For, as the number of buyers diminishes, there is less money requisite for transacting the business of the community, and this overplus naturally returns on him.But while less money is really wanted to execute the business of the society, he is called on to furnish as much, or probably more.The debts those dealing with him formerly contracted have to be paid, while the sales of commodities, the means by which it was anticipated that part of the funds for that payment, would be procured, have much diminished.
The situation of the banker becomes therefore at this crisis, very critical.
He cannot, in justice to himself, grant all the requisite accommodation, and yet, his refraining from doing so must aggravate existing evils.As specie is, in such a state of things, the most desirable of commodities, he has reason to fear that a large portion of his money will be returned on him, which he will be required to replace with gold or silver, and he knows that if a suspicion of his solvency arise, tie may be required thus to replace the whole of it.If he be unable to meet these difficulties, his failure adds very much to the general mass of misfortune, and farther diminishes public confidence.
The natural termination to such a state of things, would seem to be the diminution of contracts, and consequently of debts, progressively diminishing the amount of payments, for which it is necessary to provide.This termination is retarded by the struggles of those whose real funds, in proportion to the extent of their business, are smallest, and whose motives to engage in fresh transactions, are chiefly the hopes of extricating themselves from the embarrassments in which present transactions have involved them.
It is also more injuriously retarded, as has been observed, by the failure of those engaged in the business of banking.
The liability of the mercantile community to be largely affected by such sudden pressures, must depend, in a great degree, on the peculiar circumstances of the country, and nature of the employments and trades carried on in it.
It must also be dependent on the system of banking, that is there pursued, and its capacity to furnish funds where there is real capital; to check unsafe and gambling transactions by withholding funds from those desirous of extending hazardous speculations, though deficient in capital; and to pursue its operations steadily and confidently notwithstanding any general embarrassment.To attempt, however, an enumeration and comparison of the different systems of transacting the business of banking, which have been adopted in different times and places, would involve us in inquiries of so complicated a nature, that while to discuss them partially would be unsatisfactory, to do so fully would lead too far from our present object.
I reserve therefore the few observations I have to make On the subject, to another place.(54)Gold and silver would thus seem to have been considered, first, simply as themselves the most precious, and easily preserved of all articles;next, their capacity for being divided and re-united without injury, would seem to have led to their general employment in exchange for other things the acquisition of which their possessors found useful or necessary; (55) convenience then to have rendered it expedient to have them formed into pieces of a certain weight, and fineness, when they began to constitute what is now called money; lastly, their general adoption as money would seem naturally to have rendered them proper measures to give fixedness to those obligations to future delivery of things in exchange, which the increased security and tranquillity of modern times, and the great amount of exchanges transacted, have in recent days, introduced.In the two latter employments, as serving for real, or determining the rights which the possession of fictitious money conveys, they occasionally serve as media for exchanging all instruments, and, therefore, for determining and expressing their relation to each other, as things capable of being exchanged.In this way measuring all things exchanged, or capable of being exchanged, that is, all instruments, they come to denote the amount of instruments, or capital, or stock, which any man possesses.A person is said to be worth five hundred, or five thousand pounds, as be has instruments, which, in exchange, would be measured by these sums respectively; and, as in common life all things are considered, not as they are, but merely in their actions and relations, instruments come there, also, to be spoken about, and conceived of, altogether in the relation they have to certain pieces of gold and silver.
These are not the only effects which the exchange of instruments for one another, and the consequent use of money as the medium of exchange, have produced in our conceptions of them.The system of exchanges, being attended by that of credit, implies the existence of some mode of ascertaining the amount to be rendered back, for instruments received in trust.It is sufficiently obvious that this must be determined by the order to which the principle of accumulation, and the time it has had to operate, has carried the formation of instruments in the society.If, in any society, instruments are at the order D, doubling in four years, then one receiving an instrument on trust, for four years, will, at the end of that period, have to return two of the same sort and quality.If they are at the order E, he will have to return two at the end of five years, etc.Thus it is a common practice in many parts of North America, especially in new settlements, to sell cattle and sheep on trust, the terms being that double the number thus transferred, is to be returned in four or five years, as the agreement may be made.More generally, however, much shorter periods are adopted, for the settlement of accounts.The natural periods of a year, and a month, have in different times and places, been made choice of for this purpose.
