and other dealers of whom he buys goods. He 
has no occasion to keep any by him for the 
circulation between himself and the consumers
who are his customers, and who bring 
ready money to him, instead of taking any 
from him. Though no paper money, therefore, 
was allowed to be issued, but for such 
sums as would confine it pretty much to the 
circulation between dealers and dealers; yet 
partly by discounting real bills of exchange
and partly by lending upon cash-accounts
banks and bankers might still be able to relieve 
the greater part of those dealers from the 
necessity of keeping any considerable part of 
their stock by them unemployed, and in ready 
money, for answering occasional demands
They might still be able to give the utmost 
assistance which banks and bankers can with 
propriety give to traders of every kind
To restrain private people, it may be said, 
from receiving in payment the promissory 
notes of a banker for any sum, whether great 
or small, when they themselves are willing to 
receive them; or, to restrain a banker from 
issuing such notes, when all his neighbours 
are willing to accept of them, is a manifest 
violation of that natural liberty, which it is 
the proper business of law not to infringe, but 
to support. Such regulations may, no doubt
be considered as in some respect a violation of 
natural liberty. But those exertions of the 
natural liberty of a few individuals, which 
might endanger the security of the whole society, 
are, and ought to be, restrained by the 
laws of all governments; of the most free, as 
well as of the most despotical. The obligation 
of building party walls, in order to prevent 
the communication of fire, is a violation 
of natural liberty, exactly of the same kind 
with the regulations of the banking trade which 
are here proposed
A paper money, consisting in bank notes
issued by people of undoubted credit, payable 
upon demand, without any condition, 
and, in fact, always readily paid as soon as 
presented, is, in every respect, equal in value 
to gold and silver money, since gold and silver 
money can at any time be had for it. 
Whatever is either bought or sold for such 
paper, must necessarily be bought or sold as 
cheap as it could have been for gold and silver
The increase of paper money, it has been 
said, by augmenting the quantity, and consequently 
diminishing the value, of the whole 
currency, necessarily augments the money 
price of commodities. But as the quantity of 
gold and silver, which is taken from the currency
is always equal to the quantity of paper 
which is added to it, paper money does 
not necessarily increase the quantity of the 
whole currency. From the beginning of the 
last century to the present time, provisions 
never were cheaper in Scotland than in 1759, 
though, from the circulation of ten and five 
shilling bank notes, there was then more paper 
money in the country than at present
The proportion between the price of provisions 
in Scotland and that in England is the 
same now as before the great multiplication 
of banking companies in Scotland. Corn is, 
upon most occasions, fully as cheap in England 
as in France, though there is a great deal 
of paper money in England, and scarce any 
in France. In 1751 and 1752, when Mr 
Hume published his Political Discourses, and 
soon after the great multiplication of paper 
money in Scotland, there was a very sensible 
rise in the price of provisions, owing, probably, 
to the badness of the seasons, and not 
to the multiplication of paper money
It would be otherwise, indeed, with a paper 
money, consisting in promissory notes, of 
which the immediate payment depended, in 
any respect, either upon the good will of those 
who issued them, or upon a condition which 
the holder of the notes might not always have 
it in his power to fulfil, or of which the payment 
was not exigible till after a certain 
number of years, and which, in the meantime, 
bore no interest. Such a paper money 
would, no doubt, fall more or less below the 
value of gold and silver, according as the difficulty 
or uncertainty of obtaining immediate 
payment was supposed to be greater or less, 
or according to the greater or less distance of 
time at which payment was exigible
Some years ago the different banking companies 
of Scotland were in the practice of inserting 
into their bank notes, what they called 
an optional clause; by which they promised 
payment to the bearer, either as soon as the 
note should be presented, or, in the option of 
the directors, six months after such presentment
together with the legal interest for the 
said six months. The directors of some of those 
banks sometimes took advantage of this optional 
clause, and sometimes threatened those 
who demanded gold and silver in exchange 
for a considerable number of their notes, that 
they would take advantage of it, unless such 
demanders would content themselves with a 
part of what they demanded. The promissory 
notes of those banking companies constituted
at that time, the far greater part of the currency 
of Scotland, which this uncertainty of 
payment necessarily degraded below the value 
of gold and silver money. During the 
continuance of this abuse (which prevailed 
chiefly in 1762, 1763, and 1764), while the 
exchange between London and Carlisle was at 
par, that between London and Dumfries would 
sometimes be four per cent. against Dumfries
though this town is not thirty miles distant 
from Carlisle. But at Carlisle, bills were 
paid in gold and silver; whereas at Dumfries 
they were paid in Scotch bank notes; and the 
uncertainty of getting those bank notes exchanged 
for gold and silver coin, had thus degraded 
them four per cent. below the value of