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INTRODUCTION - Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain 
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain, edited and with an Introduction by F.A. Hayek (London: George Allen and Unwin, 1939).
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This works appears online with the permission of the Estate of F.A. Hayek. A further annotated version of Hayek’s introduction appears as a chapter in volume 3 of the Collected Works of F.A. Hayek (University of Chicago Press, 1991).
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The first intention of the Writer of the following pages was merely to expose some popular errors which related chiefly to the suspension of the cash payments of the Bank of England, and to the influence of our paper currency on the price of provisions. But in pursuing his purpose, many questions occurred which it seemed important to discuss, partly on account of their having some bearing on the topics under consideration, and partly because they appeared to be of general importance, and had either been left unexplained, or had been inaccurately stated by those English writers who have treated of paper credit. This work has, therefore, assumed, in some degree, the character of a general treatise.
The first Chapter contains a few preliminary observations on commercial credit. The object of the two following Chapters is distinctly to describe the several kinds of paper credit; to lay down some general principles respecting it; and, in particular, to point out the important consequences which result from the different degrees of rapidity in the circulation of different kinds of circulating medium, and also in the circulation of the same medium at different periods of time.
The nature of the institution of the Bank of England is then explained; the necessity of maintaining the accustomed, or nearly the accustomed, quantity of its notes, however great may be the fluctuations of its cash, is insisted on; and the suspension of its cash payments is shewn to have resulted neither from a deficiency in its resources, nor from a too great extension of its loans to government, nor from rashness or improvidence in its directors, but from circumstances which they had little power of controuling: this event being one to which a national establishment, like the Bank of England, is, in some situations of the country, unavoidably subject.
The manner in which an unfavourable balance of trade affects the course of exchange, and in which an unfavourable exchange creates an excess of the market price above the mint price of gold, and a profit on the exportation of our coin, are the subjects of a succeeding Chapter.
The circumstances, also, which have led to the multiplication of our country banks, and the several advantages and disadvantages of those institutions, are fully stated.
The earlier parts of the work having tended to shew the evil of a too great and sudden diminution of our circulating medium, some of the latter Chapters are employed in pointing out the consequences of a too great augmentation of it. The limitation of the amount of the notes of the Bank of England is shewn to be the means of restricting the quantity of the circulating paper of the kingdom, of preventing a rise in the price of commodities in Great Britain, and of thus extending our exports and restraining our imports, and rendering the exchange more favourable. Some objections to the limitation of the Bank of England paper are likewise stated and answered.
The last Chapter treats of the influence of paper credit on the price of all the articles of life: a subject, the difficulties of which are in some degree removed by the antecedent discussions.
In the course of this enquiry, several passages in the work of Dr. A. Smith on the Wealth of Nations are animadverted on, as are also some observations made by Mr. Hume in his Essays on Money and on the Balance of Trade, and by Sir James Stewart in his book on Political Œconomy, as well as some remarks in the writings of Locke and Montesquieu.
The mode in which the subjects of coin, of paper credit, of the balance of trade, and of exchanges (subjects intimately connected with each other), have been treated by those writers, was suggested by the circumstances of more early times: and we ought not to be surprised, if, in treatises necessarily in some degree theoretical, or written for the purpose of establishing a particular truth, certain incidental observations should not be just, nor even if some main principles should have been laid down in terms not sufficiently guarded.
A person who presumes to differ from the authorities which have been mentioned, and who proposes to correct the public opinion on the important subject of our paper credit, ought, undoubtedly, to be very cautious lest he should propagate new errors while he is endeavouring to remove the old. A sense of the duty of mature consideration has caused some delay in the publication of the following work. That its leading doctrines are just, the writer feels a confident persuasion. That it may have imperfections, and some, perhaps, which greater care on his part might have corrected, he cannot doubt. But he trusts, that a man who is much occupied on the practical business of life, will be excused by the public, if he should present to them a treatise less elaborate, and, in many respects, more incomplete, than those on which he has found it necessary to remark Future enquirers may possibly pursue, with advantage, some particular topics on which he has felt a certain degree of distrust.
It may not be irrelevant or improper to observe, that the present work has been written by a person whose situation in life has supplied information on several of the topics under discussion, and that much use has been made of those means of correcting the errors of former writers which recent events have afforded.