Essays by Thomas Paine (black books to read .TXT) 📕

Thirdly, the bank acts as banker for the government. This is the connection that threatens to ruin every public bank. It is through this connection that the credit of a bank is forced far beyond what it ought to be, and still further beyond its ability to pay. It is through this connection, that such an immense redundant quantity of bank notes, have gotten into circulation; and which, instead of being issued because there was property in the bank, have been issued because there was none.

When the treasury is empty, which happens in almost every year of every war, its coffers at the bank are empty also. It is in this condition of emptiness that the minister has recourse to emissions of what are called exchequer and navy bills, which continually generates a new increase of bank notes, and which are sported upon the public, without there being property in the bank to pay them. These exchequer and navy bills (being, as I have said, emitted because the treasury and its coffers at the bank are empty, and cannot pay the demands that come in) are no other than an acknowledgment that the bearer is entitled to receive so much money. They may be compared to the settlement of an account, in which the debtor acknowledges the balance he owes, and for which he gives a note of hand; or to a note of hand given to raise money upon it.

Sometimes the bank discounts those bills as it would discount merchants’ bills of exchange; sometimes it purchases them of the holders at the current price; and sometimes it agrees with the ministers to pay an interest upon them to the holders, and keep them in circulation. In every one of these cases an additional quantity of bank notes gets into circulation, and are sported, as I have said, upon the public, without there being property in the bank, as banker for the government, to pay them; and besides this, the bank has now no money of its own; for the money that was originally subscribed to begin the credit of the bank with, at its first establishment, has been lent to government and wasted long ago.

“The bank” (says Smith, book ii chap. 2) “acts not only as an ordinary bank, but as a great engine of State; it receives and pays a greater part of the annuities which are due to the creditors of the public.” (It is worth observing, that the public, or the nation, is always put for the government, in speaking of debts.) “It circulates” (says Smith) “exchequer bills, and it advances to government the annual amount of the land and malt taxes, which are frequently not paid till several years afterwards.” (This advancement is also done in bank notes, for which there is not property in the bank.) “In those different operations” (says Smith) “its duty to the public may sometimes have obliged it, without any fault of its directors, to overstock the circulation with paper money.”⁠—bank notes. How its duty to the public can induce it to overstock that public with promissory bank notes which it cannot pay, and thereby expose the individuals of that public to ruin, is too paradoxical to be explained; for it is on the credit which individuals give to the bank, by receiving and circulating its notes, and not upon its own credit or its own property, for it has none, that the bank sports. If, however, it be the duty of the bank to expose the public to this hazard, it is at least equally the duty of the individuals of that public to get their money and take care of themselves; and leave it to placemen, pensioners, government contractors, Reeves’ association, and the members of both houses of Parliament, who have voted away the money at the nod of the minister, to continue the credit if they can, and for which their estates individually and collectively ought to answer, as far as they will go.

There has always existed, and still exists, a mysterious, suspicious connection, between the minister and the directors of the bank, and which explains itself no otherways than by a continual increase in bank notes. Without, therefore, entering into any further details of the various contrivances by which bank notes are issued, and thrown upon the public, I proceed, as I before mentioned, to offer an estimate on the total quantity of bank notes in circulation.

However disposed governments may be to wring money by taxes from the people, there is a limit to the practice established by the nature of things. That limit is the proportion between the quantity of money in a nation, be that quantity what it may, and the greatest quantity of taxes that can be raised upon it. People have other uses for money besides paying taxes; and it is only a proportional part of the money they can spare for taxes, as it is only a proportional part they can spare for house-rent, for clothing, or for any other particular use. These proportions find out and establish themselves; and that with such exactness, that if any one part exceeds its proportion, all the other parts feel it.

Before the invention of paper money (bank notes,) there was no other money in the nation than gold and silver, and the greatest quantity of money that was ever raised in taxes during that period never exceeded a fourth part of the quantity of money in the nation. It was high taxing when it came to this point. The taxes in the time of William III never reached to four millions before the invention of paper, and the quantity of money in the nation at that time was estimated to be about sixteen millions. The same proportions established themselves in France. There was no paper money in France before the present revolution, and the taxes