The stop of Payments which hapned to the Bank of Scotland, was foreseen, and might have been prevented. The Consumption of Forreign Goods, and Expense in England, being more than the Export of Goods did pay; the Ballance sent out in Money lessen'd the Credit of the Bank.
For as Credit is volunatary, it depends on the Quantity of Money in the Country, and Increases or Decreases with it. Coyning Notes of one Pound supported the Bank, by furnishing Paper for small payments, and thereby preventing a part of the Demand for Money: by these Notes the Bank might have kept its Credit, till other Methods had been taken to supply the Country with Money; had not a Report of raising the Money occasion'd an extraordinary Demand, which in few days exhaust the Money in Bank, and put a stop to payments.
It would not have been easie in that scarcity of Money to have got enough to support the Bank, tho Men of the best Credit had undertaken it; That Report of raising the Money having only occasioned a Demand from the People of Edinburgh. In a short time Notes would have come in so fast from the Country, that what Money could have been got, would not have answer'd the Demand.
If the Privy Council had lower'd the Money, the English Crown to 5 sh. and the other Money in proportion, to take place 2 pence p.
Crown in 3 days, and the other 3 pence in a Month; the occasion of the Demand being remov'd, in all appearance Money would have been return'd to the Bank.
If the state of the Bank had been known, or suspected by the People; such a Proclamation would have had the same effect, tho the stop of payment had then happen'd. In that case, the support of the Bank might have been the Narrative of the Proclamation; The security being good, few or none would have kept their Money to loss, rather than return it to the Bank. And if in 3 days Money had not come in so fast as expected, their Lordships by a 2d Proclamation might have lower'd the Crown to 5 sh. to take place then, and 6 pence more in 3days. When the Credit of the Bank had been re-establish'd, the Money might have been cry'd up, if that had been necessary, the Crown to 5sh and 5 pence, and the other money in proportion as it was before.
Some are against all Banks where the Money does not lie pledg'd equal to the Credit. 1. They say the Demand may be greater than the Money in Bank. Secondly, If we are declining in our Trade, or Money, we are not at all, or are less-sensible of it: And if the Bank fail, we are in a worse condition than before.
To the first it's Answered, tho the Nation had no Benefit by the addition the Bank makes to the Money; Nor the People by being supply'd with Money when otherwise they could not, and at less Interest; And tho the Proprietors had no gain by it: the other Conveniencies, as quicker and easier Payments, etc. are more than equal to that hazard;Or Bank Notes, Gold-smiths and Bankers Notes, would not be prefer'd to Money, every Body knowing such a stop may happen to the Bank, and that Gold-smiths and Bankers may fail.
The other Objection is the same as to say, a Merchant who had a small Stock, ans was capable of imploying a greater; If a Sum wereoffer'd him without Interest, equal to what he had, and more as his own encreas'd, should refuse it, because he might fancy himself Richer than he was, and if his own Stock decreas'd, that Sum lent would be taken from him.
If 15000 is suppos'd the Money in Bank, and 75000 lib. of Notes out; 60000 lib. is added to the Money of the Nation, without Interest:
For what is pay'd by the Borrowers, is got by the Proprietors. As the Money of the Nation encreases, the Credit of the Bank encreases, and the Sum of Notes out is greater; And so far from making the People less sensible of the condition of the Country, a surer Judgment of the state of Trade and Money may be made from the Books of the Bank, than any other way.
If Trade can be carried on with a 100000 lib. and a Ballance then due by Forreigners; The same measures, and a greater Quantity of Money, would make the Ballance greater. Nor is that Additional Money the Bank furnishes, to be suppos'd will be lost, if by a Ballance due from Trade the Silver Money encreases: That Credit may fail from an accident when Money is plentiful, and would soon be recover'd; 'Tis only lost by a scarcity of Money. Such a Credit may support Trade, in cases where without it Trade would sink, but cannot do prejudice.
Another Objection is made against the Bank. That it encourag'd the Exportation of Money, by furnishing Sums in such Species as were of most value Abroad. To answer this Objection, I shall make a Supposition. A.B. Merchant has occasion for a 1000 lib. in Holland, and desires C.D. Banker to give him a Bill for that value; There is no Money due in Holland to Scots Merchants, so C.D. must Export the Money to pay the Bill he Draws: But there being no Bank, nor any possibility of getting a 1000 lib. in 40 Pence Pieces, he sends out Money of different Species. This does not hinder the Money to go out, but makes the Exchange dearer by 2 or 3 per cent, then it would have been if 40Pence Pieces could have been got. And tho no other Money were left, but old Marks, if a Ballance is due these will go out, tho not worth 10 Pence: The Exchange will be so much higher, the profit of Exporting is the same; And so far from doing hurt to the Country, the Bank by furnishing such pieces as could be Exported to least loss, kept the Exchange 2 or 3 per cent lower than otherwise it would have been, and saved yearly the sending out a considerable Sum to pay a greater Ballance, the higher Exchange would have occasioned.