Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1817-01-02
OUERIST.
FOR THE ENQUIRER.
ON BANKS


ON BANKS.
have read with much pleasure the es-
say OF your correspondent II. ON The sub
iect of Banks. His reasoning is very in
genious, and he evidently writes with
the candor of one unbiased by prejudice
and solIcltous TO arrive ut truth He APP
pears TO haveread and reflected much up-
on his subject but think him wrong
i'll most OF the positions he has taken. His
errors, however, are such as may be eX-
pected from any one who possesses no
practical knowledge of the operations of
Commerce and Banking, takes his maNims
from the Author of the Wealth of Natl
ons, and upon them builds his theory. =
The danger is, that the extent and appli-
cation of the text may be misundcr
stood.
1t is not my intention, indeed have
not the time, to follow II. through every
part of his essay: will content myself
with endeavoring TO point out his error i'll
a few particulars, which have a hearing
upon the whole scale.-And, in TIE first
place, IT becomes necessary To dispose Of
those maNims of Adam Smith, quoted by
our author, 81 quoted in all conversations,
debates and essays on the subject of
Banking, viz. That bank can safely
advance toa merchantonly such part of
his capital rs he would otherwise be obi
gedto keep by him in specie -and, "that
tie quantity of bank notes which can ca
silly circulate III any country, can never
exceed the value of the gold and silver
of which ii supplies the place"
The first, II true at all, can only apply
in a country possessing mercantile CAPT
tai, and a metallic circulating medium equal
to 0U the denandS of its commerce. The 9TH
or maxim is literally true but it means
nothing more or less than that the whole
quantity of paper money, which can cir
culate easily ina country, cannot ex-
coed i'll amount the value of the gold and
silver, which the commerce of thecountry
conldkeepin circulation, fit possessed them.
He docs not mean 10 say, that in a conn
try possessing less of the precious metals
than ITS commerce requires, bank notes
cannot easily circulate TO ten times the
whole value oftbe gold and silver in the
country, II the Whole amount OftIlat gold
and silver, was only one eleventh part of
what the commerce of the country reuui-
red. His meaning, in other words, is,
thalthe quantity of bank notes which can
easily circulate IN any country, cannot ex-
coed that, which, added TO the specie re-
sum required TO give activity to It's COM
merce.
The United States presents an example
OF country not possessing a suificiency
OF the precious metals for the purposes
OF clrcuiatiOn and here bank notes NAV
easily circulated the extent ofihe detici-
ency.
X. admits, that from the establishment
efspecie-Pqyias' ban Ks, :" no evils, but ma
ny benefits may arise :" but he doubts
whether such can be established, as can
pay specie, under all circumstances, and
be profitable. But if can show that
banks may be prC.itably managed in pros
porous times, and also be Sqfe under anv
possible change, am sure X. will agree
with me, that we ought not to deprive
ourselves Ofthe benefitswe should receive
under favorable circumstances, because,
although they willnot injure, they cannot
continue TO confer all those benefits in adj
verse times.
ltwlllbe admitted, that under the most
adverse circumstances, bank NAV dis
count TO the erted Of its capital, without
being III danger of dishonorlng its notes.
The whole of It's capital NAV be lent on
what Is usually termed accommodation M
per-, aud If such should be the course of
tic Ddnh, dhu all us discounts above ITS
capital, be confined strictly 10 what is
CALLED business paper,f in prosperous times,
II may discount such papertO any amount,
which will not cause greater emission
OF notes than The commerce Ofthe coun-
try will keep in circulation. And tie pro-
fits Of the bank Will depend upon The a.
mount Of such business paper. Should
the bank find lis notes returning upon il, ,
either because too many had been issued
or from all unlavOrabIe balance of trade
against The Districtw whose circulation is
supplied, The remedy is obvious and sim
ple,giz. TO discount somuch less ofbnsiness
paper, a. is equal to the excessive issue
of notes or, If the unfayorable balance of
IL may be remarked, thGt Smith wrote
I'M country possessing saficinog Of specie
circulation, 0nd sach country requires no
aid from Bants Of C;rcmation-aiiiorgh e.
zen there, Baaks Of Discount end DepoJt
'conld give greatJacihtiest 20 tyade.
4 ~ business paper, is D.eani susa paper
as is s.irer for NE pwc'ltc Of goods &c. or
| ichic@y certainly to be. to G. nsqtuitY.