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the holder wishes to make payments or purchases where they are not current—the same happens when the credit of the bank is shaken, or a political revolution is apprehended. Some probable calculation may be made in regard to the rivalship of other similar institutions, and their means of collecting and returning to a bank its notes. A comparison of the extent within which the notes of a bank circulate, with the extent and character of the commercial relations of the town in which the bank is situated, afford some data for calculating on the demand for specie created by the necessity of making foreign payments. Here the balance of trade is to be taken into consideration, that is, whether all the articles exported from a place are sold to the exporters for a greater or less aggregate amount, than all the imported articles are purchased. For example, suppose a foreign fleet should visit Boston in the autumn, and there should be a sale made of every thing exported from the town during the year, and each seller should receive from the agents of the fleet, the price of whatever he may have sold in specie : business then ceases till the next spring, when the fleet returns with foreign articles to supply the town for the ensuing year. Those who were vendors in autumn now become purchasers. If the aggregate amount of the purchases exceed that of the sales, the balance of trade is against us, provided we have the means of subsistence within ourselves, and bave no trafick whatever, by which property is carried out of the town and brought into it. It is evident, that this cannot be often repeated ; our money will soon be exhausted. But if the fleet belong to our own citizens, the case is very different. We build and rig their ships, and supply them with provisions, for all which they pay us in the autumn, in addition to the price of the articles exported. The merchants will charge the expenses of the outfits and those of the voyage upon the cargoes. We may, then, buy in the spring of the important articles, to a greater amount than that for which we sold the articles of exportation, without, on the whole, sustaining any loss; we may have part of the money remaining on hand. Thus, though the balance of trade, according to the common mode of estimating it, is against us, we may be flourishing and growing rich. But if the amount of our sales in a foreign market, did not exceed that of our purchases of imported articles in our own, our losses would soon deprive us of the means of trading. We hence see the

cause of those perplexities and errours, into which specula. tors have been led by calculations concerning the balance of trade. Had the embarrassment been confined to writers, it would have been well, but governments have sometimes acted upon erroneous inductions, derived from the same source, and in attempting to regulate trade in such a manner that the balance should be adjusted to their own wishes, they have restrained and discouraged it. If in the case supposed, the balance should continue to be in favour of Boston, specie would accumulate, and unless it were wrought up in some manufacture, requiring a constant supply, as in China, some outlet would be sought for the superfluous specie ; we should send away to procure those new conveniences or luxuries which should happen first to offer, this course of trade would cause a quantity of specie to pass annually through the channels of Trade in the town. It would naturally be lodged in the vaults of the bank in its passage. This was actually the case in the former regular course of business.

We sold goods to the southern states to a greater amount than those we purchased of them; and waggon-loads of specie were transported from New York and Philadelphia to Boston. We did not procure furs and skins in sufficient quantities, to purchase all the goods imported from China. The balance between us and the southern states, went to cancel the balance against us in the East-India trade. When there is a current of specie through a commercial place, it is much more easy to keep the banks replenished, than when it rests in a stagnant deposit. In the latter case, as the banks of the shire towns in the interiour experience, it is difficult to supply any casual diminutions of specie, just as a cistern will be kept more uniformly full, if a stream be running into it and out of it at the same time, than if the waste of evaporation and discharge be supplied by buckets. The alarm then,which has prevailed, lest the East-India trade should drain away all the specie of the commercial world, is groundless; it is as much as if we should fear that we should have no cotton for our manufactories, because, part of what is brought from the sonth, is shipped to Liverpool. The transmit will afford a more sure supply for our domestick manufacturers generally; though the foreign demand might at times be so great, as to cause the re-shipments to be too extensive, before the diminished quantity would raise the price in our own market.

Just so in regard to specie, some extraordinary cause for exportation, may, at certain times, drain it away, and produce a scarcity ; or the sources whence we obtain it, may sometimes be less copious, and produce the same effect : but if trade and industry flourish, the deficiency will be temporary, and those who are suffering by it, will soon supply it.

But this does not always take place soon enough to prevent some general embarrassment. It requires some time to change settled habits. We must not only know a change to be necessary, we must also feel it.

A man who has been accustomed to the indulgences of affluence, does not contract his expenses within the limits of his income, immediately on his circumstances being reduced; he generally continues them till he finds his bills troublesome. The commercial habits of a nation have a similar operation. If in the ordinary course of business, a considerable quantity of specie has been transmitted through a trading town, and by a change of circumstances, the introduction of it ceases, still those who have been in the habit of carrying it away, will continue the practice till none can be obtained. The consequence is a general einbarrassment for want of specie. We have been describing the situation of Great Britain, and also that of the United States. The evil does not appear in its natural form in either country. We have spoken of the situation and necessities of Great Britain. In the United States, our southern brethren, instead of allowing the cistern to be drained till the efflux should have ceased by the diminution of the quantity, raised the bottom, and thus gave the vessel the appearance of being full. The situation of the country required it, they say, and the war could not otherwise have been carried on. For ourselves, we do not believe this, but it is unnecessary to attempt to refute it, since allowing it to be true, it is no justification of the banks. It is absurd to suppose, that the directors of each of the hundred banks, which refused to receive their notes, according to their agreements previously to this measure, held a deliberation on the state of the nation, and concluded, that the publick exigencies required of them to violate their engagements, and unless they should substitute their own paper for the legal coin, the government could no longer go on. In thus interfering by an assumed legislative power, and regulating the circulating medium, these corporations arrogated one of the most important func

tions of the legislature. We believe that the situation of the nation would have been much better at all times, and more especially at the present, had the southern banks adopted the conduct of the eastern, and confined themselves to the exercise of the powers given by their charters. When the quantity of specie began to be diminished, and the state of the country produced a general distrust of each other among commercial men, the eastern banks contracted their business within narrower limits; and thus saved their credit, and enabled merchants to judge more accurately of each other's circumstances, and act with greater safety, while the southern banks increased their issues, and by thus overtrading, for the sake of a temporary gain, an artificial

, inflated state of things was produced; from which just dimensions and proportions disappeared, and accuracy of calculation was impossible. Conjecture took its place, and speculation was substituted for the regular process of business.

It is unnecessary to consider all the circumstances which may affect the credit of a bank; its reputation, like that of a mercantile house, will generally depend upon the punctuality of its payments, and this again on the skilful management of its affairs.

The apprehension of a revolution is a conjuncture exempted from all calculation.

Competitions in the demands of specie for the adjustment of balances of trade, and the circumstances which may effect the credit of a bank, are objects of attention to directors; a knowledge of which, constitutes part of their science : but the address and perspicacity, acquired by experience, are much more important. The ocean of affairs is liable to storms and agitations ; besides, the charts and tables of science, the navigator must learn to descry, with an almost instinctive sagacity, the signs of change and omens of danger.

The agents of the corporation, upon taking a view of circumstances which have been mentioned, calculate how many of its notes can possibly be returned upon them. If they have a reasonable degree of skill in their business, they can make such arrangements, that the probability of their being able to meet all the demands that can be made upon them, will almost amount to a certainty. The idea then, that banks can pay specie according to their contracts,

is not fictitious or illusory, nor is there any thing mysterious in their operation, by which they are distinguished froin other commercial transactions.

The use of the publick debt, as part of the stock of a bank, is attended with some inconveniences, and some advantages. The credit of a bank founded on this species of capital, is liable to vary with that of the publick. Next to specie, the best capital for a bank, is that which is most saleable, and least liable to depression of price. A real property in a flourishing town, would be preferable to any other, but not so good as the securities of substantial inen, or those of the publick, since these are more easily converted into cash. A pablick debt may be useful by giving credit to paper, and thus increasing the circulating capital, but this does not prove a publick debt to be on the whole advantageous, for a government might as well borrow money for this purpose, as to run in debt for other


and use the stock for this. Suppose the government of the United States to have owed nothing in 1790, and the people to have been exhausted by the war, and unable to recover themselves, for want of a sufficient circulating medium, to give facility to business, and restore commercial confidence. Suppose that individuals had not been able or disposed to form a bank. The government would have promoted the prosperity of the country just as much, by borrowing seven million five hundred thousand dollars of Holland, and depositing it in the bank of the United States, as it did by authorising the bank by its charter, to receive subscriptions of publick stock to that amount. The publick would then kave shared in the dividends, which would more than have cancelled the interest. It was in the way we have mentioned; namely, by increasing the circulating property, that Hamilton said a publick debt might be a publick blessing ! He never said, that the mere fact of being in debt was more desirable to a government, than to an individual. The principal advantage, which the advocates of national debts attribute to them, is the support which a government derives froin its creditors. But it pays dear, and it would be much better economy to hire supporters when it needs them, than to keep a host of idle auxiliaries in constant pay.

We test the character of an administration of government, by its influence upon industry—the manners are best which animate the mind, and put in action the muscle of Vol. II, No. 6.


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