TheBankofEnglandisthegreatregulatorofthecountrypaper。Whentheyincreaseordecreasetheamountoftheirnotes，thecountrybanksdothesame；andinnocasecancountrybanksaddtothegeneralcirculation，unlesstheBankofEnglandshallhavepreviouslyincreasedtheamountoftheirnotes。
Itiscontended，thattherateofinterest，andnotthepriceofgoldorsilverbullion，isthecriterionbywhichwemay，thatifitwerealwaysjudgeoftheabundanceofpaper-moneytooabundant，interestwouldfall，andifnotsufficientlyso，interestwouldrise。Itcan，Ithink，bemademanifest，thattherateofinterestisnotregulatedbytheabundanceorscarcityofmoney，butbytheabundanceorscarcityofthatpartofcapital，notconsistingofmoney。
"Money，"observesDrA。Smith，"thegreatwheelofcirculation，thegreatinstrumentofcommerce，likeallotherinstrumentsoftrade，thoughitmakesapart，andaveryvaluablepartofthecapital，makesnopartoftherevenueofthesocietytowhichitbelongs；andthoughthemetalpiecesofwhichitiscomposed，inthecourseoftheirannualcirculation，distributetoeverymantherevenuewhichproperlybelongstohim，theymakethemselvesnopartofthatrevenue。
"Whenwecomputethequantityofindustrywhichthecirculatingcapitalofanysocietycanemploy，wemustalwayshaveregardtothosepartsofitonlywhichconsistinprovisions，materials，andfinishedwork:theother，whichconsistsinmoney，andwhichservesonlytocirculatethosethree，mustalwaysbededucted。Inordertoputindustryintomotion，threethingsarerequisite:-materialstoworkupon，toolstoworkwith，andthewagesorrecompenseforthesakeofwhichtheworkisdone。Moneyisneitheramaterialtoworkupon，noratooltoworkwith；andthoughthewagesoftheworkmanarecommonlypaidtohiminmoney，hisrealrevenue，likethatofallothermen，consistsnotinmoney，butinmoney'sworth；notinthemetalpieces，butwhatcanbegotforthem。"
Andinotherpartsofhiswork，itismaintained，thatthediscoveryoftheminesinAmerica，whichsogreatlyincreasedthequantityofmoney，didnotlessentheinterestfortheuseofit:
therateofinterestbeingregulatedbytheprofitsontheemploymentofcapital，andnotbythenumberorqualityofthepiecesofmetal，whichareusedtocirculateitsproduce。
MrHumehassupportedthesameopinion。Thevalueofthecirculatingmediumofeverycountrybearssomeproportiontothevalueofthecommoditieswhichitcirculates。Insomecountriesthisproportionismuchgreaterthaninothers，andvaries，onsomeoccasions，inthesamecountry。Itdependsupontherapidityofcirculation，uponthedegreeofconfidenceandcreditexistingbetweentraders，andaboveall，onthejudiciousoperationsofbanking。InEnglandsomanymeansofeconomizingtheuseofcirculatingmediumhavebeenadopted，thatitsvalue，comparedwiththevalueofthecommoditieswhichitcirculates，isprobably（duringaperiodofconfidence（10*））reducedtoassmallaproportionasispracticable。
Whatthatproportionmaybehasbeenvariouslyestimated。Noincreaseordecreaseofitsquantity，whetherconsistingofgold，silver，orpaper-money，canincreaseordecreaseitsvalueaboveorbelowthisproportion。Iftheminesceasetosupplytheannualconsumptionofthepreciousmetals，moneywillbecomemorevaluable，andasmallerquantitywillbeemployedasacirculatingmedium。Thediminutioninthequantitywillbeproportionedtotheincreaseofitsvalue。Inlikemanner，ifnewminesbediscovered，thevalueofthepreciousmetalswillbereduced，andanincreasedquantityusedinthecirculation；sothatineithercasetherelativevalueofmoney，tothecommoditieswhichitcirculates，willcontinueasbefore。
If，whilsttheBankpaidtheirnotesondemandinspecie，theyweretoincreasetheirquantity，theywouldproducelittlepermanenteffectonthevalueofthecurrency，becausenearlyanequalquantityofthecoinwouldbewithdrawnfromcirculationandexported。
IftheBankwererestrictedfrompayingtheirnotesinspecie，andallthecoinhadbeenexported，anyexcessoftheirnoteswoulddepreciatethevalueofthecirculatingmediuminproportiontotheexcess。IftwentymillionshadbeenthecirculationofEnglandbeforetherestriction，andfourmillionswereaddedtoit，thetwenty-fourmillionswouldbeofnomorevaluethanthetwentywerebefore，providedcommoditieshadremainedthesame，andtherehadbeennocorrespondingexportationofcoins；andiftheBankweresuccessivelytoincreaseittofifty，orahundredmillions，theincreasedquantitywouldbeallabsorbedinthecirculationofEngland，butwouldbe，inallcases，depreciatedtothevalueofthetwentymillions。
Idonotdispute，thatiftheBankweretobringalargeadditionalsumofnotesintothemarket，andofferthemonloan，butthattheywouldforatimeaffecttherateofinterest。Thesameeffectswouldfollowfromthediscoveryofahiddentreasureofgoldorsilvercoin。Iftheamountwerelarge，theBank，ortheownerofthetreasure，mightnotbeabletolendthenotesorthemoneyatfour，norperhaps，abovethreepercent。；buthavingdoneso，neitherthenotes，northemoney，wouldberetainedunemployedbytheborrowers；theywouldbesentintoeverymarket，andwouldeverywhereraisethepricesofcommodities，tilltheywereabsorbedinthegeneralcirculation。ItisonlyduringtheintervaloftheissuesoftheBank，andtheireffectonprices，thatweshouldbesensibleofanabundanceofmoney，interestwould，duringthatinterval，beunderitsnaturallevel；
butassoonastheadditionalsumofnotesorofmoneybecameabsorbedinthegeneralcirculation，therateofinterestwouldbeashigh，andnewloanswouldbedemandedwithasmucheagernessasbeforetheadditionalissues。
Thecirculationcanneverbeover-full。Ifitbeoneofgoldandsilver，anyincreaseinitsquantitywillbespreadovertheworld。Ifitbeoneofpaper，itwilldiffuseitselfonlyinthecountrywhereitisissued。Itseffectsonpriceswillthenbeonlylocalandnominal，asacompensationbymeansoftheexchangewillbemadetoforeignpurchasers。
TosupposethatanyincreasedissuesoftheBankcanhavetheeffectofpermanentlyloweringtherateofinterest，andsatisfyingthedemandsofallborrowers，sothattherewillbenonetoapplyfornewloans，orthataproductivegoldorsilverminecanhavesuchaneffect，istoattributeapowertothecirculatingmediumwhichitcanneverpossess。Bankswould，ifthiswerepossible，becomepowerfulenginesindeed。Bycreatingpapermoney，andlendingitatthreeortwopercent。underthepresentmarketrateofinterest，theBankwouldreducetheprofitsontradeinthesameproportion；andiftheyweresufficientlypatriotictolendtheirnotesataninterestnohigherthannecessarytopaytheexpencesoftheirestablishment，profitswouldbestillfurtherreduced；nonation，butbysimilarmeans，couldenterintocompetitionwithus，weshouldengrossthetradeoftheworld。Towhatabsurditieswouldnotsuchatheoryleadus！Profitscanonlybeloweredbyacompetitionofcapitalsnotconsistingofcirculatingmedium。AstheincreaseofBank-notesdoesnotaddtothisspeciesofcapital，asitneitherincreasesourexportablecommodities，ourmachinery，orourrawmaterials，itcannotaddtoourprofitsnorlowerinterest。（11*）
Whenanyoneborrowsmoneyforthepurposeofenteringintotrade，heborrowsitasamediumbywhichhecanpossesshimselfof"materials，provisions，etc。"tocarryonthattrade；anditcanbeoflittleconsequencetohim，providedheobtainthequantityofmaterials，etc。necessary，whetherhebeobligedtoborrowathousand，ortenthousandpiecesofmoney。Ifheborrowtenthousand，theproduceofhismanufacturewillbetentimesthenominalvalueofwhatitwouldhavebeen，hadonethousandbeensufficientforthesamepurpose。Thecapitalactuallyemployedinthecountyisnecessarilylimitedtotheamountofthe"materials，provisions，etc。"andmightbemadeequallyproductive，thoughnotwithequalfacility，iftradewerecarriedonwhollybybarter。Thesuccessivepossessorsofthecirculatingmediumhavethecommandoverthiscapital:buthoweverabundantmaybethequantityofmoneyorofbank-notes；thoughitmayincreasethenominalpricesofcommodities；thoughitmaydistributetheproductivecapitalindifferentproportions；
thoughtheBank，byincreasingthequantityoftheirnotes，mayenableAtocarryonpartofthebusinessformerlyengrossedbyB
andC，nothingwillbeaddedtotherealrevenueandwealthofthecountry。BandCmaybeinjured，andAandtheBankmaybegainers，buttheywillgainexactlywhatBandClose。Therewillbeaviolentandanunjusttransferofproperty，butnobenefitwhateverwillbegainedbythecommunity。
ForthesereasonsIamofopinionthatthefundsarenotindebtedfortheirhighpricetothedepreciationofourcurrency。Theirpricemustberegulatedbythegeneralrateofinterestgivenformoney。IfbeforethedepreciationIgavethirtyyears'purchaseforland，andtwenty-fiveforanannuityinthestocks，Icanafterthedepreciationgivealargersumforthepurchaseofland，withoutgivingmoreyears'purchase，becausetheproduceofthelandwillsellforagreaternominalvalueinconsequenceofthedepreciation；butastheannuityinthefundsispaidinthedepreciatedmedium，therecanbenoreasonwhyIshouldgiveagreaternominalvalueforitafterthanbeforethedepreciation。
Ifguineasweredegradedbyclippingtohalftheirpresentvalue，everycommodityaswellaslandwouldrisetodoubleitspresentnominalvalue；butastheinterestofthestockswouldbepaidinthedegradedguineas，theywould，onthataccount，experiencenorise。
TheremedywhichIproposeforalltheevilsinourcurrency，isthattheBankshouldgraduallydecreasetheamountoftheirnotesincirculationuntiltheyshallhaverenderedthereminderofequalvaluewiththecoinswhichtheyrepresent，or，inotherwords，tillthepricesofgoldandsilverbullionshallbebroughtdowntotheirmintprice。Iamwellawarethatthetotalfailureofpapercreditwouldbeattendedwiththemostdisastrousconsequencestothetradeandcommerceofthecounty，andevenitssuddenlimitationwouldoccasionsomuchruinanddistress，thatitwouldbehighlyinexpedienttohaverecoursetoitasthemeansofrestoringourcurrencytoitsjustandequitablevalue。
IftheBankwerepossessedofmoreguineasthantheyhadnotesincirculation，theycouldnot，withoutgreatinjurytothecountry，paytheirnotesinspecie，whilethepriceofgoldbullioncontinuedgreatlyabovethemintprice，andtheforeignexchangesunfavourabletous。TheexcessofourcurrencywouldbeexchangedforguineasattheBankandexported，andwouldbesuddenlywithdrawnfromcirculation。Beforethereforetheycansafelypayinspecie，theexcessofnotesmustbegraduallywithdrawnfromcirculation。Ifgraduallydone，littleinconveniencewouldbefelt；sothattheprinciplewerefairlyadmitted，itwouldbeforfutureconsiderationwhethertheobjectshouldbeaccomplishedinoneyearorinfive。Iamfullypersuadedthatweshallneverrestoreourcurrencytoitsequitablestate，butbythispreliminarystep，orbythetotaloverthrowofourpapercredit。
IftheBankdirectorshadkepttheamountoftheirnoteswithinreasonablebounds；iftheyhadacteduptotheprinciplewhichtheyhaveavowedtohavebeenthatwhichregulatedtheirissueswhentheywereobligedtopaytheirnotesinspecie，namely，tolimittheirnotestothatamountwhichshouldpreventtheexcessofthemarketabovethemintpriceofgold，weshouldnothavebeennowexposedtoalltheevilsofadepreciated，andperpetuallyvaryingcurrency。
ThoughtheBankderiveconsiderableadvantagefromthepresentsystem，thoughthepriceoftheircapitalstockhasnearlydoubledsince1797，andtheirdividendshaveproportionallyincreased，IamreadytoadmitwithMrThornton，thatthedirectors，asmoniedmen，sustainlossesincommonwithothersbyadepreciationofthecurrency，muchmoreserioustothemthananyadvantageswhichtheymayreapfromitasproprietorsofBankstock。Idothereforeacquitthemofbeinginfluencedbyinterestedmotives，buttheirmistakes，iftheyaresuch，areintheireffectsquiteaspernicioustothecommunity。
Theextraordinarypowerswithwhichtheyareentrustedenablethemtoregulateattheirpleasurethepriceatwhichthosewhoarepossessedofaparticularkindofproperty，calledmoney，shalldisposeofit。TheBankdirectorshaveimposedupontheseholdersofmoneyalltheevilsofamaximum。To-dayitistheirpleasurethat4l。10s。shallpassfor3l。17s。101/2d。，to-morrowtheymaydegrade4l。15s。tothesamevalue，andinanotheryear10l。maynotbeworthmore。Bywhataninsecuretenureispropertyconsistingofmoneyorannuitiespaidinmoneyheld！Whatsecurityhasthepubliccreditorthattheinterestonthepublicdebt，whichisnowpaidinamediumdepreciatedfifteenpercent，maynothereafterbepaidinonedegradedfiftypercent？Theinjurytoprivatecreditorsisnotlessserious。A
debtcontractedin1797maynowbepaidwitheighty-fivepercent。ofitsamount，andwhoshallsaythatthedepreciationwillgonofurther？
ThefollowingobservationsofDrSmithonthissubjectaresoimportant，thatIcannotbutrecommendthemtotheseriousattentionofallthinkingmen。
"Theraisingthedenominationofthecoinhasbeenthemostusualexpedientbywhicharealpublicbankruptcyhasbeendisguisedundertheappearanceofapretendedpayment。Ifasixpence，forexample，shouldeitherbyactofparliamentorroyalproclamationberaisedtothedenominationofashilling，andtwentysixpencestothatofapoundsterling，thepersonwhoundertheolddenominationhadborrowedtwentyshillings，ornearfourouncesofsilver，would，underthenew，paywithtwentysixpences，orwithsomethinglessthantwoounces。Anationaldebtofaboutahundredandtwentymillions，nearlythecapitalofthefundeddebtofGreatBritain，mightinthismannerbepaidwithaboutsixty-fourmillionsofourpresentmoney。Itwouldindeedbeapretendedpaymentonly，andthecreditorsofthepublicwouldbedefraudedoftenshillingsinthepoundofwhatwasduetothem。Thecalamitytoowouldextendmuchfurtherthantothecreditorsofthepublic，andthoseofeveryprivatepersonwouldsufferaproportionableloss；andthiswithoutanyadvantage，butinmostcaseswithagreatadditionalloss，tothecreditorsofthepublic。Ifthecreditorsofthepublicindeedweregenerallymuchindebttootherpeople，theymightinsomemeasurecompensatetheirlossbypayingtheircreditorsinthesamecoininwhichthepublichadpaidthem。Butinmostcountriesthecreditorsofthepublicarethegreaterpartofthemwealthypeople，whostandmoreintherelationofcreditorsthaninthatofdebtorstowardstherestoftheirfellow-citizens。Apretendedpaymentofthiskind，therefore，insteadofalleviating，aggravatesinmostcasesthelossofthecreditorsofthepublic；andwithoutanyadvantagetothepublic，extendsthecalamitytoagreatnumberofotherinnocentpeople。
Itoccasionsageneralandmostpernicioussubversionofthefortunesofprivatepeople；enrichinginmostcasestheidleandprofusedebtorattheexpenceoftheindustriousandfrugalcreditor，andtransportingagreatpartofthenationalcapitalfromthehandswhicharelikelytoincreaseandimproveit，tothosewhicharelikelytodissipateanddestroyit。Whenitbecomesnecessaryforastatetodeclareitselfbankrupt，inthesamemanneraswhenitbecomesnecessaryforanindividualtodoso，afair，open，andavowedbankruptcyisalwaysthemeasurewhichisbothleastdishonourabletothedebtor，andleasthurtfultothecreditor。Thehonourofastateissurelyverypoorlyprovidedfor，wheninordertocoverthedisgraceofarealbankruptcy，ithasrecoursetoajugglingtrickofthiskind，soeasilyseenthrough，andatthesametimesoextremelypernicious。"
TheseobservationsofDrSmithonadebasedmoneyareequallyapplicabletoadepreciatedpapercurrency。Hehasenumeratedbutafewofthedisastrousconsequenceswhichattendthedebasementofthecirculatingmedium，buthehassufficientlywarnedusagainsttryingsuchdangerousexperiments。Itwillbeacircumstanceevertobelamented，ifthisgreatcountry，havingbeforeitseyestheconsequencesofaforcedpapercirculationinAmericaandFrance，shouldpersevereinasystempregnantwithsomuchdisaster。Letushopethatshewillbemorewise。Itissaidindeedthatthecasesaredissimilar:thattheBankofEnglandisindependentofgovernment。Ifthisweretrue，theevilsofasuperabundantcirculationwouldnotbelessfelt；butitmaybequestionedwhetheraBanklendingmanymillionsmoretogovernmentthanitscapitalandsavingscanbecalledindependentofthatgovernment。
Whentheorderofcouncilforsuspendingthecashpaymentsbecamenecessaryin1797，therunupontheBankwas，inmyopinion，causedbypoliticalalarmalone，andnotbyasuperabundant，oradeficientquantity（assomehavesupposed）oftheirnotesincirculation。（12*）
ThisisadangertowhichtheBank，fromthenatureofitsinstitution，isatalltimesliable。Noprudenceonthepartofthedirectorscouldperhapshaveavertedit:butiftheirloanstogovernmenthadbeenmorelimited；ifthesameamountofnoteshadbeenissuedtothepublicthroughthemediumofdiscounts；
theywouldhavebeenable，inallprobability，tohavecontinuedtheirpaymentstillthealarmhadsubsided。Atanyrate，asthedebtorstotheBankwouldhavebeenobligedtodischargetheirdebtsinthespaceofsixtydays，thatbeingthelongestperiodforwhichanybilldiscountedbytheBankhastorun，thedirectorswouldinthattime，ifnecessary，havebeenenabledtoredeemeverynoteincirculation。ItwasthenowingtothetoointimateconnectionbetweentheBankandgovernmentthattherestrictionbecamenecessary；itistothatcausetoothatweoweitscontinuance。
Topreventtheevilconsequenceswhichmayattendtheperseveranceinthissystem，wemustkeepoureyessteadilyfixedontherepealoftheRestriction-bill。
TheonlylegitimatesecuritywhichthepubliccanpossessagainsttheindiscretionoftheBankistoobligethemtopaytheirnotesondemandinspecie；andthiscanonlybeeffectedbydiminishingtheamountofbank-notesincirculationtillthenominalpriceofgoldbeloweredtothemintprice。
HereIwillconclude；happyifmyfeebleeffortsshouldawakenthepublicattentiontoadueconsiderationofthestateofourcirculatingmedium。IamwellawarethatIhavenotaddedtothestockofinformationwithwhichthepublichasbeenenlightenedbymanyablewritersonthesameimportantsubject。I
havehadnosuchambition。Myaimhasbeentointroduceacalmanddispassionateenquiryintoaquestionofgreatimportancetothestate，andtheneglectofwhichmaybeattendedwithconsequenceswhicheveryfriendofhiscountrywoulddeplore。
NOTES:
1。Theymight，strictlyspeaking，ratherexceedthatquantity，becauseastheBankwouldaddtothecurrencyoftheworld，Englandwouldretainitsshareoftheincrease。
2。Thisisstronglycorroborated，bythestatementofMrRose，intheHouseofCommons，thatourexportsexceededourimportsby（I
believe）sixteenmillions。Inreturnforthoseexportsnobullioncouldhavebeenimported，becauseitiswellknown，thatthepriceofbullionhavingbeenduringthewholeyearhigherabroadthaninthiscountry，alargequantityofourgoldcoinhasbeenexported。Tothevalueofthebalanceofexports，therefore，mustbeaddedthevalueofthebullionexported。Apartoftheamountmaybeduetousfromforeignnations，buttheremindermustbepreciselyequaltoourforeignexpenditure，consistingofsubsidiestoourallies，andthemaintenanceofourfleetsandarmiesonforeignstations。
3。Ithasbeenobserved，inaworkofgreatanddeservedrepute，theEdinburghReview，thatanincreaseinthepapercurrencywillonlyoccasionariseinthepaperorcurrencypriceofcommodities，butwillnotcauseanincreaseintheirbullionprice。