On page 251 he discusses what happens when a bank tries to circulate more currency than what the country can employ, and how the excess is almost immediately returned. I suspect this is another area that is no longer applicable; at least directly.
Similarly, on page 254: “What a bank can with propriety advance to a merchant or undertaker of any kind, is not either the whole capital with which he trades, or even any considerable part of that capital; but that part of it only, which he would otherwise be obliged to keep by him unemployed, and in ready money for answering occasional demands.” Not so much any more–banks have become completely intertwined in every branch of every industry. Indeed, Lenin defined Imperialism as that stage of capitalism which is dominated by finance capital, with industrial capital taking a back seat.
He goes on in this vein for some time, cautioning banks against making loans which cannot be returned for many years. Page 258: “It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country.” I may be brushing over this too lightly, but it just seems to me to no longer apply. Perhaps there would be value in tracing exactly when and how it stopped applying, and what the consequences are, but there’s no way I could pull that off. A man’s got to know his limitations.
Page 259, quoted mostly because I like it: “The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel upon the solid ground of gold and silver.”
He then goes on to discuss the reglulation of banks by government, arguing that small denominations of paper should be avoided, and admitting that some people may see such regulations as infringement upon personal liberty. Page 263: “But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotic. The obligation of bulding party walls, in order to prevent the communication of fire, is a violation of natural liberty, excactly of the same kind, with the regulations of the banking trade which are here proposed.”
He then asserts that paper money is exactly the same as gold and silver, under certain conditions: “issued by people of undoubted credit, payable upon demand without any condition, and in fact always readily paid as soon as presented.”
He discusses errors in the banking trade which no longer, I think, apply. He talks about the North American colonies (most of which would no longer be colonies within a decade), and how these colonies attempted, by law, to declare certain paper currencies to be above their actual value, with Smith condems as, in essence, debtors attempting to steal from their creditors. Page 266: “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.”
Page 268: 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 of poverty of the mines, which happen at any particular time to supply the great market of the commercial world with those metals.”
Which brings us, at least, to the end of the this chapter. I only hope that my confusion over much of what was covered here won’t interfere with my understanding further chapters, because if it does, I’ll have to go back to this one and try again, and I may jump off the Mendota Bridge instead.