the whole circulation may thus be conducted 
with a fifth part only of the gold and 
silver which would otherwise have been requisite
Let us suppose, for example, that the whole 
circulating money of some particular country 
amounted, at a particular time, to one million 
sterling, that sum being then sufficient for 
circulating the whole annual produce of their 
land and labour; let us suppose, too, that 
some time thereafter, different banks and 
bankers issued promissory notes payable to 
the bearer, to the extent of one million, reserving 
in their different coffers two hundred 
thousand pounds for answering occasional demands
there would remain, therefore, in circulation
eight hundred thousand pounds in 
gold and silver, and a million of bank notes
or eighteen hundred thousand pounds of paper 
and money together. But the annual produce 
of the land and labour of the country 
had before required only one million to circulate 
and distribute it to its proper consumers
and that annual produce cannot be immediately 
augmented by those operations of 
banking. One million, therefore, will be sufficient 
to circulate it after them. The goods 
to be bought and sold being precisely the same 
as before, the same quantity of money will be 
sufficient for buying and selling them. The 
channel of circulation, if I may be allowed 
such an expression, will remain precisely the 
same as before. One million we have supposed 
sufficient to fill that channel. Whatever, 
therefore, is poured into it beyond this 
sum, cannot run into it, but must overflow
One million eight hundred thousand pounds 
are poured into it. Eight hundred thousand 
pounds, therefore, must overflow, that sum 
being over and above what can be employed 
in the circulation of the country. But though 
this sum cannot be employed at home, it is 
too valuable to be allowed to lie idle. It will, 
therefore, be sent abroad, in order to seek that 
profitable employment which it cannot find at 
home. But the paper cannot go abroad; because 
at a distance from the banks which issue 
it, and from the country in which payment of 
it can be exacted by law, it will not be received 
in common payments. Gold and silver
therefore, to the amount of eight hundred 
thousand pounds, will be sent abroad
and the channel of home circulation will remain 
filled with a million of paper instead of 
a million of those metals which filled it before. 
But though so great a quantity of gold and 
silver is thus sent abroad, we must not imagine 
that it is sent abroad for nothing, or that 
its proprietors make a present of it to foreign 
nations. They will exchange it for foreign 
goods of some kind or another, in order to 
supply the consumption either of some other 
foreign country, or of their own. 
If they employ it in purchasing goods in 
one foreign country, in order to supply the 
consumption of another, or in what is called 
the carrying trade, whatever profit they make 
will be in addition to the neat revenue of their 
own country. It is like a new fund, created 
for carrying on a new trade; domestic business 
being now transacted by paper, and the 
gold and silver being converted into a fund 
for this new trade
If they employ it in purchasing foreign 
goods for home consumption, they may either, 
first, purchase such goods as are likely to be 
consumed by idle people, who produce nothing, 
such as foreign wines, foreign silks
&c.; or, secondly, they may purchase an additional 
stock of materials, tools, and provisions
in order to maintain and employ an additional 
number of industrious people, who 
reproduce, with a profit, the value of their 
annual consumption
So far as it is employed in the first way, is 
promotes prodigality, increases expense and 
consumption, without increasing production
or establishing any permanent fund for supporting 
that expense, and is in every respect 
hurtful to the society
So far as it is employed in the second way, 
it promotes industry; and though it increases 
the consumption of the society, it provides a 
permanent fund for supporting that consumption
the people who consume reproducing
with a profit, the whole value of their annual 
consumption. The gross revenue of the society
the annual produce of their land and 
labour, is increased by the whole value which 
the labour of these workmen adds to the materials 
upon which they are employed, and 
their neat revenue by what remains of this value, 
after deducting what is necessary for 
supporting the tools and instruments of their 
That the greater part of the gold and silver 
which being forced abroad by those operations 
of banking, is employed in purchasing 
foreign goods for home consumption, is, and 
must be, employed in purchasing those of this 
second kind, seems not only probable, but almost 
unavoidable. Though some particular 
men may sometimes increase their expense 
very considerably, though their revenue does 
not increase at all, we may be assured that 
no class or order of men ever does so; because, 
though the principles of common prudence 
do not always govern the conduct of 
every individual, they always influence that of 
the majority of every class or order. But the 
revenue of idle people, considered as a class 
or order, cannot, in the smallest degree, be 
increased by those operations of banking
Their expense in general, therefore, cannot 
be much increased by them, though that of a 
few individuals among them may, and in 
reality sometimes is. The demand of idle 
people, therefore, for foreign goods, being the 
same, or very nearly the same as before, a