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increasing； and； when it stopped； amounted to upwards of six
hundred thousand pounds。 This bank； therefore； had； in little
more than the course of two years； advanced to different people
upwards of eight hundred thousand pounds at five per cent。 Upon
the two hundred thousand pounds which it circulated in bank
notes； this five per cent might； perhaps； be considered as clear
gain； without any other deduction besides the expense of
management。 But upon upwards of six hundred thousand pounds； for
which it was continually drawing bills of exchange upon London；
it was paying； in the way of interest and commission； upwards of
eight per cent； and was consequently losing more than three per
cent upon more than three…fourths of all its dealings。
The operations of this bank seem to have produced effects
quite opposite to those which were intended by the particular
persons who planned and directed it。 They seem to have intended
to support the spirited undertakings； for as such they considered
them； which were at that time carrying on in different parts of
the country； and at the same time； by drawing the whole banking
business to themselves； to supplant all the other Scotch banks；
particularly those established in Edinburgh； whose backwardness
in discounting bills of exchange had given some offence。 This
bank； no doubt； gave some temporary relief to those projectors；
and enabled them to carry on their projects for about two years
longer than they could otherwise have done。 But it thereby only
enabled them to get so much deeper into debt； so that； when ruin
came； it fell so much the heavier both upon them and upon their
creditors。 The operations of this bank； therefore； instead of
relieving； in reality aggravated in the long…run the distress
which those projectors had brought both upon themselves and upon
their country。 It would have been much better for themselves；
their creditors； and their country； had the greater part of them
been obliged to stop two years sooner than they actually did。 The
temporary relief； however； which this bank afforded to those
projectors； proved a real and permanent relief to the other
Scotch banks。 All the dealers in circulating bills of exchange；
which those other banks had become so backward in discounting；
had recourse to this new bank； where they were received with open
arms。 Those other banks； therefore； were enabled to get very
easily out of that fatal circle； from which they could not
otherwise have disengaged themselves without incurring a
considerable loss； and perhaps too even some degree of discredit。
In the long…run； therefore； the operations of this bank
increased the real distress of the country which it meant to
relieve； and effectually relieved from a very great distress
those rivals whom it meant to supplant。
At the first setting out of this bank； it was the opinion of
some people that how fast soever its coffers might be emptied； it
might easily replenish them by raising money upon the securities
of those to whom it had advanced its paper。 Experience； I
believe； soon convinced them that this method of raising money
was by much too slow to answer their purpose； and that coffers
which originally were so ill filled； and which emptied themselves
so very fast； could be replenished by no other expedient but the
ruinous one of drawing bills upon London； and when they became
due； paying them by other drafts upon the same place with
accumulated interest and commission。 But though they had been
able by this method to raise money as fast as they wanted it；
yet； instead of making a profit； they must have suffered a loss
by every such operation； so that in the long…run they must have
ruined themselves as a mercantile company； though； perhaps； not
so soon as by the more expensive practice of drawing and
redrawing。 They could still have made nothing by the interest of
the paper； which； being over and above what the circulation of
the country could absorb and employ； returned upon them； in order
to be exchanged for gold and silver； as fast as they issued it；
and for the payment of which they were themselves continually
obliged to borrow money。 On the contrary； the whole expense of
this borrowing； of employing agents to look out for people who
had money to lend； of negotiating with those people； and of
drawing the proper bond or assignment； must have fallen upon
them； and have been so much clear loss upon the balance of their
accounts。 The project of replenishing their coffers in this
manner may be compared to that of a man who had a water…pond from
which a stream was continually running out； and into which no
stream was continually running； but who proposed to keep it
always equally full by employing a number of people to go
continually with buckets to a well at some miles distance in
order to bring water to replenish it。
But though this operation had proved not only practicable
but profitable to the bank as a mercantile company； yet the
country could have derived no benefit from it； but； on the
contrary； must have suffered a very considerable loss by it。 This
operation could not augment in the smallest degree the quantity
of money to be lent。 It could only have erected this bank into a
sort of general loan office for the whole country。 Those who
wanted to borrow must have applied to this bank instead of
applying to the private persons who had lent it their money。 But
a bank which lends money perhaps to five hundred different
people； the greater part of whom its directors can know very
little about； is not likely to be more judicious in the choice of
its debtors than a private person who lends out his money among a
few people whom he knows； and in whose sober and frugal conduct
he thinks he has good reason to confide。 The debtors of such a
bank as that whose conduct I have been giving some account of
were likely； the greater part of them； to be chimerical
projectors； the drawers and re…drawers of circulating bills of
exchange； who would employ the money in extravagant undertakings；
which； with all the assistance that could be given them； they
would probably never be able to complete； and which； if they
should be completed； would never repay the expense which they had
really cost； would never afford a fund capable of maintaining a
quantity of labour equal to that which had been employed about
them。 The sober and frugal debtors of private persons； on the
contrary； would be more likely to employ the money borrowed in
sober undertakings which were proportioned to their capitals； and
which； though they might have less of the grand and the
marvellous； would have more of the solid and the profitable；
which would repay with a large profit whatever had been laid out
upon them； and which would thus afford a fund capable of
maintaining a much greater quantity of labour than that which had
been employed about them。 The success of this operation；
therefore； without increasing in the smallest degree the capital
of the country； would only have transferred a great part of it
from prudent and profitable to imprudent and unprofitable
undertakings。
That the industry of Scotland languished for want of money
to employ it was the opinion of the famous Mr。 Law。 By
establishing a bank of a particular kind； which he seems to have
imagined might issue paper to the amount of the whole value of
all the lands in the country； he proposed to remedy this want of
money。 The Parliament of Scotland； when he first proposed his
project； did not think proper to adopt it。 It was afterwards
adopted； with some variations； by the Duke of Orleans； at that
time Regent of France。 The idea of the possibility of multiplying
paper to almost any extent was the real foundation of what is
called the Mississippi scheme； the most extravagant project both
of banking and stock…jobbing that； perhaps； the world ever saw。
The different operations of this scheme are explained so fully；
so clearly； and with so much order and distinctness； by Mr。 du
Verney； in his Examination of the Political Reflections upon
Commerce and Finances of Mr。 du Tot； that I shall not give any
account of them。 The principles upon which it was founded are
explained by Mr。 Law himself； in a discourse concerning money and
trade； which he published in Scotland when he first proposed his
project。 The splendid but visionary ideas which are set forth in
that and some other works upon the same principles still continue
to make an impression upon many people； and have； perhaps； in
part； contributed to that excess of banking which has of late
been complained of both in Scotland and in other places。
The Bank of England is the greatest bank of circulation in
Europe。 It was incorporated； in pursuance of an act of
Parliament； by a charter under the Great Seal； dated the 27th of
July； 1694。 It at that time advanced to government the sum of one
million two hundred thousand pounds； for an annuity of one
hundred thousand pounds； or for L96；000 a year interest； at the
rate of eight per cent； and L4000 a year