tion. We will suppose, however untrue it may be, that every bank contains coin to the amount of its capital. Yet this is a sum, inferior to the aggregate of its stock, its notes, and its dividends. If the coin is only mortgaged for the two last items, yet these greatly exceed its amount, and this excess forms a mass of paper currency, for which the coin is no security. Without a security adequate to its redemption, we know it to be a law of paper currencies to depreciate; and as this surplus of nank paper beyond the ability of the deposited coin to redeem, does not depreciate, its credit must be supported by some other security; that security is the tax, which banking collects; a tax, not only sufficing for the redemption and credit of this species of paper currency, but supplying a redundancy, sufficient in some cases to add one half of its numerical value to the coin deposited as stock.
Of the correctness of this reasoning, and of the nature of banking, an ancient practice in Pennsylvania, furnishes a demonstration. That state, whilst a province, became a banker. It made and loaned a paper currency, at a moderate interest. The interest paid for it to the state, was a tax, applied to publick use. This is banking, stript of its ambiguity. Simply an indirect mode of taxation, successfully used to raise national revenue. The idea that it was not a tax, because individuals borrowed the money, and collected and paid the tax, would be an assertion in every view less tenable, than that an impost upon ordinary licences was not a tax, because such licences were voluntarily taken and confined to a few persons; the reimbursement derived from the privilege in both cases, transfers the tax from the individuals to the publick.
The differences between the Pennsylvanian and the present mode of banking, are, that then the tax was paid by individuals to the publick; now it is paid by the publick to individuals. Then it was paid to assist industry, and defray publick expenses; now to enrich idleness, and supply the means of luxury to a separate interest. Then the publick,
