again faster on the one hand than it was drawn out on the other. This gentleman lived long in England. He was very intelligent in matters relating to commerce; and his authority may, I believe, be relied on as much as on any other, except that of the bank itself; which, it would appear, has some interest in keeping those affairs a secret. We see by his account, that the bank of England keeps in coin ⅓ of the value of all their notes in circulation. With this quantity, business is carried on with great smoothness, owing to the prosperity of that kingdom, which seldom owes any considerable balance to other nations. But the consequence of the obligation to pay in coin, is, that when the nation comes to owe a balance, the notes which the bank had issued to support domestic circulation _only_, come upon it for payment of a foreign balance; and thereby the coin which it had provided for home demand only, is drawn out. It is this circumstance, above all others, which distresses banks of circulation. Were it not for this, the obligation to pay in coin might easily be discharged; but when in virtue of this pure obligation, a heavy national balance is demanded of the bank, which has only made provision for the current and ordinary demand at home, it requires a little combination to find out, at once, an easy remedy. This combination we shall, in the following chapters, endeavour to unfold: it is by far the most intricate, and at the same time the most important in the whole doctrine of banks of circulation. Another inconvenience resulting from this obligation to pay in coin, we have explained in the third book. It is, that the confusion of the English coin, and the lightness of a great part of it, obliges the bank of England to purchase the metals at a price far above that which they can draw back for them after they are coined. We have there shewn the great profit that might be made in melting down and exporting the heavy species. This profit turns out a real loss to the bank of England, which is constantly obliged to provide new coin, in proportion as it is wanted. This inconvenience is not directly felt by banks, in countries where there is no mint established. Here then is another bad consequence of this obligation to pay in the metals, which a proper regulation of the coin would immediately remove. In countries which abound in coin, banking is an easy trade, when once their credit is well established. It is only when either a foreign war, or a wrong balance of trade has carried off the metals, that the weight of this obligation to pay in coin is severely felt. ------------------------------------------------------------------------ CHAP. VIII. _How a wrong Balance of Trade affects Banks of Circulation._