the work is done。 Money is neither a material to work upon； nor a
tool to work with； and though the wages of the workman are
commonly paid to him in money； his real revenue； like that of all
other men； consists； not in money； but in the money's worth； not
in the metal pieces； but in what can be got for them。
The quantity of industry which any capital can employ must；
evidently； be equal to the number of workmen whom it can supply
with materials； tools； and a maintenance suitable to the nature
of the work。 Money may be requisite for purchasing the materials
and tools of the work； as well as the maintenance of the workmen。
But the quantity of industry which the whole capital can employ
is certainly not equal both to the money which purchases； and to
the materials； tools； and maintenance； which are purchased with
it； but only to one or other of those two values； and to the
latter more properly than to the former。
When paper is substituted in the room of gold and silver
money； the quantity of the materials； tools； and maintenance；
which the whole circulating capital can supply； may be increased
by the whole value of gold and silver which used to be employed
in purchasing them。 The whole value of the great wheel of
circulation and distribution is added to the goods which are
circulated and distributed by means of it。 The operation； in some
measure； resembles that of the undertaker of some great work；
who； in consequence of some improvement in mechanics； takes down
his old machinery； and adds the difference between its price and
that of the new to his circulating capital； to the fund from
which he furnishes materials and wages to his workmen。
What is the proportion which the circulating money of any
country bears to the whole value of the annual produce circulated
by means of it； it is； perhaps； impossible to determine。 It has
been computed by different authors at a fifth； at a tenth； at a
twentieth； and at a thirtieth part of that value。 But how small
soever the proportion which the circulating money may bear to the
whole value of the annual produce； as but a part； and frequently
but a small part； of that produce； is ever destined for the
maintenance of industry； it must always bear a very considerable
proportion to that part。 When； therefore； by the substitution of
paper； the gold and silver necessary for circulation is reduced
to； perhaps； a fifth part of the former quantity； if the value of
only the greater part of the other four…fifths be added to the
funds which are destined for the maintenance of industry； it must
make a very considerable addition to the quantity of that
industry； and； consequently； to the value of the annual produce
of land and labour。
An operation of this kind has； within these five…and…twenty
or thirty years； been performed in Scotland； by the erection of
new banking companies in almost every considerable town； and even
in some country villages。 The effects of it have been precisely
those above described。 The business of the country is almost
entirely carried on by means of the paper of those different
banking companies； with which purchases and payments of kinds are
commonly made。 Silver very seldom appears except in the change of
a twenty shillings bank note； and gold still seldomer。 But though
the conduct of all those different companies has not been
unexceptionable； and has accordingly required an act of
Parliament to regulate it； the country； notwithstanding； has
evidently derived great benefit from their trade。 I have heard it
asserted； that the trade of the city of Glasgow doubled in about
fifteen years after the first erection of the banks there； and
that the trade of Scotland has more than quadrupled since the
first erection of the two public banks at Edinburgh； of which the
one； called the Bank of Scotland； was established by act of
Parliament in 1695； the other； called the Royal Bank； by royal
charter in 1727。 Whether the trade； either of Scotland in
general； or the city of Glasgow in particular； has really
increased in so great a proportion； during so short a period； I
do not pretend to know。 If either of them has increased in this
proportion； it seems to be an effect too great to be accounted
for by the sole operation of this cause。 That the trade and
industry of Scotland； however； have increased very considerably
during this period； and that the banks have contributed a good
deal to this increase； cannot be doubted。
The value of the silver money which circulated in Scotland
before the union； in 1707； and which； immediately after it； was
brought into the Bank of Scotland in order to be recoined；
amounted to L411；117 10s。 9d。 sterling。 No account has been got
of the gold coin； but it appears from the ancient accounts of the
mint of Scotland； that the value of the gold annually coined
somewhat exceeded that of the silver。 There were a good many
people； too； upon this occasion； who； from a diffidence of
repayment； did not bring their silver into the Bank of Scotland：
and there was； besides； some English coin which was not called
in。 The whole value of the gold and silver； therefore； which
circulated in Scotland before the union； cannot be estimated at
less than a million sterling。 It seems to have constituted almost
the whole circulation of that country； for though the circulation
of the Bank of Scotland； which had then no rival； was
considerable； it seems to have made but a very small part of the
whole。 In the present times the whole circulation of Scotland
cannot be estimated at less than two millions； of which that part
which consists in gold and silver most probably does not amount
to half a million。 But though the circulating gold and silver of
Scotland have suffered so great a diminution during this period；
its real riches and prosperity do not appear to have suffered
any。 Its agriculture； manufactures； and trade； on the contrary；
the annual produce of its land and labour； have evidently been
augmented。
It is chiefly by discounting bills of exchange； that is； by
advancing money upon them before they are due； that the greater
part of banks and bankers issue their promissory notes。 They
deduct always； upon whatever sum they advance； the legal interest
till the bill shall become due。 The payment of the bill； when it
becomes due； replaces to the bank the value of what had been
advanced； together with a clear profit of the interest。 The
banker who advances to the merchant whose bill he discounts； not
gold and silver； but his own promissory notes； has the advantage
of being able to discount to a greater amount； by the whole value
of his promissory notes； which he finds by experience are
commonly in circulation。 He is thereby enabled to make his clear
gain of interest on so much a larger sum。
The commerce of Scotland； which at present is not very
great； was still more inconsiderable when the two first banking
companies were established； and those companies would have had
but little trade had they confined their business to the
discounting of bills of exchange。 They invented； therefore；
another method of issuing their promissory notes； by granting
what they called cash accounts； that is by giving credit to the
extent of a certain sum （two or three thousand pounds； for
example） to any individual who could procure two persons of
undoubted credit and good landed estate to become surety for him；
that whatever money should be advanced to him； within the sum for
which the credit had been given； should be repaid upon demand；
together with the legal interest。 Credits of this kind are； I
believe； commonly granted by banks and bankers in all different
parts of the world。 But the easy terms upon which the Scotch
banking companies accept of repayment are； so far as I know；
peculiar to them； and have； perhaps； been the principal cause；
both of the great trade of those companies and of the benefit
which the country has received from it。
Whoever has a credit of this kind with one of those
companies； and borrows a thousand pounds upon it； for example；
may repay this sum piecemeal； by twenty and thirty pounds at a
time； the company discounting a proportionable part of the
interest of the great sum from the day on which each of those
small sums is paid in till the whole be in this manner repaid。
All merchants； therefore； and almost all men of business； find it
convenient to keep such cash accounts with them； and are thereby
interested to promote the trade of those companies； by readily
receiving their notes in all payments； and by encouraging all
those with whom they have any influence to do the same。 The
banks； when their customers apply to them for money； generally
advance it to them in their own promissory notes。 These the
merchants pay away to the manufacturers for goods； the
manufacturers to the farmers for materials and provisions； the
farmers to their landlords for rent； the landlords repay them to
the merchants for the conveniencies and luxuries with which they
supply them； and the merchants again return them to the banks in
order to balance their cash accounts； or to replace what they may
have borrowed of them； and thus almost the whole money business
of the country is transacted by means of them。 Hence the great
trade of those companies。
By means of those cash accounts every merchant can； without
imprudence； carry on a greater trade than he otherwise could do。
If there are two merchants； one in London and the other in
Edinburgh； who employ equal stocks in the same branch of trade；
the Edinburgh merchant can； without imprudence； carry on a
greater trade and give employment to a greater number of people
than the London merchant。 The London merchant must always keep by
him a considerable sum of money； either in his own coffers； or in
those of his banker； who gives him no interest for it； in order
to answer the demands continually coming upon him for payment of
the goods which he purchases upon credit。 Let the ordinary amount
of this sum be supposed five hundred p