rency might be always kept in the market, and the amount of the circulation be doubled.
Whilst, however, this system acted with a double power to one purely metallic, and entirely of intrinsic value, it was controuled in its amount, not by the realicants and demands of the community, which is the only true controul, but by the proportion necessary to be kept between Bank Notes and Coin—a principle necessary indeed to the system, but totally irrelevant to the general theory of a currency. Whenever, therefore, the kingdom might be alarmed and terrified from failures within or dangers without, by which an unusual demand for Coin, the valuable part of the medium, should be created, it would become necessary, for the support of the system, to withdraw Bank Notes from the circulation in a double ratio to the Coin withdrawn: and hence it was evident, whenever a pressure continued for any length of time, and the demand for Coin increased with the pressure, the Coin would be exhausted, and the system stop. Thus the controuling principle of the system, being formed in direct opposition to the theory of the currency, became its destruction. This peculiar and essential characteristic proved to be not its perfection, but its vice; in prosperity it had no operation at all; in adversity its activity was fatal.
The stoppage of this mixed system of currency took place in 1797, when another system of Paper Currency was resorted to, not convertible, at pleasure, into cash, but founded on the ultimate solvency of the Bank, by its own funds, for the issues made to individuals, and by the funds of the nation for the issues made to government: and this system has carried us through the war successfully, and exists at present.
The two systems, the late and the present one, are both founded in mere confidence, their common parent.