； and without any advantage to the public；
extends the calamity to a great number of other innocent people。
It occasions a general and most pernicious subversion of the
fortunes of private people； enriching in most cases the idle and
profuse debtor at the expence of the industrious and frugal
creditor； and transporting a great part of the national capital
from the hands which are likely to increase and improve it； to
those which are likely to dissipate and destroy it。 When it
becomes necessary for a state to declare itself bankrupt； in the
same manner as when it becomes necessary for an individual to do
so； a fair； open； and avowed bankruptcy is always the measure
which is both least dishonourable to the debtor； and least
hurtful to the creditor。 The honour of a state is surely very
poorly provided for； when in order to cover the disgrace of a
real bankruptcy； it has recourse to a juggling trick of this
kind； so easily seen through； and at the same time so extremely
pernicious。〃
These observations of Dr Smith on a debased money are equally
applicable to a depreciated paper currency。 He has enumerated but
a few of the disastrous consequences which attend the debasement
of the circulating medium； but he has sufficiently warned us
against trying such dangerous experiments。 It will be a
circumstance ever to be lamented； if this great country； having
before its eyes the consequences of a forced paper circulation in
America and France； should persevere in a system pregnant with so
much disaster。 Let us hope that she will be more wise。 It is said
indeed that the cases are dissimilar： that the Bank of England is
independent of government。 If this were true； the evils of a
superabundant circulation would not be less felt； but it may be
questioned whether a Bank lending many millions more to
government than its capital and savings can be called independent
of that government。
When the order of council for suspending the cash payments
became necessary in 1797； the run upon the Bank was； in my
opinion； caused by political alarm alone； and not by a
superabundant； or a deficient quantity （as some have supposed） of
their notes in circulation。（12*）
This is a danger to which the Bank； from the nature of its
institution； is at all times liable。 No prudence on the part of
the directors could perhaps have averted it： but if their loans
to government had been more limited； if the same amount of notes
had been issued to the public through the medium of discounts；
they would have been able； in all probability； to have continued
their payments till the alarm had subsided。 At any rate； as the
debtors to the Bank would have been obliged to discharge their
debts in the space of sixty days； that being the longest period
for which any bill discounted by the Bank has to run； the
directors would in that time； if necessary； have been enabled to
redeem every note in circulation。 It was then owing to the too
intimate connection between the Bank and government that the
restriction became necessary； it is to that cause too that we owe
its continuance。
To prevent the evil consequences which may attend the
perseverance in this system； we must keep our eyes steadily fixed
on the repeal of the Restriction…bill。
The only legitimate security which the public can possess
against the indiscretion of the Bank is to oblige them to pay
their notes on demand in specie； and this can only be effected by
diminishing the amount of bank…notes in circulation till the
nominal price of gold be lowered to the mint price。
Here I will conclude； happy if my feeble efforts should
awaken the public attention to a due consideration of the state
of our circulating medium。 I am well aware that I have not added
to the stock of information with which the public has been
enlightened by many able writers on the same important subject。 I
have had no such ambition。 My aim has been to introduce a calm
and dispassionate enquiry into a question of great importance to
the state； and the neglect of which may be attended with
consequences which every friend of his country would deplore。
NOTES：
1。 They might； strictly speaking； rather exceed that quantity；
because as the Bank would add to the currency of the world；
England would retain its share of the increase。
2。 This is strongly corroborated； by the statement of Mr Rose； in
the House of Commons； that our exports exceeded our imports by （I
believe） sixteen millions。 In return for those exports no bullion
could have been imported； because it is well known； that the
price of bullion having been during the whole year higher abroad
than in this country； a large quantity of our gold coin has been
exported。 To the value of the balance of exports； therefore； must
be added the value of the bullion exported。 A part of the amount
may be due to us from foreign nations； but the reminder must be
precisely equal to our foreign expenditure； consisting of
subsidies to our allies； and the maintenance of our fleets and
armies on foreign stations。
3。 It has been observed； in a work of great and deserved repute；
the Edinburgh Review； that an increase in the paper currency will
only occasion a rise in the paper or currency price of
commodities； but will not cause an increase in their bullion
price。
This would be true at a time when the currency consisted
wholly of paper not convertible into specie； but not while specie
formed any part of the circulation。 In the latter case the effect
of an increased issue of paper would be to throw out of
circulation an equal amount of specie； but this could not be done
without adding to the quantity of bullion in the market； and
thereby lowering its value； or in other words； increasing the
bullion price of commodities。 It is only in consequence of this
fall in the value of the metallic currency； and of bullion； that
the temptation to export them arises； and the penalties on
melting the coin is the sole cause of a small difference between
the value of the coin and of bullion； or a small excess of the
market above the mint price。 But exporting of bullion is
synonymous with an unfavourable balance of trade。 From whatever
cause an exportation of bullion； in exchange for commodities； may
proceed； it is called （I think very incorrectly） an unfavourable
balance of trade。
When the circulation consists wholly of paper； any increase
in its quantity will raise the money price of bullion without
lowering its value； in the same manner； and in the same
proportion； as it will raise the prices of other commodities； and
for the same reason will lower the foreign exchanges； but this
will only be a nominal； not a real fall； and will not occa