Volume III Part 30 (2/2)
”The bank” (says Smith, book ii. chap. 2.) ”acts not only as an ordinary bank, but as a great engine of State; it receives and pays a greater part of the annuities which are due to the creditors of the _public_.”
(It is worth observing, that the _public_, or the _nation_, is always put for the government, in speaking of debts.) ”It circulates” (says Smith) ”exchequer bills, and it advances to government the annual amount of the land and malt taxes, which are frequently not paid till several years afterwards.” (This advancement is also done in bank notes, for which there is not property in the bank.) ”In those different operations” (says Smith) ”_its duty to the public_ may sometimes have obliged it, without any fault of its directors, _to overstock the circulation with paper money_.”--bank notes. How its _duty_ to _the public_ can induce it _to overstock that public_ with promissory bank notes which it _cannot pay_, and thereby expose the individuals of that public to ruin, is too paradoxical to be explained; for it is on the credit which individuals _give to the bank_, by receiving and circulating its notes, and not upon its _own_ credit or its _own_ property, for it has none, that the bank sports. If, however, it be the duty of the bank to expose the public to this hazard, it is at least equally the duty of the individuals of that public to get their money and take care of themselves; and leave it to placemen, pensioners, government contractors, Reeves' a.s.sociation, and the members of both houses of Parliament, who have voted away the money at the nod of the minister, to continue the credit if they can, and for which their estates individually and collectively ought to answer, as far as they will go.
There has always existed, and still exists, a mysterious, suspicious connection, between the minister and the directors of the bank, and which explains itself no otherways than by a continual increase in bank notes. Without, therefore, entering into any further details of the various contrivances by which bank notes are issued, and thrown upon the public, I proceed, as I before mentioned, to offer an estimate on the total quant.i.ty of bank notes in circulation.
However disposed governments may be to wring money by taxes from the people, there is a limit to the practice established by the nature of things. That limit is the proportion between the quant.i.ty of money in a nation, be that quant.i.ty what it may, and the greatest quant.i.ty of taxes that can be raised upon it. People have other uses for money besides paying taxes; and it is only a proportional part of the money they can spare for taxes, as it is only a proportional part they can spare for house-rent, for clothing, or for any other particular use. These proportions find out and establish themselves; and that with such exactness, that if any one part exceeds its proportion, all the other parts feel it.
Before the invention of paper money (bank notes,) there was no other money in the nation than gold and silver, and the greatest quant.i.ty of money that was ever raised in taxes during that period never exceeded a fourth part of the quant.i.ty of money in the nation. It was high taxing when it came to this point. The taxes in the time of William III. never reached to four millions before the invention of paper, and the quant.i.ty of money in the nation at that time was estimated to be about sixteen millions. The same proportions established themselves in France. There was no paper money in France before the present revolution, and the taxes were collected in gold and silver money. The highest quant.i.ty of taxes never exceeded twenty-two millions sterling; and the quant.i.ty of gold and silver money in the nation at the same time, as stated by M.
Neckar, from returns of coinage at the Mint, in his Treatise on the Administration of the Finances, was about ninety millions sterling. To go beyond this limit of a fourth part, in England, they were obliged to introduce paper money; and the attempt to go beyond it in France, where paper could not be introduced, broke up the government. This proportion, therefore, of a fourth part, is the limit which the thing establishes for itself, be the quant.i.ty of money in a nation more or less.
The amount of taxes in England at this time is full twenty millions; and therefore the quant.i.ty of gold and silver, and of bank notes, taken together, amounts to eighty millions. The quant.i.ty of gold and silver, as stated by Lord Hawkes-bury's Secretary, George Chalmers, as I have before shown, is twenty millions; and, therefore, the total amount of bank notes in circulation, all made payable on demand, is sixty millions. This enormous sum will astonish the most stupid stock-jobber, and overpower the credulity of the most thoughtless Englishman: but were it only a third part of that sum, the bank cannot pay half a crown in the pound.
There is something curious in the movements of this modern complicated machine, the funding system; and it is only now that it is beginning to unfold the full extent of its movements. In the first part of its movements it gives great powers into the hands of government, and in the last part it takes them completely away.
The funding system set out with raising revenues under the name of loans, by means of which government became both prodigal and powerful.
The loaners a.s.sumed the name of creditors, and though it was soon discovered that loaning was government-jobbing, those pretended loaners, or the persons who purchased into the funds afterwards, conceived themselves not only to be creditors, but to be the _only_ creditors.
But such has been the operation of this complicated machine, the funding system, that it has produced, unperceived, a second generation of creditors, more numerous and far more formidable and withal more real than the first generation; for every holder of a bank note is a creditor, and a real creditor, and the debt due to him is made payable on demand. The debt therefore which the government owes to individuals is composed of two parts; the one about four hundred millions bearing interest, the other about sixty millions payable on demand. The one is called the funded debt, the other is the debt due in bank notes.
The second debt (that contained in the bank notes) has, in a great measure, been incurred to pay the interest of the first debt; so that in fact little or no real interest has been paid by government. The whole has been delusion and fraud. Government first contracted a debt, in the form of loans, with one cla.s.s of people, and then run clandestinely into debt with another cla.s.s, by means of bank notes, to pay the interest.
Government acted of itself in contracting the first debt, and made a machine of the bank to contract the second. It is this second debt that changes the seat of power and the order of things; for it puts it in the power of even a small part of the holders of bank notes (had they no other motives than disgust at Pitt and Grenville's sedition bills,) to control any measure of government they found to be injurious to their interest; and that not by popular meetings, or popular societies, but by the simple and easy opera-tion of withholding their credit from that government; that is, by individually demanding payment at the bank for every bank note that comes into their hands. Why should Pitt and Grenville expect that the very men whom they insult and injure, should, at the same time, continue to support the measures of Pitt and Grenville, by giving credit to their promissory notes of payment? No new emissions of bank notes could go on while payment was demanding on the old, and the cash in the bank wasting daily away; nor any new advances be made to government, or to the emperor, to carry on the war; nor any new emission be made on exchequer bills.
”_The bank_” says Smith, (book ii. chap. 2) ”_is a great engine of state_.” And in the same paragraph he says, ”_The stability of the bank is equal to that of the British government_;” which is the same as to say that the stability of the government is equal to that of the bank, and no more. If then the bank cannot pay, the _arch-treasurer_ of the holy Roman empire (S. R. I. A.*) is a bankrupt. When Folly invented t.i.tles, she did not attend to their application; forever since the government of England has been in the hands of _arch-treasurers_, it has been running into bankruptcy; and as to the arch-treasurer _apparent_, he has been a bankrupt long ago. What a miserable prospect has England before its eyes!
* Put of the inscription on an English guinea.--_Author_.
Before the war of 1755 there were no bank notes lower than twenty pounds. During that war, bank notes of fifteen pounds and of ten pounds were coined; and now, since the commencement of the present war, they are coined as low as five pounds. These five-pound notes will circulate chiefly among little shop-keepers, butchers, bakers, market-people, renters of small houses, lodgers, &c. All the high departments of commerce and the affluent stations of life were already _overstocked_, as Smith expresses it, with the bank notes. No place remained open wherein to crowd an additional quant.i.ty of bank notes but among the cla.s.s of people I have just mentioned, and the means of doing this could be best effected by coining five-pound notes. This conduct has the appearance of that of an unprincipled insolvent, who, when on the verge of bankruptcy to the amount of many thousands, will borrow as low as five pounds of the servants in his house, and break the next day.
But whatever momentary relief or aid the minister and his bank might expect from this low contrivance of five-pound notes, it will increase the inability of the bank to pay the higher notes, and hasten the destruction of all; for even the small taxes that used to be paid in money will now be paid in those notes, and the bank will soon find itself with scarcely any other money than what the hair-powder guinea-tax brings in.
The bank notes make the most serious part of the business of finance: what is called the national funded debt is but a trifle when put in comparison with it; yet the case of the bank notes has never been touched upon. But it certainly ought to be known upon what authority, whether that of the minister or of the directors, and upon what foundation, such immense quant.i.ties are issued. I have stated the amount of them at sixty millions; I have produced data for that estimation; and besides this, the apparent quant.i.ty of them, far beyond that of gold and silver in the nation, corroborates the statement. But were there but a third part of sixty millions, the bank cannot pay half a crown in the pound; for no new supply of money, as before said, can arrive at the bank, as all the taxes will be paid in paper.
When the funding system began, it was not doubted that the loans that had been borrowed would be repaid. Government not only propagated that belief, but it began paying them off. In time this profession came to be abandoned: and it is not difficult to see that bank notes will march the same way; for the amount of them is only another debt under another name; and the probability is that Mr. Pitt will at last propose funding them. In that case bank notes will not be so valuable as French a.s.signats. The a.s.signats have a solid property in reserve, in the national domains; bank notes have none; and, besides this, the English revenue must then sink down to what the amount of it was before the funding system began--between three and four millions; one of which the _arch-treasurer_ would require for himself, and the arch-treasurer _apparent_ would require three-quarters of a million more to pay his debts. ”_In France_,” says Sterne, ”_they order these things better_.”
I have now exposed the English system of finance to the eyes of all nations; for this work will be published in all languages. In doing this, I have done an act of justice to those numerous citizens of neutral nations who have been imposed upon by that fraudulent system, and who have property at stake upon the event.
As an individual citizen of America, and as far as an individual can go, I have revenged (if I may use the expression without any immoral meaning) the piratical depredations committed on the American commerce by the English government. I have retaliated for France on the subject of finance: and I conclude with retorting on Mr. Pitt the expression he used against France, and say, that the English system of finance ”is on the verge, nay even in the
GULPH OF BANKRUPTCY.”
Thomas Paine.
PARIS, 19th Germinal. 4th year of the Republic, April 8, 1796.
XXVII. FORGETFULNESS.(1)
1 This undated composition, of much biographical interest, was shown by Paine to Henry Redhead Yorke, who visited him in Paris (1802), and was allowed to copy the only portions now preserved. In the last of Yorke's Letters from France (Lond., 1814), thirty-three pages are given to Paine. Under the name ”Little Corner of the World,” Lady Smyth wrote cheering letters to Paine in his prison, and he replied to his then unknown correspondent under the name of ”The Castle in die Air.” After his release he discovered in his correspondent a lady who had appealed to him for a.s.sistance, no doubt for her husband. With Sir Robert (an English banker in Paris) and Lady Smyth, Paine formed a fast friends.h.i.+p which continued through life. Sir Robert was born in 1744, and married (1776) a Miss Blake of Hanover Square, London.
He died in 1802 of illness brought on by his imprisonment under Napoleon. Several of Paine's poems were addressed to Lady Smyth.--_Editor._
<script>