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 that coin。 The same Act of
Parliament which suppressed ten and five shilling bank notes
suppressed likewise this optional clause； and thereby restored
the exchange between England and Scotland to its natural rate； or
to what the course of trade and remittances might happen to make
it。
In the paper currencies of Yorkshire； the payment of so
small a sum as a sixpence sometimes depended upon the condition
that the holder of the note should bring the change of a guinea
to the person who issued it； a condition which the holders of
such notes might frequently find it very difficult to fulfil； and
which must have degraded this currency below the value of gold
and silver money。 An Act of Parliament accordingly declared all
such clauses unlawful； and suppressed； in the same manner as in
Scotland； all promissory notes； payable to the bearer； under
twenty shillings value。
The paper currencies of North America consisted； not in bank
notes payable to the bearer on demand； but in government paper；
of which the payment was not exigible till several years after it
was issued； and though the colony governments paid no interest to
the holders of this paper； they declared it to be； and in fact
rendered it； a legal tender of payment for the full value for
which it was issued。 But allowing the colony security to be
perfectly good； a hundred pounds payable fifteen years hence； for
example； in a country where interest at six per cent； is worth
little more than forty pounds ready money。 To oblige a creditor；
therefore； to accept of this as full payment for a debt of a
hundred pounds actually paid down in ready money was an act of
such violent injustice as has scarce； perhaps； been attempted by
the government of any other country which pretended to be free。
It bears the evident marks of having originally been； what the
honest and downright Doctor Douglas assures us it was； a scheme
of fraudulent debtors to cheat their creditors。 The government of
Pennsylvania； indeed； pretended； upon their first emission of
paper money； in 1722； to render their paper of equal value with
gold and silver by enacting penalties against all those who made
any difference in the price of their goods when they sold them
for a colony paper； and when they sold them for gold and silver；
a regulation equally tyrannical； but much less effectual than
that which it was meant to support。 A positive law may render a
shilling a legal tender for guinea； because it may direct the
courts of justice to discharge the debtor who has made that
tender。 But no positive law can oblige a person who sells goods；
and who is at liberty to sell or not to sell as he pleases； to
accept of a shilling as equivalent to a guinea in the price of
them。 Notwithstanding any regulation of this kind； it appeared by
the course of exchange with Great Britain； that a hundred pounds
sterling was occasionally considered as equivalent； in some of
the colonies； to a hundred and thirty pounds； and in others to so
great a sum as eleven hundred pounds currency； this difference in
the value arising from the difference in the quantity of paper
emitted in the different colonies； and in the distance and
probability of the term of its final discharge and redemption。
No law； therefore； could be more equitable than the Act of
Parliament； so unjustly complained of in the colonies； which
declared that no paper currency to be emitted there in time
coming should be a legal tender of payment。
Pennsylvania was always more moderate in its emissions of
paper money than any other of our colonies。 Its paper currency；
accordingly； is said never to have sunk below the value of the
gold and silver which was current in the colony before the first
emission of its paper money。 Before that emission； the colony had
raised the denomination of its coin； and had； by act of assembly；
ordered five shillings sterling to pass in the colony for six and
threepence； and afterwards for six and eightpence。 A pound colony
currency； therefore； even when that currency was gold and silver；
was more than thirty per cent below the value of a pound
sterling； and when that currency was turned into paper it was
seldom much more than thirty per cent below that value。 The
pretence for raising the denomination of the coin； was to prevent
the exportation of gold and silver； by making equal quantities of
those metals pass for greater sums in the colony than they did in
the mother country。 It was found； however； that the price of all
goods from the mother country rose exactly in proportion as they
raised the denomination of their coin； so that their gold and
silver were exported as fast as ever。
The paper of each colony being received in the payment of
the provincial taxes； for the full value for which it had been
issued； it necessarily derived from this use some additional
value over and above what it would have had from the real or
supposed distance of the term of its final discharge and
redemption。 This additional value was greater or less； according
as the quantity of paper issued was more or less above what could
be employed in the payment of the taxes of the particular colony
which issued it。 It was in all the colonies very much above what
could be employed in this manner。
A prince who should enact that a certain proportion of his
taxes should be paid in a paper money of a certain kind might
thereby give a certain value to this paper money； even though the
term of its final discharge and redemption should depend
altogether upon the will of the prince。 If the bank which issued
this paper was careful to keep the quantity of it always somewhat
below what could easily be employed in this manner； the demand
for it might be such as to make it even bear a premium； or sell
for somewhat more in the market than the quantity of gold or
silver currency for which it was issued。 Some people account in
this manner for what is called the Agio of the bank of Amsterdam；
or for the superiority of bank money over current money； though
this bank money； as they pretend； cannot be taken out of the bank
at the will of the owner。 The greater part of foreign bills of
exchange must be paid in bank money； that is； by a transfer in
the books of the bank； and the directors of the bank； they
allege； are careful to keep the whole quantity of bank money
always below what this use occasions a demand for。 It is upon
this account； they say； that bank money sells for a premium； or
bears an agio of four or five per cent above the same nominal sum
of the gold and silver currency of the country。 This account of
the bank of Amsterdam； however； it will appear hereafter； is in a
great measure chimerical。
A paper currency which falls below the value of gold and
silver coin does not thereby sink the value of those metals； or
occasion equal quantities of them to exchange for a smaller
quantity of goods of any other kind。 The proportion between the
value of gold and silver and that of goods of any other kind
depends in all cases not upon the nature or quantity of any
particular paper money； which may be current in any particular
country； but upon the richness or poverty of the mines； which
happen at any particular time to supply the great market of the
commerc