accurate knowledge of the characters and situations of those who come within
that description . And they have, in addition to this, the course of dealing of the
persons themselves with the bank to assist their judgment, which is, in most
cases, a good index of the state in which those persons are. The artifices and
shifts which those in desperate or declining circumstances are obliged to
employ, to keep up the countenance which the rules of the bank require , and
the trai n of their connections, are so many prognostics , not difficult to be
interpreted, of the fate which awaits them . Hence, it not unfrequently happens,
that banks are the first to discover the unsoundness of such characters, and ,
by withholding credit, to announce to the public that they are not entitled to.it.
If banks , in spite of every precaution, are sometimes betrayed into giving a
false credit to the persons described, they more frequently enable honest and
industrious men, of small, or, perhaps, of no capitai , to undertake and prosecute business with advantage to themselves and to the community ; and assist
merchants, of both capitai and credit, who meet with fortuitous and unforeseen
shocks, which might, without such helps, prove fatai to them and to others, to
make head against their misfortunes, and finally to retrieve their affairs circumstances which form no inconsiderable encomium on the utility of banks.
But the last and he viest charge is stili to be examined: this is , that banks tend
to banish the gold and silver of the country.
The force of this objection rests upon their being an engine of paper credit,
which, by furnishing a substitute for the metals , is supposed to promote their
exportation. It is an objection which, if it has any foundation , lies not against
banks peculiarly, but against every species of paper credit.
The most common answer given to it is, that the thing supposed is of little or of
no consequence ; that it is immaterial what serves the purpose of money,
whether paper, or gold and silver; that the effect of both upon industry is the
same; and that the intrinsic wealth of a nation is to be measured , not by the
abundance of the precious metals contained in it, but by the quantity of the
productions of its labor and industry.
This answer is not destitute of solidity, though not entirely satisfactory. It is
certain that the vivification of industry, by a full circulation, with the aid of a
proper and well-regulated paper credit, may more than compensate for the
loss of a part of the gold and silver of a nation, if the consequence of avoiding
that loss should be a scanty or defective circulation.
But the positive and permanent increase or decrease of the precious metals in
the country can hardly ever be a matter of indifference. As the commodity
taken in lieu of every other, it is a species of the most effective wealth; and as
the money of the world, it is of great concern to the state, that it possess a
sufficiency of it to face any demands which the protection of its external
interest may create.
The objection seems to admit of another and a more conclusive answer, which
controverts the fact itself. A nation that has no mines of its own must derive the
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