Baking Funds and Capital 1
In the ‘Wealth of Nations’ Adam Smith says that ‘the gold and silver money which circulate in a country may very properly be compared to a highway which, while it circulates and carries to market all the grass and corn of the country, produces itself not a pile of either. Countries like Britain, every year sending many surplus millions abroad for investment, really pay for their corns not with wealth which would otherwise have formed wages and salaries at home but with funds which, had they not been arrested in their courses, would have gone abroad and yielded interest, or at most net profit. The portion of such currency left with bankers and by them lent in discount augments by its full amount the home circulation. The Bank of England, like private banks, gives no interest, hence it receives chiefly sums which would otherwise have been kept by their owners as money, that is as sovereigns and bank notes.