because the wool would equally have been bought, if they had charged the
market price for it. It would not lower the price of cloth to the
consumer, because the price, as I have said before, would be regulated
by the cost of its production to those who were the least favoured. Its
sole effect then, would be to swell the profits of a part of the
clothiers beyond the general and common rate of profits. The
establishment would be deprived of its fair profits, and another part of
the community would be in the same degree benefited. Now this is
precisely the effect of our banking establishments; a rate of interest
is fixed by the law below that at which it can be borrowed in the
market, and at this rate the Bank are required to lend, or not to lend
at all. From the nature of their establishment, they have large funds
which they can only dispose of in this way; and a part of the traders of
the country are unfairly, and for the country unprofitably, benefited by
being enabled to supply themselves with an instrument of trade, at a
less charge than those who must be influenced only by market price.

The whole business, which the whole community can carry on, depends on
the quantity of capital, that is, of its raw material, machinery, food,
vessels, &c., employed in production. After a well regulated paper money
is established, these can neither be increased nor diminished by the
operations of banking. If then the state were to issue the paper money
of the country, although it should never discount a bill, or lend one
shilling to the public, there would be no alteration in the amount of
trade; for we should have the same quantity of raw materials, of
machinery, food, and ships; and it is probable too, that the same amount
of money might be lent, not at 5 per cent. indeed, a rate fixed by law,
but at 6, 7, or 8 per cent., the result of the fair competition in the
market between the lenders and the borrowers.

Adam Smith speaks of the advantages derived by merchants from the
superiority of the Scotch mode of affording accommodation to trade, over
the English mode, by means of cash accounts. These cash accounts are
credits given by the Scotch banker to his customers, in addition to the
bills which he discounts for them; but as the banker, in proportion as
he advances money, and sends it into circulation in one way, is debarred
from issuing so much in the other, it is difficult to perceive in what
the advantage consists. If the whol