709 B
709 B
Drawing and Redrawing
Definition
A practice where merchants draw bills on each other in a circular pattern to raise money through repeated discounting, often involving accumulated interest and commission. This creates artificial credit that can be very expensive.
Source Chapter
Book II, Chapter 2
Context
Smith criticises drawing and redrawing as an expensive method of raising money that often leads to over-trading and eventual bankruptcy. He describes it as a practice that emerged when banks refused to extend excessive credit.
Economic Domain
Exchange