To this set of men, therefore, it should be left to give credit to merchants, as the credit they give is purely mercantile; and to banks alone, who give credit on good private security, it should be left to conduct the great national circulation, which ought to stand upon the solid principles of private credit. From this example we may discover the justness of the distinction I have made between _private_ and _mercantile_ credit: had I not found it necessary, I would not have introduced it. ------------------------------------------------------------------------ CHAP. VII. _Concerning the Obligation to pay in Coin, and the Consequences thereof._ In all banks of circulation upon mortgage, the obligation in the note is to pay in coin, upon demand: and in the famous book of Mr. Law, there was a very necessary clause added; to wit, that the coin was to be of the same weight, fineness, and denomination, as at the date of the note. This was done, in order to prevent the inconveniencies which might result to either party, by an arbitrary raising or sinking the denominations of the coin; a practice then very familiar in France. This obligation to pay in coin, owes its origin to the low state of credit in Europe at the time when banks first began to be introduced; and it is not likely that any other expedient will soon be fallen upon to remove the inconveniences which result from it in domestic circulation, as long as the generality of people consider all money, except coin, to be false and fictitious. I have already thrown out abundance of hints, from which it may be gathered, that coin is not absolutely necessary for carrying on domestic circulation, and more will be said on that subject, as we go along. But I am here to examine the nature and consequences of this obligation contracted by banks, to discharge their notes in the current coin of the country. In the first place, it is plain, that no coin is ever (except in very particular cases) carried to a bank, in order to procure notes. The greatest part of notes issue from the banks, of which we are treating, either in consequence of a loan, or of a credit given by the bank, to such as can give security for them. The loan is made in their own notes; which are quickly thrown back into circulation by the borrower; who borrowed, because he had occasion to pay them away. In like manner, when a credit is given, the bank pays (in her notes) the orders she receives from the person who has the credit: in this manner are notes commonly issued from a bank.