Afterthisfirstoperationinreducingtheinterest，thebankcompliedwithareductionto5percentofwhatwasduetothem；
　　andtheybegantocirculateexchequerbillsatamoremoderateinterestthanformerly。
　　Publiccreditwasnowdailygainingground。In1719，theSouthSeacompany，thecapitalofwhichwasthenswelledtoelevenmillionsat5percentwithasumof9397l。sterlingfortheexpenceofmanagement，enlargedtheirviews；andfindinglargeprofitstoarisefromsogreatafundunderoneadministration，formedaprojectofacquiringafarthersumofthepublicdebts，whichremainedoutstandingupontheoriginalfundsappropriatedforthem。
　　Forthispurposetheyproposedtogovernmenttoacquire，first，Thepropertyofabove16millionsofredeemabledebts，bearingthen4and5percentinterest；andtoreducethewholeto4percentatmidsummer1727。Secondly，Toacquirethepropertyof794，000l。ofannuitiesuponlives，andforlongterms，astheyshouldagreewiththeproprietors，at5percentuponthepurchase-money，until1727。andat4percentafterwards。Annuitieswerethenvaluedatfourteenandtwentyyearspurchase，accordingtotheirlength:theyrose，however，duringtheoperationsoftheSouthSea，to25and30yearspurchase。Thirdly，Theyweretohaveasumaddedtotheirformerallowanceforthechargeofmanagement，inproportiontothisaugmentationoftheirstock。Fourthly，Thatfortheadvantagewhichmightfollowuponthisagreementwithgovernment，thecompanywastopayintotheexchequerabovesevenmillionssterling，towarddischargingothernationaldebtsoutstanding。
　　Andinthelastplace，theyengagedtocirculateaconsiderablesumofexchequerbills，andtopaytheinterestof2pencepercentperdiem，whichshouldgrowuponthemduringsevenyears。1*
　　Fromtheoperationswehavebeendescribing，weperceive，thatthepointofviewinEngland，fromthepeaceofUtrecht，hasalwaysbeen，toreducetheinterestofthenationaldebt；butnevertoleaveinthehandsofthecreditors，anypartofthesavingsmade，inordertodiminishthecapital。Thesesavingshaveconstantlybeenthrownintoasinkingfundsupposedtobeintendedforextinguishingthecapital:andwereitemployedforthispurposeforafewyearsonly，andnotdivertedtootheruses，Iampersuadedtheconsequencewouldbe，toreducetheinterestofmoneyinEnglandlowerthaneverperhapsithasbeenseeninanynation。Thatinterestmaybereduced，bymakingmoneyregorgeinthehandsofthelenders，is，Ithink，anuncontrovertedprinciple:thatbyregorginginFrance，anno1720，itreducedinterestto2percentisafactindisputable。Ishallnotpretendtosaypositively，thatthetotalappropriationofthesinkingfund，andanaugmentationuponannualgrants，tomakeupthevoid，wouldinGreatBritainworkthiseffectinafewyears；butIthinkitisveryprobablethatitwould:andifthedomesticcreditors，inanystate，wheredebts，duetostrangers，areswelledtosuchaheightastoexceedthewholeprofitsmadeupontrade，shallbytheirinfluence，andfromamotiveofpresentadvantage，obstructaschemeofthisnature；theconsequencewillprove，inthefirstplace，todiscourage，andthentotallytoextinguishcommerce，andinalittletimetooccasionanunavoidablebankruptcy；asshallbefartherexplainedinasucceedingchapter。IreturntotheSouthSeacompany。
　　TheproposaloftheSouthSeacompany，mentionedabove，wasacceptedof，andratifiedbyactofparliament，6Geo。I。chap。
　　4th。Butthedisasterwhichbefelcredit，inconsequenceoftheambitiousviewsofthosewhowereintheadministrationofthatcompany，preventedthenationfromreapingalltheadvantageswhichmighthaveproceededfromit。
　　ThereignofK。GeorgeIthoughlittledisturbedbyforeignwars，producednotthesmallestdiminutionuponthecapitalofthepublicdebts；andthosewhichsubsistedatthepeaceofUtrecht，stood，athisdeath，at50，354，953l。Thesametaxessubsisted；andeveryonealmostwasbythistimemadeperpetual，exceptindeedthelandtaxandmaltduty，whichtothisdaycontinuetobeannualgrants。
　　Butalas！thisapparentrevenue，arisingfromamultitudeoftaxes，wasofnousetowardsdefrayingthesmallestextraordinaryexpenceofgovernment。Everyarticleofitwasengagedfordebts；
　　andtheoperationsforreducingtheinterestwerecalculatedonlytoproduceafundfordischargingthecapital。Thecivillist，indeed，thatistosay，theexpenceofcivilgovernment，exclusiveofarmy，navy，ordnance，andincidentalarticles，waspaidfromthepermanenttaxes，andconsideredasachargeuponthem。ButwerenotarmiesandnaviesthenbecomeasregularanexpenceuponeverystateinEuropeasjudgesandambassadors？
　　Undoubtedlytheywere。YetafterthepeaceofUtrecht，inlayingdowntheplanwhichhasconstantlybeenfollowedeversince，fordefrayingtheregularexpenceofBritishgovernment，thesetwogreatandunavoidableexpenceswereconsideredascontingentonly，andprovidedforbyannualgrants:andbecausearmies，intimeofpeace，informerreigns，hadproveddangeroustolibertyfromtheabuseofpower，theywerestillconsideredinthesamelight，atatimewhenlibertyandtradewerecontinuallythreatenedfromtheirarmedenemiesandrivalsabroad。
　　Whenthecontinuanceofpeace，inthereignofGeorgetheFirst，hadproducedtheeffectofreducinginterest，onmanyoccasions，to3percentthesinkingfundbegantogatherstrength。Thelandtax，fromtheyear1722，hadnotexceededtwoshillingsinthepound；andtheextraordinaryexpenceofgovernment，accordingtotheannualgrantsofthe13yearsofhisreign，didnotexceed34，800，000l。or2，670，000l。ayear。
　　Publictranquillitywasverylittledisturbedduringthefirsttwelveyearsofthesucceedingreign；andalltheextraordinaryexpencedidnotmuchexceedthreemillionsperannum:yetthisexpence，smallasitwas，comparedwithwhatithasbeensince，wasalmosteveryyearmadeout，bytakingonemillionatleastfromthesinkingfund:andintheyearsoftheleastexpence，suchas1731and1732，thelandtaxwasreducedtooneshillinginthepound，attheexpenceoftakingtwomillionsandahalffromthesinkingfund。
　　ThesestepsofadministrationIneithercensure，orapproveof。Imustsupposeeverystatesmantohavegoodreasonsfordoingwhathedoes，unlessIcandiscoverthathismotivesarebad。Maynotthelandedinterest，whocomposedtheparliament，haveinsisteduponsuchadiminutionoftheirload？Maynottheproprietorsofthepublicdebtshaveinsistedontheirside，thatnomoneyoutofthesinkingfundshouldbethrownintotheirhands，whilethebankwasmakingloansuponthelandandmaltdutiesat3percent？Mightnotthepeoplehavebeenaversetoanaugmentationoftaxes？Whenthreesuchconsiderableinterestsconcurinascheme，whichinitsultimate，thoughdistantconsequences，mustendinthenotableprejudiceofperpetuatingthedebts，althoughopportunitiesoffertodiminishthem，whatcangovernmentdo？Theymustsubmit；and，whichisworse，theycannotwellavowtheirreasons。
　　Suchcombinationsmustoccur，andfrequentlytoo，ineverystateloadedwithdebts，wherethebodyofthepeople，thelandlordsandthecreditors，findanadvantageinthenon-paymentofthem。ItisforthisreasonthatIimagine，thebestwaytoobviatethebadconsequencesofsostronganinfluenceinparliament，wouldbe，toappropriatetheamountofallsinkingfundsinsuchamanner，astoputitoutofanation’spowertomisapplythem，andbythistoforcethemeithertoretrenchtheirextraordinaryexpences，ortoimposetaxesfordefrayingthem。
　　ThesecondperiodofGeorgeIId’sreign，wasfromthebreakingoutoftheSpanishwarin1739，tothepeaceofAix-la-Chapellein1748。Duringthesetenyears，1748beingincluded，theextraordinaryexpencewas，uponanaverage，verynearsevenmillions；andattheendoftheyear1738，thepublicdebtsamountedto46，661，767l。bearing1，962，053l。interest。
　　Thefirstexpedientforborrowingmoneyduringthiswar，wastocontinuethedutyonsaltforsevenyears；andtomortgageitatoncefor1，200，000l。accordingtotheoldplan。Tothiswasadded，theexpedientoflotteries，andloansuponindeterminateannuities，accordingtothecurrentvalueofmoney。
　　Anadditionalexciseuponspirituousliquors，broughtinwherewithaltocompensatetheseadditionalsumsofinterest；andtheEastIndiacompany，forlendingonemillionat3percentuponthisoccasion，hadtheirchartercontinuedfrom1766to1780。ThisoperationIalsoconsiderasananticipation；andasitwastocommenceatthedistanceof23yearsfromthetimeofthegrant，couldnotfailofbeingveryburdensometothenation，howeverconvenientitmightbeatthatparticulartime。
　　WeretheIndiacompanynow，1766，topurchasetherenewaloftheircharterfor14years，whatasummightbeexpectedfromit！
　　Yetthevaluegivenforthegranttheythenobtaineddidnotexceed30，000l。becausetheotherannuitiesof3percent。weresoldatthattimefor97l。or，inthelanguageofthefunds，at3l。premiumforevery100l。subscribed；andthissoearlyinthewaras1743。
　　ThepracticeofborrowinguponpremiumshadtakenplaceinQueenAnne’sreign，andhasoflateyearsbeenverycommon。ThecreditofGreatBritainissofirmlyestablished，thatinwhateverwaygovernmentinclinestoborrow，themoneyedmenarewillingtolend，providedtheloanbemadeaccordingtotherateofinterestatthetime。
　　Toavoidthereforetheestablishmentoffundsatdifferentratesofinterest，inproportiontothefluctuationsofmoney，thebargainismadeatonedeterminaterate。Suppose，foranexample，3percent。Then，accordingasmoneyisfoundtoriseabovethisrateinthemarket，apremiumispaidoutofthemoneysubscribed；asinthiscase3l。waspaidoutofthe100l。
　　subscribed；thatis，thesubscriberretainedit，andobtainedhis3l。annuity，forthepaymentof97l。sothisremaineda3percentloan，insteadofbeing，asitreallywas，at39/97percent。andwassoldandtransferredaseveryother3percentwithoutoccasioninganyperplexity。
　　Asthewarcontinued，interestrose，fromthedemandformoney，whenthesuppliesbecamedeficient。
　　Theyearfollowing，viz。1744，thismanifesteditself，bytheconditionsofferedbygovernment，whichwere。That，oftwomillionstobeborrowedat3percentasbefore，uponthewholesum，1，500，000l。shouldbeformedintoperpetualannuities，andtheremaining500，000l。intoalottery，consistingof50，000
　　tickets，tobesoldat10l。each。Theoriginalsubscriberstothisloansubscribedtherefore10l。fortheticket，and30l。
　　fortheannuity，inall40l。；forwhichtheyweretoreceive3
　　percent。Butthepremiumconsistedinthis；thateverysubscriberfor10tickets，thatis，400l。ofthetotalfund，hadanannuityforlifegiventohimof4l。10s。
　　Thismadefivethousandannuitiesonlives，of4l。10s。
　　each，or22，500l。ayeartobeaddedtotheinterestof3percent。onthetwomillions，thatis，to60，000l。ayearofperpetualannuities。Sothatthewholeloanoftwomillionsthisyearcostgovernment82，500l。ofinterest，of41/8percent；
　　22，500l。ofwhichwastoextinguishwiththelivesofthesubscribers。
　　Now，ifwesupposetheselife-annuitiesworth20yearspurchase，2*thiswasthesamethingasifgovernmenthadgivenadeductionof90l。outofthe400l。subscribed；consequentlytheremainder，whichwas310l。produced12l。Thismakestherateofinterestupontheloantohavebeen3。87percent。Andasgovernmentinclinedthattheloanshouldbemadeinthisway，thelenderswerewillingthatitshouldbeso；andthedifferencebetween3。87percentthethenrateofmoneyand41/8
　　interest，whichwaspaidbygovernment，wasasinkingfund，asitwere，forthegradualextinctionofthecapitalofthelotteryfor300，000l。duringthelivesoftheannuitants。
　　In1746，perpetualorindeterminateannuitieswereconstitutedat4percentandthepremiumuponthetenlotteryticketswasraisedto9l。life-annuity。
　　Itwouldbeunnecessarytotracethevariousmethodsofcontrivingthepremiumsgiveninthesucceedingyearsofthiswar。Theprincipleuponwhichtheywereregulatedwasalwaystoproportionthemtotherateofinterestatthetime；andthemotivewas，Isuppose，thatbythismethodofborrowing，apartatleastofthedebtwouldbecomeextinguishedwiththelivesofthesubscribers。Theremightperhapsbeanother，towit，thatbyswellingthecapital，forvaluenotreceived，therewasanappearanceofborrowingatalowerrateofinterestthanwhatinrealitywasthecase。Thusin1747，when6，300，000l。wereborrowed；insteadofgivingnotquite41/2percent。forthissum，theygave4percent。upon6，930，000l。whichcapital，althoughmoneyshouldreturnto3percentwasstilltostandatitsfullvalue；whereas，had6，300，000l。beenborrowedat41/2
　　percent。therewouldhavebeenasavingof600，000l。uponthecapital；andatthepeace，theinterestof41/2percentwouldequallyhavecomedownto3percentwiththeotherfunds。
　　DuringthisfirstwarofGeorgetheSecond，thelandtaxwasconstantlyat4s。inthepound；andnewbranchesofcustoms，excise，orotherinlandduties，werecreatedinproportiontotheswellingofthenationaldebts，which，onthe31stofDecember1748，amountedto78，293，313l。sterling，bearing3，003，325l。
　　interest；andthesinkingfund，orsurplusofallpermanenttaxesthenimposed，afterpayingthecivillist，andtheinterestuponthiscapital，amountedto1，060，948l。sterling。Duringthiswar，thedebtswereincreasedabovewhattheywereattheendof1738，by31，631，346l。sterlingcapital，andby1，043，272l。ofinterestorannuities。
　　Thewarwasnosoonerover，andthenationalexpencediminished，thanmoneybegantoregorgeinthehandsofthemoniedinterest:aninfallibleconsequenceofsuchaviolentrevolution，whenextraneouscircumstances，suchasoccurredafterthepeaceof1763，donotpreventit。
　　Toprofitofthisconjuncture，government，earlyin1749，proposedthatallthepubliccreditorsuponcapitalsbearing4
　　percentinterest，redeemablebyparliament，andamountingtoupwardsof57millions，whoshouldacceptof3percentfromDecember1757，shouldhavetheirdebtsmadeirredeemableuntilthattime；andintheintervalshouldcontinuetohave4percenttillDecember1750；and31/2percentfromthence，untilthetotalreductionto3percentinDecember1757。
　　Thisboldundertakinghadthedesiredeffect。Manyobstacleswerethrownintheway；buttheregorgingcapitalsinthehandsofmany，madeeveryonefearthereimbursementforhimself；andthecreditofFrancewasthensolow，thatveryfewchoseitsfundsasanoutletfortheirsuperfluousmoney。
　　Butanoutlet，unfortunately，wasnotwantingattheendofthelastwarin1763，asweshallshewinitsproperplace。
　　Herethenisanotableinstanceoftheeffectsofregorgingmoney。Asmallsum，whencomparedwithanation’sdebt，operatesuponthewholecapital；asasmallbalanceupontradeaffectsthewholemassofreciprocalpayments。
　　Thereimbursementof57millionsofferedbygovernment，in1749，was，totheconvictionofalltheworld，animpracticablescheme；butthestockholdersseeingalargesumreadytobesubscribed，attheinterestoffered，andfeelingtheeffectswhichthatregorgingmoneymust，inallevents，haveproduced；
　　willingly，andwiselyperhaps，consentedtotheoffermadethem。
　　Hadtheyrefused，andhadtheschemeproposedbecomeabortivethereby，perhapsthenation，fromthedisappointment，mighthavebeensofaranimatedagainstthecreditors，astohaveconsentedtobeattheexpenceofdefrayingtheserviceofthefollowingyears，withoutencroachinguponthesinkingfund。Whateffectthiswouldhaveproducedupontherateofinterest，inthatconjuncture，nomancantell，norwilltherealconsequenceofsuchameasurebeeverknown，untilthehappytrialbemade。Thatitwouldhavebroughtinterestbelow3percentinDecember1757，is，Ithink，evident:forasmattersstood，hadthecreditorsof57millionsbeenabletoholdout，Imustdothemthejusticetobelieve，theywouldnothaveacceptedtheproposalmadetothem；
　　andanadditionofallthesinkingfundthrownamongthemannually，atatimetheycouldnotdisposeofwhattheyhad，uponbettertermsthanthoseofferedtothem，wouldundoubtedlythen，asatalltimes，operateaverygreatnationalrelief，inbringingdowntheinterestofmoney。
　　DuringthetranquillitywhichcontinuedfromthepeaceofAix-la-Chapelle，in1748，tothecommencementofhostilitiesin1755，themoneyexpendedforextraordinaryservicesamountedonanaveragetoabovefourmillionsperannum。Theexpenceofgovernmentwasthenincreased，bysupportingthecolonies，andbyseveralgreatanduncommonoutgoingsathome，forpurposesmentionedinthesuppliesofthoseyears。
　　Alittlebeforethebreakingoutofthelastwar，thatistosay，onthe5thofJanuary1755，thenationalfundeddebtwasreducedto72，289，674l。uponwhichwaspaidanannuityof2，654，500l。andthesinkingfundamountedto1，308，814l。Attheendof1763，theyearofthepeace，thefundeddebtamountedto130，586，789l。10s。besidesabove9millionsnotprovidedfor。
　　Sothatattheendoflastwarthenationaldebtexceeded140
　　millions；besidesthevalueoftheannuitiesgrantedin1757，1761，and1762。Henceitappears，thatthewaroccasionedanaugmentationofupwardsof58，297，116l。uponthefundednationaldebt；3*besidesthedifferencebetweentheunfundeddebtsatthebeginningandendofthewar；andalsothevalueofthoseannuities。
　　Ishall，beforeIconcludethischapter，presentashortschemeofthestateofthenationatthattime:butfirstletustakeaviewofthemethodsusedtoborrowsolargeasumintheshortperiodofeightyears。
　　Until1757，moneywasborrowedbygovernment，atverylittlemorethan3percentbutthenaloanof5millionsbeingnecessary，governmentconsentedtocreateannuitiesof41/2percentirredeemablefor24years。Bythisexpedientthemoniedpeopleeludedtheoperationofreducingtheinterestofthisfund，uponthereturnofpeace。Howfarthisexpedientwastobepreferredtotheformer，ofincreasingthecapitalbeyondthemoneypaid；orwhetheritwouldnothavebeenstillbettertohavepaidforthemoneywanted，accordingtothecurrentrateofinterestinthemarketatthetime，waitinguntilapeacemightaffordafavourableopportunityofreducingit，Ishallnottakeuponmetodetermine。4*
　　Ihaveobservedhowrashitisforanyonetocensureactsofadministration，whenthemotivesofastatesman’sconductareunknown。This，however，Ihavesometimesventuredtodo，inspeakingofthingswhichhappenedmanyyearsago；butweoughttobemorecautiousaswecomenearertoourowntimes，becausenothaving，asinthecasebeforeus，acourseofexperiencetopointouttheerrors，wemustentirelyrelyuponourownsagacity，andreasonfromanalogyonly。
　　Duringthelastwar，asinthatprecedingit，taxeswereincreasedinproportiontotheinterestofthemoneyborrowed；
　　andnewimpositionswerenowlaidonthearticlesofgreatconsumption，whichproducedabundantly。Thenewmalt-dutyof3d。
　　perbushel，andthenewbeer-dutyof3s。perbarrel，bringinnetintotheexchequernear820，000l。perannum，anddischargetheinterestofabove27millionssterling，at3percent。Suchasumraisedattheendofawarsoveryexpensive，andattheverytimewhenthecreditofFrancewastotallyfallen，musthaveoperatedinthestrongestmanner，anddidinfactoperatemore，perhaps，thananyotherconsideration，toputanendtothatwar，themostgloriousthatEuropehasbeheldsincethebeginningofthiscentury，orperhapsinanyagewhatever:advantageoustoGreatBritain，notwithstandingalltheexpence，providedthattheconsequenceshappentocorrespondtowhatmaybereasonablyexpected。
　　Ishallnowsetbeforemyreaderashortstateofthetaxes，debts，andpublicfundsofGreatBritain，atthisbrightperiodofherhistory。
　　FromthebestauthorityIhavebeenabletoprocure，therevenueofthestate，consideredunderthethreegeneralbranchesofcustoms，excise，andotherinlandduties，whichcomprehendthewholepermanentincomeofthiskingdom，wasthenasfollows:
　　Customsnetintotheexchequer，about*2，000，000
　　Exciseinallitspermanentbranchesnet，about4，600，000
　　Otherinlanddutiesnet1，000，000
　　Landtaxat4s。inthepound2，000，000
　　Annualmalttaxnet613，000
　　Inall10，213，000
　　Letusnextstatetheannualchargesandappropriationssettleduponthisfund。
　　Firstthenthecivillist，totheamountof800，000
　　Secondly，Theinterestofabout131millionsoffundeddebtsatdifferentratesofinterest，about4，500，000
　　Thirdly，Theinterestofninemillionsnotthenprovidedfor，supposedtobeat4percent。360，000
　　Inallofregularandpermanentannualcharge5，660，000
　　Sothereremainsfree，about4，553，000
　　Fromwhichifwededucttheannualgrantsoflandandmalt-taxes，whichextendtogether，asabove，to2，613，000
　　Therewillremainastheproduceofthesinkingfund5*1，940，000
　　Inthisstate，nearly，stoodtheaffairsofGreatBritainaftertheconclusionofthepeacein1763。
　　Itnowonlyremainstooffersomeconjectureswhy，aftertheconclusionofthispeace，asafterthepeaceofAix-la-chapelle，moneywasnotfoundtoregorge，soastofurnishanopportunityofreducingtherateofinterestuponallredeemabledebts，andbythattoraisetheamountofthesinkingfund，andmorefirmlytoestablishthenationalcredit。
　　AfterthefallofthecreditofFrancetowardtheendof1759，GreatBritainhadthecommandofallthemoneytobelentinEurope；andaccordinglyamazingsumswereborrowedin1760，1761，and1762。Ofthesumsborrowed，agreatpart，nodoubt，wasthepropertyofstrangers；butthey，notbeingsowellacquaintedwiththeaffairsofthisnationastheEnglishthemselves，insteadofsubscribingtotheloans，lentthemoneytoourowncountrypeople，who，inhopesofagreatriseuponthereturnofpeace，filledthesubscriptionswiththisborrowedmoney。
　　Theconsequencewas，thatnosoonerdidthefundsbegintoriseafterthepeace，thanmanycreditorsdemandedtheirmoneyofthosewhohadinvesteditinthepublicfunds。Thisobligedthelattertobringtheirstocktomarket，andthisagainhadnaturallytheeffectofkeepingthefundsverylow。Some，moreprudentthantherest，hadborroweduponalongtermofrepayment:whichhadtheeffectofputtingoffstilllongerthesettlementofthefundsinthehandsoftherealproprietors，andoftakingthemoutofthosewhoonlyheldthemnominally。
　　Besidesthisaccidentalcauseofthelowpriceofthefunds，othercircumstances，nodoubt，greatlycontributedtoproducethesameeffect。
　　Howgreatsoeverthebalanceoftrade，thatis，ofexportationsaboveimportations，mayhavebeenoflateinfavourofEngland，stillthemightysumsdrawnoutbytheforeigncreditorshavecertainly，uponthewhole，preventedmuchmoneyfromcominghomeonthegeneralorgrandbalanceofpayments。
　　Whilethiscontinuestobethecase，itisimpossiblethatmuchmoneyshouldregorgeathomeinthehandsofthenatives，anduntilthisshallhappen，therecanbenohopeofseeingthe3percentsriseabovepar。Butthentherise，smallasitis，sincethepeace，mayencourageustohopethatthisfavourablechangeisnotfaroff:forhadtheprofitsofourtradebeenquiteunabletobalancethelossuponourforeigndebts，thefundswouldundoubtedlystillcontinuetofall，whichisdemonstrablynotthecasefromthecircumstancesoftheloaninApril1766，obtainedbygovernment，withtheassistanceofalotteryindeed，at3percent。6*
　　Herethenwasanoutletprovidedformoremoneythanallthatcouldregorgeathome，viz。thepaymentofthoseforeigncreditors，towhomthestockholderswereindebted。besidesthis，thesalebygovernment，ofsuchtractsoflandinthenewacquiredislandsintheWestIndies，providedanother；moneywasevenplacedinthefundsofFrancesoonafterthepeace，untiltheadventurerswerecheckedbytheoperationsoftheKing’scouncil，inreducingbothcapitalsandinterestuponthem，contrarytotheoriginalstipulationswiththecreditors。AluckycircumstanceforGreatBritain，asitforces，inamanner，allthemoneyofthecontinentintotheEnglishfunds，whichequallyremainadebtuponthenation，whetherhighorlowinthemarket。
　　Chap。VIII
　　ContingentConsequencesoftheExtensionofCredit，andIncreaseofDebtsInowproceedtoinquirewhatbetheconsequencesofthismightchangeproduceduponthepolicyofindustriousandtradingstatesfromtheestablishmentofcredit，debts，andtaxes。
　　Ihave，fromtheverybeginningofthisinquiry，occasionallytakennoticeoftheinfluencewhichsuchachangemustmakeuponthespiritandmannersofapeople。Thelowerclasses，whoareslowinformingcombinations，donotsooncomprehendthenecessaryconsequencesofsuchrevolutions。Evenministershavebeenoftenatalosstojudgeoftheconsequenceswhichmightfollowuponsomestepsoftheirownconductrelativethereto，althoughtakenuponmaturedeliberation。
　　Whenpubliccreditisemployedforraisingmoneyuponaplanofrefundingthecapital，eitherbyuniformannualpaymentsexceedingtheinterest，orbyfundsestablishedforsinkingthecapital，nocontingentconsequencescanhappen，providedtheplanbeexecuted:thedebtscontractedwillbepaid，andmatterswillreturntotheirformerstate。
　　Whenpubliccreditisemployedforraisingmoneyuponpaymentofaperpetualinterest；orif，whateverbetheplanlaiddown，capitalsshouldnothappentobedischarged，butthedebtsshouldswellcontinually；inthiscase，thecontingentconsequencesaremanyandvarious，farexceedinganyman’ssagacitytoinvestigate。
　　Ifwejudgeofthemfromwhatpastexperiencehastaughtus，wemayconclude，that，inonewayorother，alldebtscontractedwillintimedisappear，eitherbybeingpaid，orbybeingabolished:becauseitisnottobeexpectedthatposteritywillgroanundersuchaloadanylongerthanitisconvenient；andbecauseinfactweseenoveryoldpublicdebtsasyetoutstanding，whereinteresthasbeenregularlypaidoutofafundwhichhasremainedinthepossessionofthestate。
　　Thisisaveryrationalconclusionfrompastexperience；butitisrelativeonlytothecircumstancesofpasttimes。Whilethedebtorsarethemasters，thereisnodifficultyofgettingclearofdebts:butiftheconsequenceofthisnewsystemshouldbetomakethecreditorsthemasters，Isupposethecasemaybedifferent。Farther，Informertimespublicdebtswerecontractedbetweenthestateanditsownsubjects；butatpresentweseethatinsuchloans，foreigners，evenenemies，areinvitedtoconcur:andthebettertoengagethemtoit，atotalimmunityispromisedfromalltaxesupontheinteresttobepaidbytheborrowers。
　　ThiscircumstancehasalreadydrawntheattentionofPrinces，inthediscussionoftheirreciprocalconcerns。Wesawhow，inthetreatyofDresden，whichtookplaceaftertheKingofPrussia’sinvasionofSaxonyin1745，itwasprovidedbythe6tharticle，thatalldebtsduebythebankoftheSteuertothatPrince’ssubjects，weretobepaid，onpresentationoftheircontracts。
　　Wehavenotindeedasyetseenwarscarriedonforthepaymentofdebts；butthecasemayhappen，andkingdommaybecarriedoffuponsuchpretensions，aswellasprivateproperty。
　　Whatachainofcontingentconsequencesarisesfromthissinglecombination，werethisaproperplacetointroducethem！
　　ButwithoutgoingtothesuppositionofPrincesornationsbecomingreciprocallyengagedindebts，andtherebyinvolvingsuchmightyinterestsinthesupportofpublicfaith，wemayeasilyconceive，thatamoniedinterest，ofalongstanding，mayhaveinfluenceenoughtoproduceachangeuponthespiritandmannersofapeople。
　　LetmeheretaketheexampleofGreatBritain。Dowenotseehowthespiritofthatnationistotallybentuponthesupportofpubliccredit？Anddowenotseehowabsolutelytheircommercialinterestdependsuponit？Canitbesupposed，thateveryonehascombinedalltheconsequenceswhichmayflowfromtheconstantswellingoftheirdebts？Or，indeedisitpossibletodeterminewhatwillbetheconsequencesofthem？Thishoweverwemaysupposeatleast，becauseweseetheprogressofitalready，thattheinterestofthecreditorswilldailygatherstrength，bothinparliamentandwithoutdoors:andiffromsmallbeginningsithavearrivedatthepitchwenowsee，itisverynaturaltoconclude，that，intime，itmaybecomestronger，andthatatlast，thecreditorsofthenationmaybecomethemastersofit。
　　Whenanyoneinterestbecomestoopredominant，theprosperityofthestatestandsuponaprecariousfooting。Everyinterestshouldbeencouraged，protected，andkeptwithinduebounds。Thefollowingspeculationsareintendedfortheapplicationofprinciplestonewandunexperiencedcombinations；wherenaturalcausesmayworktheirdirectandimmediateeffects，andtherebyproveprejudicialtothegeneralwelfare，unlesstheybeforeseeninsomedegree，andproperremediesbepreparedagainstthem。
　　Europewaspossessedbyourancestorsfreefromtaxes；ourfatherssawthemimposed，andwenowseehowfasttheybecomemortgagedforourdebts。Wecanaslittlejudgeoftheextentofourcredit，astheycouldofthepossibilityofcontributingsolargeafundforthesupportofit。
　　Astheplanofimposingtaxeshasbeenextended，weseethepubliccofferseverydayreceivingavastfluxofmoney，andliketheheartinthehumanbody，throwingitoutagainintocirculation。Happystate，coulditbelasting，andwerethisfluxandrefluxpreservedinadueproportiontoalltheusesforwhichitisintended！Butstateshavetheirvices，aswellasprivatepeople。Publicopulenceshouldbeproportionedtopublicexigences:buthowoftendoweseeambitionputtingonthefaceofpublicspirit，andanimatingtheresentmentofanation，undercolourofprovidingforhersecurity？Hencewars，fromwarsexpence:recourseishadtocredit，moneyisborrowed，debtsarecontracted，taxesareaugmented；allthisincreasescirculation，whichdemandsasupplyofcurrency:thisisprocuredbymeltingdownthesolidproperty。Theseoperationsperformed，thepublicmoneyiseithersentabroad，orremainsathome。Ifsentabroad，morepropertymustbemelteddown，inordertofillupthevoid。
　　Ifitremainathome，itwillanimateeverybranchofcirculation；andwhentheexigence，whichrequiredthisadditionalquantityofmoney，isover，whatcirculationfindssuperfluous，willstagnateinthehandsofthemoniedinterest，andwilleitherformafundforthefillingofnewloanstogovernment，oritwillbelaidoutinthepurchaseofthepropertyformerlymelteddown，whichproducedit；andtherebywillbeconsolidateda-new。
　　Everyinterestinastatemustinfluencethegovernmentofit，inproportiontoitsconsequenceandweight；andeverygovernmentmustinfluencethespiritofthepeoplewholiveunderit。
　　Now，aswehaveseenhowindustrycreateswealth；howwealthandconfidencecreatecredit；howcreditcreatesdebtsandtaxes；
　　howtheseagainoccasionanaugmentationofmoney，bythemeltingdownofproperty；andhowthispropertybecomestransferredtoanewsetofmen，oncethemoniedinterest，whoafterwardsacquirethelands，andconsolidatethisquantityofmoneywhichisbecomesuperfluoustocirculation；doesnotthischainofconsequencesrepresentakindofcircle，returningintoitself？Andisitnotplain，thatwithouttheinterventionofthisengine，namelythemoneycreatedinproportiontothedemandforit，thechainwouldbecutoff，beforeitcouldreachthelinkfromwhichitfirstsetout？Willnotthisconversionoftheformermoniedinterestintoanewlandedinterest，insensiblyinspirethebulkofthelandlordswithsentimentsanalogoustoamoniedinterest？IsnotthisevidentlymoreandmorethecaseeverydayinEngland？Andfromthismaywenotprognosticatethesolidityofpubliccreditinthatnation？
　　Ifontheotherhandwefind，asinFrance，industryintimesofpeacedrawingwealthfromothernations，andtherebyincreasingthecoin，uponwhichalonecreditiscirculatedthroughthekingdom；andthenforeignexpencesendingitawayintimesofwar；mustnotcirculationkeeppacewiththecoin，thatistosay，becircumscribedwithintheproportionofit？
　　IfthesolidityandextentoftheKing’sfreerevenueshouldaffordcredittoborrowthiscoin；andif，withoutprovidingaproportionalsupplyofcurrencytofillupthevoid，thecoinborrowedbesentoutofFrance；howcantheordinarycirculationbecarriedon？
　　Letushererecaltomindwhatwassaidinthe22dchapter，uponbanks，wherewedistinguishedvoluntarycirculation，whichisbuying，frominvoluntarycirculation，whichispaying:wethereobservedhowpayingmustalwaystakeplaceofbuying；
　　consequently，wemayheredeterminethattaxesmustbepaidbeforebuying，thatisconsumption，cangoon。Thedeficiencythereforeofcoinforcirculation，will，first，proportionallyaffectthetrade，manufactures，andconsumptionofFrance，andafterwardstherevenuewhicharisesfromthem。IsnotthistheconstantcomplaintinFrance，whenwarcarriesofftheircoin？
　　Theremonstrancesofalltheirparliamentsarefilledwithit。
　　Intimesofpeace，theamountofwhatcomesfromthepeopleisgreaterthanintimeofwar:butthenthereiscoinsufficientforallthepayments；andwhentheyaremadetotheroyaltreasury，theyimmediatelyreturnintocirculation，andnohurtisfelt。
　　Iinsistthemoreuponthisprinciple，andIintroduceitinsomanydifferentways，andundersuchavarietyofviews，becauseItakeittobeoneofthemostimportantconsiderationsinthewholedoctrineofcredit，andonewhichIhaveneverseensuggestedbyanyFrenchorEnglishwriteruponthissubject。Manyarethecomplaintsforwantofmoney；butnomethodhaveIeverseenproposedforobtainingitfromsolidproperty；theeasiestandsafestofalloperations，whenconductedwithhonesty，andaccordingtoprinciples。
　　Asmoneythereforeisthemeansofclosingthechainofconsequencesalreadymentioned，andformingitintoacircle，ashasbeensaid，weplainlyseehow，whenitiswanting，thesameeffectscannotbeproduced；andconsequentlythecountryofFrance，wheremoneyisconfinedtothecoin，willbeverylongofadoptingthesentimentsofamoniedinterest；whetherforitsprofitoritsloss，intheend，isnotherethequestion。
　　Wehavenowtracedthecontingentconsequencesofpubliccreditasfarastoshewhowitmaytendtoinfluencethespiritofapeople，andmakethemadoptthesentimentsofamoniedinterest。
　　Theallurementofacquiringland-propertyisverygreat，nodoubt，especiallytomoniedmen。Theeaseandaffluenceofthose，ontheotherhand，whohavetheircapitalsintheirpocket-books，isveryattractingtotheeyesofmanylandlords，especiallyatatimewhentheyarepayingtheheavytaxeslaidupontheirpossessions。
　　Thefirmestablishmentofpubliccredittendsgreatlytointroducethesereciprocalsentimentsofgood-willamongthetwogreatclassesofapeople，andtherebytopreserveabalancebetweenthem。Themoniedinterestwishtopromotetheprosperityofthelandlords；thelandlords，thesolidityofcredit；andthewell-beingofbothdependsuponthesuccessoftradeandindustry。
　　LetusnowsupposewhatisactuallythecaseinGreatBritain，thatfromtheswellingofpublicdebtsanenormousfundofpersonalpropertyiscreated。Thisisformedoutoftheincomeofthewholenation；andasithasbeenpurchasedbythosewhohavelentmoneytothestate，incommonlanguageitisincludedinwhatwecallthemoniedinterest:itishoweververydistinctfromit，aswillbeunderstoodfromwhatistofollow。
　　Thecapitalofthepublicdebtsisthepricewhichhasbeenpaidfortheannuitiesduetothecreditors，andisnownomoremoneytothemthanlandismoneytothelandlord。Itmaybeturnedintomoney，nodoubt；butsomayland。
　　Themoniedinterest，comprehends，thoseonlywhohavemoney，notrealizeduponanyfund，andwhoeitheremployitinthewayoftrade，inthewayofindustry，injobbinginland，instock，orinanywaytheyplease，soastodrawfromitanannualincome。Whileitisfixed，thatis，givenforanypermanentvalue，itceasestobemoney；whenitiscalledin，itbecomesmoneyagain。Letstock，therefore，suffereversomanyalienationsfromhandtohand，itstillcontinuesstock:itnevercanbecomeland，itnevercanbecomemoney，untilitbepaidoffbygovernment。Ihopethisideaissoclear，astobewellunderstood。Stock，therefore，Ihereconsiderasonegreatbranchofsolidpersonalproperty；asfarasthesecurityofgovernmentissolidandgood；andassuch，maybemelteddownintomoneybybanks，aswellasanyotherthing。
　　NowIhavesaidthatthisfundisformedoutoftheincomeofthewholenation；consequentlybyfund，here，Idonotunderstandthecapital，whichexistsnomore，buttheinterestwhichisdrawnforit:itisthisinterest，Isay，whichispaidfromtheland，themoney，thetrade，theindustry，&c。whichformsonegreatbranchofthemoniedinterestofEngland。Fromtheland，outoftheamountofthetaxeschargeduponit；fromthemoney，trade，industry，&c。outoftheamountofproportionaltaxes，suchasexcises，customs，salt-tax，stamp-duties，andthelike。
　　Themorethenationaldebtsincrease，bythemoniedinterestrealizingintothisbranchofsolidpropertythefunds，themorethetaxesmustaugment；andconsequently，themoretheproprietorsofthefundsthemselvesmustbeaffectedbysuchtaxes，aswellasthelandlords。
　　Fromthisexpositionofthematter，itmaybeconcluded，thatasproportionaltaxesaffecteveryman’sincome，accordingtohisconsumption；thelandlord，caeterisparibus，whopaysalandtax，aswellashisproportionuponhisconsumption，ismorehardlydealtwiththantheproprietoroftheotherbranchofsolidproperty，thefunds，whopayshisproportiononlyofthelast。
　　Buttheconditionofthestockholderisnotequallyfavourabletothatofthelandlord，fortwoveryplainreasons。
　　Thefirstis，thattheincomeofhisstockcannotincrease；thatofthelandmay。Thesecondis，thattheswellingofthisgreatcapitalofstockhastheeffectofsinkingtheinterestuponit，andconsequentlyofdiminishingtheincomeofthestockholder:
　　andinproportiontothisdiminution，thevalueoflandmustaugment。NowIreadilyallowthattheaugmentationuponthevalueoflandsisnoinducementtoalandlordtoturnthemintomoney；
　　becausehewouldthenloseuponhismoney，whathegainsupontheadditionalpricereceived。Butitisagreatadvantageinanotherrespect，namely，thathetherebydiminishestheinteresthepaysuponhisdebts，ifhehaveany；andifhehavenone，itenableshimtoborrowatalowerrateforthefuture；andbyimprovinghislandswiththemoneyborrowed，hemayaugmenthisincomemuchbeyondtheproportionoftheinterestpaid。
　　Itisthereforenecessary，inimposinglandtaxes，rightlytocombineeverycircumstance；thattheloadofallimpositionsmaybeequallydistributeduponeveryclassofapeoplewhoenjoyssuperfluity，anduponnoother。If，afterafairdeductionofprinciples，thisshallappearathingpossibletobedone，wemayexpecttoseestatesmenengagedtodepartfromtheoldmaximofgraspingatwhatisreadiestandnearestathand，towit，thelandedproperty，withaviewtospareaclassofpeople，which，inawellregulatedstate，nevercanbemadetofeeltheburdenofanyproportionaltaxwhatsoever；Imeantheindustriouspoor。
　　Inowproceedinmyinquiryintothenatureandconsequencesoftheswellingofthisgreatbranchofproperty，thepublicfunds。
　　Astothenatureofit，wehavesaidalready，thatitisformedbyrealizingmoneyintostock。Whengovernmentborrows，thelendersmustbepeoplewhohavemoney。Iftheloanbemadeathome，themoneyisnosoonerpaidin，thanitisspent；andaswemaysupposethatitwouldnothavebeenlent，hadeitherthelendersfounditnecessaryfortheircurrentexpence，orhadtheyfoundamoreprofitablewayofrealizingitthanbylendingittogovernment，weconsideritashavingbeeninastateofstagnation；butbeinglenttogovernment，itisthrownintoanewchannelofcirculation。
　　Farther，thismoneystagnatinginthehandsofthelender，eitherproceededfromhisincome，whichexceededhisexpence，orfromtheprofitsofhisindustry。Ineithercase，thecountryisneitherpoorerorricher，whenconsideredinacumulativeview，thanifthesamesumhadbeenlenttoprivatepeopleathome。
　　Letusnextsupposethemoneytohavebeenborrowedfortheexigenceofaforeignwar。Inthiscase，ifitbeborrowedathomeandsentabroad，itmustfirstbeconvertedintothemoneyoftheworld，goldandsilver，andthensentoff，tothediminutionofthiskindofproperty；oritmustgoabroadinthemoneyofthecountry，credit，tothediminutionoftheannualincomeuponwhichthecreditisestablished。Asthislastoperationmaynotbesoclear，anexamplewillexplainit。
　　Governmentborrowsonemillion；itispaidinpaper，andmustbesenttoHolland。IfatthattimeabalancebeduebyHollandofonemillion，billswillreadilybefoundforit。Inthiscase，thebalanceoftradeisborrowedasitwerebygovernment，andbecomesconvertedintoacapitalofamillioninthepublicfunds，theinterestofwhichwillremainathome，andcontinuetobethepropertyofthenation。ButasthevalueofthisbalanceissenttoHollandandspentabroad，itis，uponthewhole，tothenation，asifnobalancehadbeenduetothem。ThisIcallalucrumcessanstothecountry。
　　ButsupposenobalancetobeduebyHollandatthetimethemillioncomestobesentoff，Isaytheconsequencewillbe，toalienateinfavourofforeignersapartoftheannualincome，proportionaltothewholeinterestpaidfortheloan，whetherithasbeensubscribedforbyforeigners，orbynatives。
　　Ifthesubscriptionbefilledbyforeigners，theconsequenceisevident:itisequallysointheothercase，uponalittlereflection。
　　Supposethenthemillionsubscribedfor，andpaidinLondon。
　　Billsaresoughtfor；nonearefound，Imeaninthewayofreciprocalcompensation，doesnotthissumimmediatelybecomeabalanceagainstLondon？Andasacountrylosesallsuchbalances，andthecountrytowhichtheyareduegainsthem，thismillionislosttoEngland，andformswhatIcalladamnumemergens；thatistosay，herformerpropertyorincomeissofardiminished，orcomestobetransferredtostrangers。
　　Fromthiswemayconclude，thatinallmattersofpublicborrowing，itisofnoconsequencewhetherthesubscriptionbefiledbynatives，orbyforeigners，whenthevalueofitistobesentabroad。
　　Letusnextexaminethestateofthequestionwhentheloanismadeinordertobespentathome，asisthecaseafterawar，whentheunfundeddebtscometobepaidoff。
　　Wehavesaidthatloansarefilledbymoneystagnating，whichtheownerdesirestorealize:ifhecannotdobetter，helendsittogovernment；ifhecandobetter，hewillnotlendit。
　　Whiletheusesofdomesticcirculationabsorballthemoneyinthecountry，thatistosay，whenthereareprivatepersonsreadytoborrowallthemoneytobelent，atthistimegovernmentcannotborrowathome；andiftheydid，byofferingahighinterestforit，theborrowingwoulddoharmtocirculation；
　　becauseitwouldraiseinterestathome，ordisappointthosewhowouldgladlyborrowit，forlittlemorethantheinterestofferedbygovernment。
　　Letusnextsupposethatafterawar，whentheunfundeddebtsareeitherbearingahighinterest，orsellingatdiscount，governmentshallfindanadvantageinopeningasubscription，whichmaybefilledfromabroad，atalowerratethanthethenactualvalueofmoney。Suppose，Isay，theDutchshouldbewillingtolendat3percentwhilemoneyinEnglandstoodat4
　　percent。Iaskif，inthiscase，governmentoughttoborrowfromHolland，attheexpenceofsendingtheinterestoutofthecountry，ratherthansuffersuchdebtstosellatdiscount；orcontinuepayingahigherinterestathomeforwhattheyowe？
　　Itismyopinionthatstilltheyoughttoborrowabroad，forthefollowingreasons。Thatifthehighinterestathomeproceedfromwantofmoney，thatistosay，fromcirculationnotbeingfullenough，itistheirinteresttoborrow，wereitfornothingelsethantosupplycirculation；becauseunlessthisbefull，allindustrymustlanguish。Butsupposeitshouldbesaidthatcirculationisfullenough，thatindustrysuffersnocheckfromthatquarter，butthattherebeingnosuperfluityofmoney，intereststands1percenthigherthanitwoulddowerethereconsiderablestagnations。Inthiscasealso，Ithinkitistheirinteresttoborrow，wereitfornootherreasonthantoproducesuchstagnations。
　　Itisageneralruleeverywhere，thatthereisnohavingenoughwithouthavingasuperfluity；atleastthereisnocertaintyofone’shavingenoughwithoutfindingasuperfluity。
　　Borrowingabroad，therefore，insmallsums，atsuchatime，willproducestagnationsathome，fromwhichsucceedingloansmaybefilled，aftercirculationissufficientlyprovided:andevenincasemoreshouldbeborrowedfromstrangersthanmaybefoundnecessary；andthatinconsequenceofthis，toomuchmoneyshouldcometostagnateathome，afterthedemandofgovernmentisover；
　　themoniedinterestwouldthenlend，intheirturn，tootherstates，whereinterestishigher；andtheannualreturnsfromthatquarterwouldmorethancompensatewhatmustbesentaway，inconsequenceoftheformerborrowing。
　　Fromthesecombinations，letusdrawsomeconclusions。
　　First，Thattheeffectofpublicborrowing，ornationaldebt，istoaugmentthepermanentincomeofthecountry，outofstagnatingmoney，andbalancesoftrade。
　　Secondly，Thatthisincomesocreated，maybeeitherthepropertyofnatives，orofstrangers。
　　Thirdly，Thatwhenmoneyisfoundtoregorge，inacountrywherecirculationisnotdiminishing，itmaybesupposedtoproceedfromthecominginofarightbalanceoftrade。
　　Fourthly，Ifstagnationsinonepartbefoundtointerruptcirculationinanother，publicborrowing，fordomesticpurposes，hasthegoodeffectofgivingventtothestagnation，andthrowingthemoneyintoanewchannelofcirculation。
　　Fifthly，Thatthesumofinterestpaidbyanynationtostrangers，shewsthegeneralbalanceduebythenation，afterdeductingalltheprofitsoftheirpasttradefromalltheexpenceoftheirforeignwars。
　　Buthereitmustbeobserved，thatasononehandwearecomprehendingallthatispaidtoforeigncreditors，onaccountofthefundstheyhaveinEngland，forexample，soontheotherhand，mustbedeductedfromthis，allthepaymentsmadetoEnglishmenbyothernations。
　　Sixthly，Fromthislastcircumstancewediscoverthatthelendingtoothernationsbyprivatehands，producesthesameeffecttoanationasifthestatewereactuallypayingoffthedebtsduetostrangers。Consequently，whenMosespermittedtheJewstolendtostrangersatinterest，andforbadesuchloansamongthemselves，hisviewwastoestablishaforeigntribute，asitwere，infavourofhisownnation，insteadofpromotingluxuryathome。
　　Seventhly，Asthebalanceduetoanationuponhertrade，isfoundtocompensate，protanto，themoneyshespendsabroad，wemayfromthesameprinciple，concludethatsosoonassheceasestoexpendmoneyabroad，thebalanceoftradeinherfavour，ifnotrealizedathomeinsomenewimprovement，willdiminish，protanto，theinterest，orcapitalsduetostrangers。Thisisevidentfromthenatureofbalances，ofwhichwehavetreatedalready。
　　Eighthly，Theconsequence，forexample，ofEngland’sowinglargesumstostrangers，will，fromthesameprinciple，constantlypreventexchangefromrisingveryhighinherfavour，whenthebalanceofhertradecomestobepaidtoher:becauseoneverysuchoccasion，herforeigncreditorswillbegladtodisappointexchangers，byfurnishingbillsfortheirinterest，orcapitals，tothosewhoowethebalance；theconsequenceofwhichisplainlytodiminishtheforeigndebts。7*
　　Thiscircumstanceimpliesnolosstothenationwhichiscreditorinthebalanceoftrade，anddebtoruponthecapitals；
　　becausewehaveprovedthatthepriceofexchangeneveraffectsanation，butcertainindividualsonly，whopayittoothersofthesamenation。
　　Thisissufficient，Ithink，topointoutinsomedegreethenatureofanationaldebt。Icomenexttoexaminetheconsequencesofitsconstantaugmentation；whenpropermeasuresarenottaken，eithertopayitoff，ortocircumscribeitwithincertainbounds。
　　Inwhatistofollow，Ishallthrowallconsiderationofcapitalstotallyoutofthequestion；andastotheamountoftaxes，itisquiteindifferentwhetherthemoneyproceedingfromthembeinconsequenceofanimprovementmadeuponthosealreadyestablished，orfromnewimpositions:suchcombinationswillcomeinmoreproperlyafterwards。
　　IftheinterestpaiduponthenationaldebtofEngland，forexample，befoundconstantlytoincreaseuponeverynewwar，theconsequencewillbe，thatmoremoneymustberaisedonthesubjectforthepaymentofit。Thequestionthencomestobe。
　　First，Howfarmaydebtsextend？Secondly，Howfarmaytaxesbecarried？AndThirdly，Whatwillbetheconsequence，supposingtheoneandtheothercarriedtothegreatestheightpossible？
　　Ianswertothefirst，thatabstractingfromcircumstanceswhichmaydisturbthegradualprogressofthisoperation，beforeitcanarriveattheneplusultra，debtsmaybeincreasedtothefullproportionofallthatcanberaisedforthepaymentoftheinterest。Astothesecond，Howfartaxesmaybecarried，Ishallnothereanticipatethesubjectofthefollowingbook，anyfartherthanisnecessarytoresolvethequestionbeforeus。
　　Taxes，wehavesaid，eitheraffectincome，orconsumption。
　　Theland-taxofEnglandisnowat4shillingsinthepound，uponasupposedvalueofthepropertyaffectedbyit，whichisallrealandpersonalestates，thestockuponlands，andsomefewotherparticularsexcepted。
　　ThistaxmaybecarriedtothefullvalueofalltherealestatesinEngland。Asforpersonalestatesitnevercanaffectthemproportionally；andthispartofthestatuteofland-taxwhichpasseseveryyear，andimposes4shillingsinthepoundonpersonalestates，carriesinitamarkofourformerignoranceinmattersoftaxation。
　　Thenotionofactuallyimposing20shillingsinthepoundupontherealvalueofalltheland-rentsofEngland，appearstousperfectlyridiculous。Iadmitittobeso；andcouldIhavediscoveredanyargumentbywhichIcouldhavelimitedtherisingoftheland-taxtoanyprecisenumberofshillingsundertwenty，Ishouldhavestatedthisasthemaximumratherthantheother。
　　Thesecondbranchoftaxescomprehendsthoseuponconsumptions，excises，andthelike。Themaximumastothisbranchmustdependupontheinterestsofforeigntrade；becausethisisaffectedinacertaindegreebythepricesofdomesticindustry。Othertaxeshavenotthiseffect，asweshallshewinitsproperplace。
　　Butasforeigntradeontheotherhandisnotessentialtothesupportofthedomesticindustry，consumption，circulation，&c。ofanynation，ashasbeenprovedinthesecondbook，butmerelytoitsincreasinginwealthproportionallytoothernations；wereforeigncommunicationscutoffentirely，IperceivenolimittowhichIcanconfinetheextentofproportionaltaxes。
　　Letmethereforesupposeatermbeyondwhichimpositionsofallkindsmustcometoastop，andthenask，inthethirdplace，whattheconsequencewillbe？Ianswer，thatthestatewillthenbeinpossessionofallthatcanberaisedontheland，ontheconsumption，industryandtradeofthecountry；inshort，ofallthatcanbecalledincome，whichitwilladministerforthepubliccreditors。
　　Whenthiscomestobethecase，debtsbecomeextinguishedofcourse；becausetheycometobeconsolidatedwiththeproperty:acasewhichcommonlyhappenswhenacreditortakespossessionofanestateforthepaymentofdebtsequaltoitsvalue。
　　Governmentthenmaycontinuetoadministerforthecreditors，andeitherretaininitshandwhatisnecessaryforthepublicexpenceoftheyear；orifitinclinestoshewthesameindulgenceforthisnewclassofproprietorsasfortheformer，itmaylimittheretentiontoasumequalonlytotheinterestofthemoneywanted；andinthiswaysetoutuponanewsystemofborrowing，untiltheamountoftaxesoncemoreextendingtotheamountofthepublicrevenuebetransferredtoanewsetofcreditors。Thisistheendlesspathreferredtointheninthchapterofthesecondbook，which，afteramultitudeofwindings，returnsintoitself。
　　Astate，Iimagine，whichwouldpreserveitspublicfaithinviolable，untilaperiodsuchasIhavebeensupposing，wouldrunlittleriskofnotfindingcreditforanewborrowing。Theprospectofasecondrevolutionofthesamekindwiththefirstwouldbeverydistant；andinmattersofcredit，whichareconstantlyexposedtorisk，sucheventsbeingoutofthereachofcalculation，arenevertakenintoanyman’saccountwhohasmoneytolend。
　　Thewholeofthishypothesisis，Ireadilyagree，destituteofallprobability；becauseoftheinfinitevarietyofcircumstanceswhichmayfrustratesuchascheme。Iintroduceditmerelytoshewwheretheconstantmortgagingofapublicrevenuemayend；andtodisprovethevulgarnotion，thatbycontractingdebtsbeyondacertainsum，atradingnationwhichhasagreatbalanceinitsfavour，mustbeinvolvedinanunavoidablebankruptcy。Tosaythatanationmustbecomebankrupttoitself，isapropositionwhichIthinkimpliesacontradiction。
　　Chap。IX
　　OfBankruptciesInthelastchapterwehavebeenrunningthroughachainofconsequencesrelativetotheincreaseofpublicdebts，whichappearasextravaganttousatpresent，asitwouldhaveappearedtoDavenant，tohavesupposedthedebtsofthisnationtogrowuptotheirpresentheight，withouttheriskofinvolvingthenationinageneralbankruptcy。
　　Buttheseconsequencesaremerelycontingent。Thepresentdebtsmayeitherbepaidoff，orthenationmaybeinvolvedinageneralbankruptcy。Ineithercase，thevastpropertyinthefunds，thisgreatarticleofpermanentincome，belongingtonativesandtoforeigners，mustwitheranddecay，andatlastdisappearaltogether。
　　Wemaythereforeconclude，thatoneofthreeeventsmusthappen，viz。eitherFirst，Debtswillswelltosuchapitchasatlasttopaythemselves:or，Secondly，Thenationwillbeinvolvedinabankruptcy……or，Thirdly，Theywillbefairlypaidoff，oratleastcircumscribedwithinreasonablebounds。
　　Thefirstsuppositionwehaveexamined；thesecondwearenowtoconsider；thelastwillbethesubjectofthefollowingchapter，withwhichIshallconcludethisbook。
　　Ishalladvancenoargumenttoprovethattheschemeofapublicbankruptcyiseitherlawful，honourable，orexpedient，ifvoluntarilygoneintobyastate；becauseIthinkitisdiametricallyoppositetoeveryprincipleofgoodgovernment。Itisamaximuncontroverted，thatacontractoughttobebindingbetweenthepartiescontracting，andthatitoughttobefulfilledineveryarticle。Ifthepublicgoodbeallegedasanoverrulingprinciple，towhicheveryothermustgiveway，I
　　readilyadmitthejustnessoftheexception。Thereisanotherofequalforce，theimpossibilityofperformance。Whensuchargumentsareusedtoengageanationtocommitadeliberateactofbankruptcy，twothingsmustbeexamined:thefirst，istheinterestwhichthepublichasinadoptingthescheme:thesecond，theconsequencesofit。Whatreasonsastatemayhaveforbreakingfaithwithhercreditors，Ishallconsiderafterwards；
　　butletusfirstenquirewhatmightbetheconsequencesofageneralandtotalbankruptcyinEngland；fromwhichwemaygatherwhatdifferenceitwouldmake，wereitpartialonly；andbythisinquiry，wemaybeledtodiscoverthepropermethodofbreakingfaith，incaseitshouldbecomeunavoidable。ThisiswhatinanotherplaceIcalledbringingcreditdecentlytohergrave；
　　when，afterbeingoverstretched，itcannolongerbesupported。
　　Abankruptcymaytakeplaceintwoways:eitherasaconsequenceofcircumstanceswhichcannotbeprevented；orbyadeliberateactofgovernment。
　　WerethetradeandindustryofEnglandtodecay，theamountofallthepermanenttaxesmightsofardiminish，astoproveinsufficienttopaytheinterestofthenationaldebt，anddefraytheexpenceofcivilgovernment。Werethepeopletobeblownupintoaspiritofrevoltagainsttaxes，thesameeventwouldprobablyhappen。Ineithercase，thenaturalandimmediateconsequencesofthebankruptcywouldprobablyfollowoneanotherinthismanner:
　　First，Everycreditorofthestatewouldbecomepoorerinproportiontothediminutionofhisincome。
　　Secondly，Consumptionandthedemandforworkwoulddiminishinproportiontothepartofthatincomewithheld，whichthecreditorsannuallyexpendforthesepurposes。
　　Thirdly，Tradewoulddirectlysuffer，inproportiontothatpartofthesaidrevenueyearlythrownintoitbythepubliccreditorsatpresent；anditwouldconsequentlysuffer，inproportiontothehurtresultingtoprivatecredit，fromtheconsequencesofthebankruptcy。
　　Thecreditorswouldthenloseall，thetradeofEnglandwouldbeundone，andthemultitudeswholiveinconsequenceofthedemandfortheirindustryfromtheoneandtheother，wouldbereducedtomisery。Theseimmediateeffectswouldfirstmanifestthemselvesinthecapital。TheconsequenceswouldsoonbefeltalloverEngland:adiminutionupontheconsumptionofthefruitsoftheearth；astagnationofthatcommercewhichiscarriedonbetweenLondonandthecountrywhichwehaveseentobeequaltotheamountofallthetaxes，andtoalltheland-rentsspentinLondonwouldsoonthroweverythingintoconfusion。Buttaxeswouldbeabolished:ofthatthereisnodoubt。Letadeliberatebankruptcytakeplacewithoutanyabolitionofthembylaw，theywouldsoonsinktonothing，fromtheutterimpossibilitytherewouldbefoundtopaythem。
　　Atotalbankruptcy，therefore，cominguponEngland，eitherfromadecayofhertrade，oradisturbanceincollectingthepublicrevenuewouldhavetheeffectofplungingthenationintoutterruinathome:whatmightbetheconsequencesfromabroad，I
　　leavetothereader’ssagacitytodetermine。
　　Letmenowsupposeabankruptcytotakeplacefromadeliberateactofpower，withaviewofexpediency。
　　Thedifferencebetweenthetwoconsistsinthis；thatinthefirst，alltheconsequenceswehavementionedwouldfollowoneuponanother，withoutapossibilityofpreventingthem:intheother，aplantopreventthemmightbeconcerted。
　　Letmethensuppose，thatgovernmentshallfinditexpedient，atanytime，touseaspungeforthepublicdebts；thattheyshallfeartoexternalbadconsequences，eitherfromtheresentmentofthosestateswhomaybehurtbyit，orfromtheambitionofotherswhomayprofitbyit；thattheyshallcoolyresolvetosacrificetheinterestofallthecreditorsinfavourofthewholebody；andthattheyshalldeliberateupontheplantobefollowed，inordertobringaboutsogreatarevolution，withoutessentiallyhurtinganyinterestinthestate，thatofthecreditorsaloneexcepted。
　　Inthiscase，Iimagine，theywouldbeginbyorderingtheamountofallthatispaidtothecreditors，tobesetapartasafundfortheexecutionoftheplan。
　　TheywouldpurchasealloverEngland，everyarticleofproduceandmanufacturewhichmightremainuponhandforwantofamarket:theywouldfeedallthosewhowouldbeforcedtobeidleforwantofemployment:theywouldinstantlyputproperemploymentsintotheirhands；oneweek’sdelayintheexecutionofthispartoftheplanwouldthrowthemanufacturinginterestintosuchconfusion，astobepastallremedy:theywouldfurnishcredittoallthemerchantssubsisting，inproportiontowhattheyhadlostbytheextinctionofthefunds:theywouldestablishofficeseverywhere，tosupplythewantsofthosewhowouldbetotallyruined，untilbydegreestheycouldre-establishconfidence，theparentoftrade，themotherofindustry。Bysuchprecautions，properlytaken，andproperlyexecuted，nonewouldsufferbuttheunhappycreditorsandtheirfamilies，who，fromgreatopulence，wouldbereducedtopoverty。
　　Asfarashumanprudenceisinsufficientforgoingthroughsogreatadetailallatonce；sofarwouldtheeffectsofageneralbankruptcyaddhurtfulconsequencestothosewhichineverycaseareunavoidable。
　　Wereastatesmanendowedwiththesupernaturalgiftofturningthemindsofanationathiswill，andofforeseeingeveryconsequencebeforeithappened，suchaplanmightbeexecuted。Anotherwho，withthegreatestcapacityevermanwasendowedwith，would，forexpediency，notfromnecessity，deliberatelyundertakeageneralbankruptcy，Ishouldconsiderasamadman。
　　Ishouldratherprefertosubmittothenaturalconsequenceswhichmightresultfromanaccidentalbankruptcy，thanendeavourtoavoidthembyaplantoocomplicatedforhumanwisdomtoexecute。
　　Letusnextsupposetheschemetobefairlyexecutedfromaviewofexpediency，nomatterhow，andallinconveniencespreventedduringtheexecution，whatwouldbegainedbyit？
　　Ifbythesuppositionalltaxesbekeptalive，foratleastacertaintime，inordertopreventatotalconfusion，certainlynobodycouldgainduringthisperiod；eventhestateitselfwouldlose，becauseeverybranchofconsumptionwouldinfalliblydiminish。Butthattimeelapsed，andtaxesreducedtothelowest，whowouldbethegainers？Weshallseewhenwecometothedoctrineoftaxation，thatasuddenabolitionoftaxes，inconsequenceofabankruptcy，wouldbeadvantageoustonobody，buttocreditorsuponmortgage，andtotheidle:nottolandlords；becausetheirincomeswoulddiminishmorethanintheproportionofthepresentland-tax，atleasttheirimprovementswouldbeinterrupted，andtheirrentsillpaid:nottothemanufacturingclasses；becauseatpresenttheypaynotaxes，butinproportiontotheiridlenessorextravagance，asshallbeproved:themoniedinterest，notsecuredonland，wouldIsupposebeextinguished；tradeandcreditatanend。Thegainsthenwouldbeconfinedtothosewhohavemoneysecureduponland，wherethecapitalisdemandable。Insuchasituation，theinterestofmoneywouldrisebeyondallbounds；andadebtwhichmighthavebeenconsideredasatriflebefore，mightthencarryoffanestate。
　　Theidlealsowholivepeaceablyuponaverymoderateincomewouldfindagreatadvantagefromthefallofpricesforwantofconsumption，andfromthedistressoftheindustrious；buttheindigentpoor，whoaresupportedfromvoluntarycharity，wouldsuffer:allthegreatestablishmentsforlabourandindustry，inpublicworkhousesandhospitals，wouldfalltotheground:thenumbersofpoorwhoaretheremaintainedatpresentwouldcomeuponasociety，whichisbeginningtolosethosetenderfeelingsofcompassion，whichincountriesofidleness，aremoreorlessprevalentinproportionasmiseryismoreorlessfamiliarlybeforethem。
　　Tosayallinoneword，atotalbankruptcy，andabolitionoftaxes，wouldbringthisnationbacktothesituationitwasinbeforetaxesanddebtswereknown。
　　Doesanybodyimaginethatourpresentsituationisnotanalogoustoourpresentpolicy，andthatitispossiblethatindependentlyofthesamecircumstancesweshouldlongcontinuetoenjoytheadvantageswefeel？No:wereweinthesamesituationasformerly，weshouldfeelasourfathersfelt。Theyhadasgoodunderstandingstoimprovetheircircumstancesaswehave；buttheyhadtodowithanidle。wewithanindustriouscommonpeople。Tradeandcredithavebeenlongatworktoeffectthisgreatrevolution:theoperationisnotasyetcompleated，andatotalbankruptcynow，woulddestroyeverygoodeffectofitforalongtime。
　　Weretaxesmadetocease，thelargesumswhichproceedfromthemwoulddisappearentirely。Moneywouldnot，assomeimagine，becomeequallydistributedamongthosewhonowpaythetaxes，andsoproportionallyincreaseeveryman’sincome。Thereasonisplain:themoneypaidfortaxes，circulates；becauseitisdemandedbythepublic，andisspentbyit。Weretaxessuppressed，peoplehavinglessoccasionformoneythanformerly，wouldcirculatelessinproportion。Itisthenecessityofpayingtaxes，whichcreatesthismoneyforthepaymentofthem；andwhenthismethodofcreatingisnotcontrived，thetaxescannotbepaid，ashasbeenoftensaid。NowitisthisgreatfluxofmoneyfromtaxeswhichanimatesthetradeofEngland:takethemoutofthecircle，whatbecomesofthewhole？
　　Tosuppose，therefore，sogreatarevolutioninthecirculationofacountry，asthatproducedbythecessationoftaxes；andtosupposenointerruptionfromituponthestateofindustry，andtheemploymentofthepeopleofthisnation，isapropositionImustreject，asbeingcontrarytoallprinciples；
　　andtothisamongtherest，thatitwouldbeamostsudden，andamostviolentrevolution；whichthroughoutthewholecourseofthisinquiry，wehavefoundtoinvolveinconveniencesbeyondthepowerofanytheorytopointoutortoremedy。
　　Uponthewholewemayconclude，thatthefatalconsequencesofabankruptcywouldbemany；andthatthegoodresultingfromatotalabolitionoftaxeswouldbeconfinedtotwoobjects。First，Arelieftothosewhopaythemupontheirpossessions，orpersons。Secondly，Adiminutionofpricesinfavouroftheidleathome，andoftradeabroad:greatobjects，nodoubt，couldtheybeobtainedatlessexpencethantheconsequencesofatotalfailureofpubliccreditanddomesticindustry。PerhapswhenwecometoexaminethePrinciplesoftaxation，weshallfindthattaxesdonotraisepricessomuchasisgenerallybelieved；andthoseprincipleswhichinfluencetheapplicationofpublicmoney，willpointoutbetterexpedientsthanabankruptcyforcompassingthegreatnationalobjectswhichwehavejustnowmentioned。
　　Butletussupposeacase，whichmaypossiblyhappen，asmattersseemtogoon。Suppose，Isay，thatbycontinuingtocarryonlongandexpensivewars，thesumofinterestpaidtostrangersshouldexceedallthatthenationcangainbyhertrade。Inthiscase，theremustbeageneralbalanceofpaymentsagainsthereveryyear，whichverysoonwouldmanifestitselfbythemostfatalconsequences。
　　ThebankofEnglandwouldbethefirsttofeelthem，bythedepartureofallthecoinandpreciousmetals。Tradewouldfeelthemnext，andthenindeedtheywouldbecomeuniversal。