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these evils in the abolition of small notes: 5th, I shall consider the arguments on these subjects as relative to Scotland, under which I think I shall refute Mr Bradwardine. My 6th head shall be miscellaneous; and, like the Reverend Brethren, I shall conclude with a few serious reflections on the whole. This arrange ment of my discourse is no doubt a little à la sermon, but I trust my audience will not dose at it.

It was a favourite remark of my old friend Burns the poet, whom none will accuse of want of originality, that apt quotations are always useful, resembling, as he said, readymade articles; and much he dealt in them, as my Secretary, whose pen I now use, could shew, by the exhibits of many of his letters. Now I shall resort to quotations also, and shall take them from home-bred philosophers: "Money (says David Hume) is not, properly speaking, one of the subjects of commerce, but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another*? So says one great man, as to money in general: another one (Adam Smith) gives us, in his Wealth of Nations, the following distinct account of paper-currency, and the principles of it: "That part of his capital which a dealer is obliged to keep by him unemployed, and in ready money, for answering occasional demands, is so much dead stock, which, so long as it remains in this situation, produces nothing either to him or to his country. The judicious operations of banking enable him to convert this dead stock into active and productive stock,-into materials to work upon, -into tools to work with,-and into provisions and subsistence to work for,-into stock which produces something both to himself and to his country. The gold and silver money which circulates in any country, and by means of which the produce of its land and labour is annually circulated and distributed to the proper con sumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country,

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which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great part of this gold and silver, enable the country to convert a great part of this dead stock into active and productive stock,-into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not to a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures and corn-fields, and thereby to increase very con siderably the annual produce of its land and labour †.”

Thus I have exhausted my first head. The application of it will come afterwards. As to my second, the history of Banking in Scotland, it commences with the institution of the Bank of Scotland in 1695, which was followed by that of the Royal Bank in 1727, and by the setting a-going of several private banks of great respectability. As to the good effects of banking in Scotland, Dr Smith says, "I have heard it asserted, that the trade of the city of Glas gow doubled, in about fifteen years after the first erection of the banks there, and that the trade of Scotland has more than quadrupled since the first erection of the two public banks at Edinburgh;" and he afterwards adds, "that the banks have contri buted a good deal to this increase cannot be doubted."

From the time of the institution of those banks, I am not aware that Government ever interfered with banks and banking in Scotland, except in a solitary instance. During the middle of last century, a set of inferior people circulated notes for five and ten shillings; and as those persons were little known, the tax-gatherers refused their paper; just as is done, it is believed, at this day in the Isle of

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Man. Inconvenience arose, though I do not think that any other evil took place than such inconvenience, and Parliament put an end to the issue of them in 1765. Since that time, the current notes in circulation in Scotland have been Guinea and Pound Notes-issued, not only by the public banks, but even private bankers, of great credit; and every thing has gone on well with them.

Sir, two circumstances in Scotch banking cannot but attract the attention, and excite the admiration of all who advert to it. The first of them is what I have styled the safety apparatus, for discovering and preventing over-issues, consisting in the weekly exchanges of notes. Of this I need say no more in addition to my remarks on it in my last letter. The second important circumstance consists in that well-constituted, tacit agreement (referred to in E. Brad wardine's letter) among the Scotch banks, whereby, in the days of trouble, they stand firm by one another with their notes and credit. This has been compared to a republic, but it is liker the ancient Achean league, wherein a number of free towns associated for mutual safety; or, as similes appear to be the order of the day, I add another one, and say, that it resembles that valuable bundle of rods given by the virtuous father as a bequest to his family, when he admonished them to adhere to one another, for their mutual welfare.

Such; Sir, is Scotch banking; but the valuable qualities of it have been acknowledged from authorities which cannot fail to meet with the highest respect. In the late written communication by the First Lord of the Treasury, and the Chancellor of the Exchequer, to the Bank of England, they say, (to use their own words):

"The failures which have occurred in England, unaccompanied as they have been by the same occurrences in Scotland, tend to prove that there must have been an unsolid and delusive system of banking in one part of Great Britain, and a solid and substantial one in the other.”Again-" In Scotland there are not more than thirty banks, and these banks have stood firm amidst all the

convulsions in the money market in England, and amid all the distresses to which the manufacturing and agricultural interests in Scotland, as well as in England, have occasionally been subject. Banks of this description must necessarily be conducted upon the general understood and ap proved principles of banking." And Mr William Dundas, our countryman, in a late debate in the House of Commons, admitted, that " he looks with attachment to a system which has prevailed for upwards of 100 years, and under which the country has greatly prospered.”

I come now to my third head, the abuses of Banking, and the evil thence arising to the different parties connected with it. Now, the abuses of Banking affect three different descriptions of persons,

the merchants, by its inducing them to over-trade, through the too great facility of accommodation with money,-the bankers, who never fail to suffer severely for their overissues,-and the poor, who, on occasion of failure of bankers, are sufferers, by having their notes in their hands instead of specie.

My fourth head has relation to the proposed cure of those evils, in the intended ABOLITION, not of papercurrency, but of SMALL NOTES; and let us see how that would operate in any endeavour towards accomplishing the different parts of its object. Now, as to the first part of these, would the abolition of small notes put an end to over-trading among merchants? I do not perceive that it would have any such effect. Dr Smith justly remarks, that whatever consumers may do, "dealers” carry on their operations by notes generally above ten pounds; but over-trading is the operation of merchants or dealers in their sales to one another, whether at home or abroad, and the consumers have nothing to do with it. But in truth, even the larger bank-notes have but a small share in it, for great commercial transactions are generally carried on by another kind of paper, namely, bills; and these in London, among the greater merchants, and banking-houses, are negotiated and paid in very many instances, it is believed, without the aid of either gold or bank-notes, by the exchange of

acceptances, which takes place daily, in a particular room, where clerks from the respective houses attend for the purpose; so that while the abolition of the small notes, and probably even that of the large ones, would be of no avail to cure that evil of over-trading, every thing, with regard to it, which can be stated against the small notes, may be urged with equal propriety against the large ones, and even more forcibly against Bills of Exchange.

But, next again, how would the abolition of the small notes operate on the Bankers themselves? It would have but a very partial effect in saving them from runs. It is true, it might prevent some poor men, or frail old women, who had a few pound or guinea-notes in their chestnooks, from hanging about the banking-house doors; but it would not keep out the holders of large notes, because there is no abolition proposed of them: it would not exclude clamorous people coming with receipts for deposits, in whatever description of money those may have been made; nor would it shut out the anxious, ghastly faces, of men calling aloud for settlements, and the balances due

them.

Let us next see what effect the abolition of small notes would have on the poor. It is true, when a banker fails, it is better for a poor man that he has a sovereign or a golden guinea, than his pound or guineanote. That is admitted, but this view is a limited one; for failures of banks happen but seldom, and would do so more rarely, were they well regulated; while the facility of payments for all descriptions of labour, by the use of small notes, encourages manufactures and agriculture, but for which the poor man would never have been brought into existence at all, and without which he has not the means of continuing it, as will appear more distinctly, when I come to consider this matter as having relation to our own country of Scotland, which I shall immediately do.

And this leads me, in the fifth place, to advert to the banking of Scotland, and the proposed abolition of small notes, in reference to mer

chants, bankers, the people, and particularly the poor of this our native country. Now, as to merchants, the general remarks already made apply to them in this as well as the other end of the island; and as no over-trading takes place in small notes any where, so the abolition of them in Scotland would be of no avail as to this matter. Further, it seems quite clear, that in Scotland merchants run less risk of being permitted to over-trade than in England, since they depend here on wellinformed bankers, and not on Cheesemonger dealers in cash ",—more particularly, when we remember, that our Scotch banks form a species of general council, for watching over the money-market, and keeping all safe, as I have already explained. And here I cannot but advert to the unreasonableness of some persons, who blame the bankers, in the day of trouble, for having so much encouraged such trading, by their readiness to accommodate with funds in better times. For what ought they to have done? They gave out their money only on good security, and they left special prudential considerations chiefly to their customers whom these concerned, and who would have probably taken their remonstrances as ill as a company should do those of a landlord in a tavern, were he, instead of sending them more wine, when called for, to come in and favour them with a lecture on temperance.

As to the bankers themselves in Scotland, the remarks generally already made occur also here, with this most important addition, that the safety-machinery in the exchange of notes, already so frequently alluded to, saves from runs, because every banker, knowing well that the day of reckoning must come within a week at farthest, is, in the general case, cautious what he does as to advances. But should there be a tendency to runs, it is well known that the members of what I have called the Achean league, also already explained, will support and protect one another, for the good of the whole-a device for the public weal, which, as to banking, it is believed,

I think it right to say, that I on no occasion mean any want of respect to English bankers in general, but only to those who merit the withholding it.

exists no where but in Scotland, and to which I shall advert further in a little.

And with regard, in the last place, to the people and the poor in Scotland, every argument already stated in a general manner applies here; with others, also, which will come out more distinctly when I shall sift Mr Bradwardine's reasonings, which I shall speedily do.

Having, as I trust, thus established sufficient premises, I come now directly down on the contest, Waver ly against Malagrowther; my observations on which I am to preface with a simile. Sir, these parties put me in remembrance of two country lairds of my acquaintance, who, entering on an amicable suit in a Sheriff-court, about the straighting of their marches, one of the parties proceeded in it inadvertently with too much warmth, and that brought on a great quarrel between them; leading them to sundry hotly-contested litigations, about mills and multures, water-runs, pasturages, trespasses, mosses, muirs, meadows, parts, pendicles, and hail pertinents, &c. &c. &c., so that, ere long, there were no fewer than twenty-seven well-going processes between them; -their procurators over their toddy declaring, that their clients were two as guid milk kye as ever writers had in their byres. It was, however, no joking with the gentlemen them selves; for such contests had their usual effect, of destroying for ever the intimacy which should always subsist between neighbour families. To apply my illustration,-the sub ject here was the currency question, as applicable to Scotland, and might have been amicably discussed; but instead of that, we must admit, that our friend, Mr Malachi, from the very beginning, lost temper; and in place of confining himself to it alone, he sent his trumpets of defiance, or rather his bagpipes, with their tuttie taities, before him; and proceeded to tear up every half-healed wound, and rake up every old grudge between the two countries, acting in a manner very different from what we were led to expect from the known good sense and moderation of that person. While I say this, how ever, I do not mean to deny that there was much truth in all he said.

My only objection is to the time and place of introducing his complaint. To resort to professional language well known to him, when he brings his action in proper form, he shall have my best aid on the occasion; and I need not remind him, that guineas, and guinea-notes, form no small part of the sinews of war, wherever the field of battle may be.

But it is not merely to the tone of our champion, in point of temper, that I object, for I was a little disappointed in the kind of warfare which he practised at first. As poor Queen Mary stood and saw the bat tle of Langside from an adjoining eminence, and as Napoleon, from the summit of a wooden elevation, surveyed the bloody field of Waterloo through his spy-glass, so I have witnessed all this struggle; and, Sir, believe me, that during the two first assaults, I was not a little dissatisfied with Mr Malachi's kind of onset; for I thought that squibs were but a feeble defence of us; and it was not until the third and last fight, when he charged Old Christal with bayonet, that he met my approbation; though I was aware, that that petty dealer in "broken tea-spoons, strayed sugar-tongs," and other such spreichry, was but poor game for so great a hero as Malachi; for it is said, I think, that the king of the forest deigns not to meddle with humble prey.

But I must now attend to my own duty, and answer, in their order, the statements of Mr Bradwardine, which bear distinctly on our subject; and those, on examination, you will find to be but very few. The whole of his first letter (for there are two of them,) is occupied in that squib, or rocket-fighting, for which I have blamed Malachi; and, in a few sentences, I shall extract all that he has said in the second that is relevant to

the present question; or to which, holding close to the matter at issue, I consider it necessary to reply.

He finds fault with Mr Malachi having said that, (as he conceived,) the present interference with the Scottish currency was unprecedented; and he refers triumphantly to the act 1765, which put down the issues of five and ten-shilling notes at that time. But surely, that was

of no consequence; and I believe the enactment proceeded from a desire to clear Scotland of Cheese-monger bankers, a few of whom then existed here also, as it has been admitted they have all along done in England. Be that, however, as it might, certainly, since the act 1765, sixty years ago, there has been no in terference on the part of Parliament with our Scotch currency. Neither have there been any failures of bankers, except in two instances, which, it is admitted, proceeded from causes altogether unconnected with the medium; and every thing has gone sweetly and smoothly on, -the bankers and their customers all prospering in an eminent degree. - On the most careful examination of Mr Bradwardine's letters, the following sentences, in the last of them, seem to be all that bears on the subject. I state them in his own words, because I mean particularly to reply to the exact propositions contained in them:-He says, "I begin by admitting-and that is as much as I suppose can be asked of me that the banks, and the individuals which compose them, are abundantly opulent, and possessed, in the aggregate, of property sufficient to answer all the engagements they can make. I further admit, that such a foundation is quite solid and sufficient for the general business of trade, and for all the higher transactions of commercial intercourse; but, on the other hand, I would ask, what defence do they afford against an unreasonable panic, which, in mat ters of paper currency, is the evil most likely to occur, and most necessary to be guarded against?

"You say, that only two or three Scottish banks have failed in a long series of years. I admit the fact, and might say something of the apologue of the pitcher and the well, but I think I can, without the aid of an allegory, explain the causes, and, consequently the precariousness, of their exemption from accidents of that nature.

"The first cause of their uninterrupted credit is, no doubt, their positive wealth, and the great stake which the partners visibly have in the country.

The second, I take to be, that the

banks hold together; that, conscious that not one of them could stand what is called in England a run, they help one another for the sake of what is a common cause. When a run takes place on a bank in Scotland, how is it met? By paying their notes in specie? If that were the case, you might well boast of the stability of the Scotch banks→→

"Which, having substance for its ground,

Could not but be more firm and sound
Than that which has the slighter basis.

"But I fancy that no such thing as a payment in coin was ever heard of. The threatened bank glorifies itself if it is able to pay its notes by the notes of one of its neighbours; and thus, by a mutual interchange of courtesy and kindness, two banks, which were objects of suspicion, each in their own districts, might weather the panic by the help of the notes of each other; and if their proximity should happen to throw any disfavour on this operation, they need only have recourse to some more distant correspondent, whose paper should happen to be in full credit.

"This, as I conclude from facts supplied by yourself, is the real cause that there has been no loss by the failure of any Scottish Banks." The very facts on which you rest your opinion of the stability of your system convince me that there is "something rotten in the state of Scotland.”

Now, the propositions which these paragraphs embrace, are, first, an acknowledgment of great property on the part of our bankers; and next this question, "What defence does all such opulence afford against an unreasonable panic?" Secondly, an admission that all the Scotch Banks have hitherto stood firm, except two, the failures of which are justly ascribed to other weighty causes;

And, thirdly, an explanation of the reason of the uninterrupted credit of the Scotch Banks, (for these are the writer's own words,)-that great and proud credit being ascribed by him to the two real grounds of it: first-to the positive wealth of the bankers, and the great stake which the partners visibly have in the country-and, next, to this circumstance, that the banks hold toge

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