which they had advanced to him had not, at 
any time, exceeded the quantity of gold and 
silver which he would otherwise have been 
obliged to keep by him for answering occasional 
demands; and that, consequently, the 
paper money, which they had circulated by 
his means, had not at any time exceeded the 
quantity of gold and silver which would have 
circulated in the country, had there been no 
paper money. The frequency, regularity, and 
amount of his repayments, would sufficiently 
demonstrate that the amount of their advances 
had at no time exceeded that part of 
his capital which he would otherwise have 
been obliged to keep by him unemployed, and 
in ready money, for answering occasional demands
that is, for the purpose of keeping 
the rest of his capital in constant employment. 
It is this part of his capital only which, within 
moderate periods of time, is continually returning 
in every dealer in the shape of money
whether paper or coin, and continually going 
from him in the same shape. If the advances 
of the bank had commonly exceeded this part 
of his capital, the ordinary amount of his repayments 
could not, within moderate periods 
of time, have equalled the ordinary amount 
of its advances. The stream which, by means 
of his dealings, was continually running into 
the coffers of the bank, could not have been 
equal to the stream which, by means of the 
same dealings was continually running out. 
The advances of the bank paper, by exceeding 
the quantity of gold and silver which, had 
there been no such advances, he would have 
been obliged to keep by him for answering occasional 
demands, might soon come to exceed 
the whole quantity of gold and silver which 
(the commerce being supposed the same) would 
have circulated in the country, had there been 
no paper money; and, consequently, to exceed 
the quantity which the circulation of the 
country could easily absorb and employ; and 
the excess of this paper money would immediately 
have returned upon the bank, in order 
to be exchanged for gold and silver. This 
second advantage, though equally real, was 
not, perhaps, so well understood by all the 
different banking companies in Scotland as 
the first. 
When, partly by the conveniency of discounting 
bills, and partly by that of cash accounts
the creditable traders of any country 
can be dispensed from the necessity of keeping 
any part of their stock by them unemployed
and in ready money, for answering 
occasional demands, they can reasonably expect 
no farther assistance from banks and 
bankers, who, when they have gone thus far, 
cannot, consistently with their own interest 
and safety, go farther. A bank cannot, consistently 
with its own interest, advance to a 
trader the whole, or even the greater part 
of the circulating capital with which he trades; 
because, though that capital is continually returning 
to him in the shape of money, and 
going from him in the same shape, yet the 
whole of the returns is too distant from the 
whole of the outgoings, and the sum of his 
the repayments could not equal the sum of his 
advances within much moderate periods of time 
as suit the conveniency of a bank. Still less 
could a bank afford to advance him any considerable 
part of his fixed capital; of the capital 
which the undertaker of an iron forge
for example, employs in erecting his forge and 
smelting-houses, his work-houses, and warehouses
the dwelling-houses of his workmen, 
&c.; of the capital which the undertaker of a 
mine employs in sinking his shafts, in erecting 
engines for drawing out the water, in 
making roads and waggon-ways, &c.; of the 
capital which the person who undertakes to 
improve land employs in clearing, draining
inclosing, manuring, and ploughing waste 
and uncultivated fields; in building farm-houses
with all their necessary appendages 
of stables, granaries, &c. The returns of 
the fixed capital are, in almost all cases, 
much slower than those of the circulating capital
and such expenses, even when laid out 
with the greatest prudence and judgment
mean very seldom return to the undertaker till after 
period of many years, a period by far too 
distant to suit the conveniency of a bank
Traders and other undertakers may, no doubt 
with great propriety, carry on a very considerable 
part of their projects with borrowed money
In justice to their creditors, however, their 
own capital ought in this case to be sufficient 
to insure, if I may say so, the capital of those 
creditors; or to render it extremely improbable 
that those creditors should incur any 
loss, even though the success of the project 
should fall very much short of the expectation 
of the projectors. Even with this precaution, 
too, the money which is borrowed, and which 
it is meant should not be repaid till after a 
period of several years, ought not to be borrowed 
of a bank, but ought to be borrowed 
upon bond or mortgage, of such private people 
as propose to live upon the interest of their 
money, without taking the trouble themselves 
to employ the capital, and who are, upon that 
account, willing to lend that capital to such 
people of good credit as are likely lo keep it 
for several years. A bank, indeed, which lends 
its money without the expense of stamped paper
or of attorneys' fees for drawing bonds 
and mortgages, and which accepts of repayment 
upon the easy terms of the banking companies 
of Scotland, would, no doubt, be a 
very convenient creditor to such traders and 
undertakers. But such traders and undertakers 
would surely be most inconvenient debtors 
to such a bank
It is now more than five and twenty years 
since the paper money issued by the different 
banking companies of Scotland was fully 
equal, or rather was somewhat more than fully