1.Of those now effected by bank bills, of which the majority are what are called one pound notes.Every purchaser, that is, every person in business, would be obliged to have continually lying by him, to answer occasional demands, a certain sum proportional to the extent of his business, and when preparing for some extraordinary occasion, for a length of time previous he would be collecting and hoarding up funds sufficient for the purchase or purchases he intended making.A large part of the money of the country, would, therefore, be constantly lying idle, doing nothing, but waiting for something to do.Let us suppose that we are m Scotland at the present moment, and that bank notes being able to hear and answer questions, we take at random a parcel of one pound notes, and interrogate them as to what their employment is, and how they discharge it.They would doubtless answer: "the service we render is to pass from hand to hand, for the purpose of making exchanges." "Do you ever lie idle for any time?" "No.Every one that gets hold of us immediately passes us to some other person, either to pay some debt, or to make some purchase, or if not, carries us to the banker, who sets us out again on the same round.Some times, indeed, we get a few days, or a few weeks rest, in the desk of a small country dealer, or some such person, who has to wait that time, perhaps, before he can collect a dozen of us to send to the bank, but this is seldom, and as it were by chance." Let now the banks be done away with, and, instead of bank notes, let us have to ask the same questions of sovereigns.Their answer would be, "we are employed in the service of people who collect us for the purpose of buying some thing, or things, with.us, when the chance presents itself.We are lying continually idle, therefore, for longer or shorter intervals, waiting till this chance cast up.Sometimes we are collected in money bags for weeks, sometimes for months, and unless when we get into the hands of very necessitous persons, we each of us expect to be put by in some place of security, along with others of our brethren, and with them to wait the chance of being called out to effect some exchange, after which we again return for a time to inactivity."What in the supposed cases must be true of a particular set of bank notes, or a particular set of sovereigns, would be true of all bank notes, and of all sovereigns, and hence the amount of exchanges effected in any particular year, by means of three and a half millions of bank notes, about the present circulation of Scotland, must be far greater than would be effected in the same time, under the suppositions we have made, by three and a half millions of sovereigns.The latter could not both be effecting exchanges, and lying idle.
2.But, besides the exchanges made by means of bank notes, a great amount of exchanges are effected by orders or checks on the banker.Were there no banking system there in existence, these, also, would have to be effected by the medium of money, either ready money, or money paid after a certain time, but certainly, in some way or other, through the instrumentality of money.There would require, then, to be a farther provision of sovereigns, to effect the large amount of exchanges now managed by a few strokes of the pen of a bankers clerk.
What would be the addition which these two circumstances would render it necessary to make to the circulating medium, in order to bring sovereigns to approximate in efficiency to the bank notes, the place of which they occupied, might be difficult to determine.The proportion of the one to the other, might be as 3 to 5, as 4 to 5, as 6 to 2, or as 8 to 2, or perhaps still higher; it is very certain, however, that the one would be much greater than the other.After all, it would only be an approximation.As what will happen can only be conjectured, not known, every person engaged in business would occasionally err in his calculations, and would sometimes have commodities offered him which he would wish to purchase., but for want of cash would be unable to purchase.The two circumstances referred to, the additional expense of exchanges, consequent to the additional money necessary to effect them, and the diminution of exchanges consequent to the want of 'the money necessary to effect them, united, would mark the direct loss the community sustained by the abolition of the banking system.The indirect loss would arise from the cheek given to the accumulative principle, by the diminished quickness of return of instruments -- by what would be termed the dulness of trade -- and the diminished accumulation of stock consequent to it.
But such a supposition as that we have made, could not possibly come to be a reality.When the art of banking has once been introduced into a country, the advantages resulting from it, are too great to admit of its being altogether abolished.There will always be some generalization of credit transactions, some recognized mode of transferring from hand to hand, promises to pay, made by one individual to another.The enactments of the legislator may act on the art so as to make it more or less effective, but they cannot prevent the practice of it.I shall, therefore, make another supposition, and assume that the measure proposed having been adopted, sovereigns took the place of bank notes, and that, notwithstanding, the banks continued their operations as before.
