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superfluous paper was converted into gold and silver； they could
easily find a use for it by sending it abroad； but they could
find none while it remained in the shape of paper。 There would
immediately； therefore； be a run upon the banks to the whole
extent of this superfluous paper； and； if they showed any
difficulty or backwardness in payment； to a much greater extent；
the alarm which this would occasion necessarily increasing the
run。
Over and above the expenses which are common to every branch
of trade； such as the expense of house…rent； the wages of
servants； clerks； accountants； etc。； the expenses peculiar to a
bank consist chiefly in two articles： first； in the expense of
keeping at all times in its coffers； for answering the occasional
demands of the holders of its notes； a large sum of money； of
which it loses the interest； and； secondly； in the expense of
replenishing those coffers as fast as they are emptied by
answering such occasional demands。
A banking company； which issues more paper than can be
employed in the circulation of the country； and of which the
excess is continually returning upon them for payment； ought to
increase the quantity of gold and silver； which they keep at all
times in their coffers； not only in proportion to this excessive
increase of their circulation； but in a much greater proportion；
their notes returning upon them much faster than in proportion to
the excess of their quantity。 Such a company； therefore； ought to
increase the first article of their expense； not only in
proportion to this forced increase of their business； but in a
much greater proportion。
The coffers of such a company too； though they ought to be
filled much fuller； yet must empty themselves much faster than if
their business was confined within more reasonable bounds； and
must require； not only a more violent； but a more constant and
uninterrupted exertion of expense in order to replenish them。 The
coin too； which is thus continually drawn in such large
quantities from their coffers； cannot be employed in the
circulation of the country。 It comes in place of a paper which is
over and above what can be employed in that circulation； and is
therefore over and above what can be employed in it too。 But as
that coin will not be allowed to lie idle； it must； in one shape
or another； be sent abroad； in order to find that profitable
employment which it cannot find at home； and this continual
exportation of gold and silver； by enhancing the difficulty； must
necessarily enhance still further the expense of the bank； in
finding new gold and silver in order to replenish those coffers；
which empty themselves so very rapidly。 Such a company；
therefore； must； in proportion to this forced increase of their
business； increase the second article of their expense still more
than the first。
Let us suppose that all the paper of a particular bank；
which the circulation of the country can easily absorb and
employ； amounts exactly to forty thousand pounds； and that for
answering occasional demands； this bank is obliged to keep at all
times in its coffers ten thousand pounds in gold and silver。
Should this bank attempt to circulate forty…four thousand pounds；
the four thousand pounds which are over and above what the
circulation can easily absorb and employ； will return upon it
almost as fast as they are issued。 For answering occasional
demands； therefore； this bank ought to keep at all times in its
coffers； not eleven thousand pounds only； but fourteen thousand
pounds。 It will thus gain nothing by the interest of the four
thousand pounds' excessive circulation； and it will lose the
whole expense of continually collecting four thousand pounds in
gold and silver； which will be continually going out of its
coffers as fast as they are brought into them。
Had every particular banking company always understood and
attended to its own particular interest； the circulation never
could have been overstocked with paper money。 But every
particular banking company has not always understood or attended
to its own particular interest； and the circulation has
frequently been overstocked with paper money。
By issuing too great a quantity of paper； of which the
excess was continually returning； in order to be exchanged for
gold and silver； the Bank of England was for many years together
obliged to coin gold to the extent of between eight hundred
thousand pounds and a million a year； or at an average； about
eight hundred and fifty thousand pounds。 For this great coinage
the bank （in consequence of the worn and degraded state into
which the gold coin had fallen a few years ago） was frequently
obliged to purchase gold bullion at the high price of four pounds
an ounce； which it soon after issued in coin at 53 17s。 10 1/2d。
an ounce； losing in this manner between two and a half and three
per cent upon the coinage of so very large a sum。 Though the bank
therefore paid no seignorage； though the government was properly
at the expense of the coinage； this liberality of government did
not prevent altogether the expense of the bank。
The Scotch banks； in consequence of an excess of the same
kind； were all obliged to employ constantly agents at London to
collect money for them； at an expense which was seldom below one
and a half or two per cent。 This money was sent down by the
waggon； and insured by the carriers at an additional expense of
three quarters per cent or fifteen shillings on the hundred
pounds。 Those agents were not always able to replenish the
coffers of their employers so fast as they were emptied。 In this
case the resource of the banks was to draw upon their
correspondents in London bills of exchange to the extent of the
sum which they wanted。 When those correspondents afterwards drew
upon them for the payment of this sum； together with the interest
and a commission； sonic of those banks； from the distress into
which their excessive circulation had thrown them； had sometimes
no other means of satisfying this draught but by drawing a second
set of bills either upon the same； or upon some other
correspondents in London； and the same sum； or rather bills for
the same sum； would in this manner make sometimes more than two
or three journeys； the debtor； bank； paying always the interest
and commission upon the whole accumulated sum。 Even those Scotch
banks which never distinguished themselves by their extreme
imprudence； were sometimes obliged to employ this ruinous
resource。
The gold coin which was paid out either by the Bank of
England； or by the Scotch banks； in exchange for that part of
their paper which was over and above what could be employed in
the circulation of the country； being likewise over and above
what could be employed in that circulation； was sometimes sent
abroad in the shape of coin； sometimes melted down and sent
abroad in the shape of bullion； and sometimes melted down and
sold to the Bank of England at the high price of four pounds an
ounce。 It was the newest； the heaviest； and the best pieces only
which were carefully picked out of the whole coin； and either
sent abroad or melted down。 At home； and while they remained in
the shape of coin； those heavy pieces were of no more value than
the light。 But they were of more value abroad； or when melted
down into bullion； at home。 The Bank of England； notwithstanding
their great annual coinage； found to their astonishment that
there was every year the same scarcity of coin as there had been
the year before； and that notwithstanding the great quantity of
good and new coin which was every year issued from the bank； the
state of the coin； instead of growing better and better； became
every year worse and worse。 Every year they found themselves
under the necessity of coining nearly the same quantity of gold
as they had coined the year before； and from the continual rise
in the price of gold bullion； in consequence of the continual
wearing and clipping of the coin； the expense of this great
annual coinage became every year greater and greater。 The Bank of
England； it is to be observed； by supplying its own coffers with
coin； is indirectly obliged to supply the whole kingdom； into
which coin is continually flowing from those coffers in a great
variety of ways。 Whatever coin therefore was wanted to support
this excessive circulation both of Scotch and English paper
money； whatever vacuities this excessive circulation occasioned
in the necessary coin of the kingdom； the Bank of England was
obliged to supply them。 The Scotch banks； no doubt； paid all of
them very dearly for their own imprudence and inattention。 But
the Bank of England paid very dearly； not only for its own
imprudence； but for the much greater imprudence of almost all the
Scotch banks。
The overtrading of some bold projectors in both parts of the
United Kingdom was the original cause of this excessive
circulation of paper money。
What a bank can with propriety advance to a merchant or
undertaker of any kind； is not eit