employed as the chief kind of money. In French the word argent is used as a synonym for money, and siller in Scotland had long a similar meaning. Silver is in fact the better metal for monetary use, since its value is more stable than that of gold, and this is the essential quality for the legal medium of payments, and the common measure of values. The value of silver is more stable than that of gold because it is exclusively obtained from the working of mines. The production of gold, three-fourths of which is obtained from auriferous sands, increases and diminishes, as history shows, in a very short time. If gold were everywhere adopted as the sole standard metal, prices would be subject to numerous and abrupt fluctuations, and this is a great evil.

§ 8. The Maintenance of Monetary Systems.

To maintain a monetary system in its integrity the following legislative measures are indispensable.

(1) The making and issuing false money, or counterfeiting or clipping the legal money, must be prohibited and punished.

(2) A minimum weight must be fixed which coins must possess or lose their legal currency and be liable to be refused in payment.

(3) At the expense either of the state or the last owner, all these coins of less than the minimum legal weight must be withdrawn from circulation and reminted. Since the coins have been worn by the

use of the public at large, and not of the last owner, it is juster for the expense of reminting to be borne by the state.

CHAPTER IV.

CREDIT.

§ 1. What Credit is.

CREDIT is the act of confidence by which the holders of a sum of money or a quantity of goods delivers them to another person on his promise of reimbusement or payment. The word credit comes from the Latin credere, "to believe." Whoever delivers to another person either money or goods on the condition that after a certain time they shall restore the sum lent, or pay the price agreed, does so because he believes that this promise will be fulfilled. The person who credits this promise and has the right to demand payment is the creditor. The person who promises and is under an obligation to pay is the debtor. The sum which has to be paid is called a debt, and is said to be placed to the credit of the first, and the debit of the second. The time which has to run till the moment of payment is the term.

Promise and confidence in a promise, these, then, are the elements of credit. That which inspires confidence is solvency, intelligence, the spirit of order and uprightness. Laws which develop these

qualities and insure the rigorous execution of engagements have as their result the expansion and increase of credit-a good instance of the way in which virtues and just laws favour the production of wealth.

A debt when acknowledged in writing gives rise to different kinds of vouchers, bank notes, bills payable to order, letters of exchange, cheques, bills of sale, municipal and joint stock debentures, and state loans.

"Personal" credit has as its basis either the individual qualities or the fortune, real or supposed, of the debtor. "Real" credit depends on the goods (res) which he pledges or gives as security. "Real" pledges are more trustworthy than personal security. Plus est cautionis in re quam in persona is the expression of that "stereotype of good sense" the Roman laws.

§ 2. The Advantages and Effects of Credit. Credit fosters the productivity of labour and enables it to increase wealth; it does not however increase wealth itself. In other words it augments the activity of capital, not its quantity. All credit is summed up in a promise or an order to pay, i.e. in a signature; and capital cannot be created by a stroke of the pen.

Credit seems to multiply capital because side by side with the thing owed appears the promise which confers a right to it. In reality, however, these are not two separate things; one is only the shadow of

the other. Burn every I O U in the world, and nothing real will have ceased to exist. Only the legal relations have been changed, since the creditors. lose exactly what the debtors gain. When a house is reflected in the water, it may be said that there are two houses. The water ruffles, and the reflection vanishes; but the real house continues to exist. When I buy a promise to pay a hundred pounds, what I acquire is the future possession of this sum with the interest attached to it. Wealth, and a title to possess this wealth, cannot be reckoned as two things.

The following are some of the useful effects of credit.

(1) Credit brings to labour the capital necessary for production.

A man with strong arms takes possession of a piece of fertile land: he lacks, however, the tools to cultivate it and provisions to maintain him until harvest-time; for lack of these he dies of hunger and the land remains unproductive. Instead of this, suppose I lend him the means of procuring tools and subsistence he sets to work, and at the end of the year repays me my advance; henceforth he can live on the fruits of his labour. This is an instance of how credit favours the increase of wealth by coming to the aid of labour.

(2) Credit puts savings in motion and thus prevents capital lying unemployed.

In the East no one dares to lend his savings for

fear of losing them. He prefers to convert them into jewels with which he ornaments his chibouque, his yataghan, or the harness of his horse. Perhaps, more prudent still, he buries them in order that they may escape the greed of the government. Thus the wealth which his savings creates in no way furthers production. Credit has no existence. On the other hand in Scotland, landlords, farmers, manufacturers, artisans, all deposit their disposable funds in banks, by which they are immediately advanced to producers. In this way no article of capital is left unemployed. Founded on honesty and the love of work, credit reigns and accomplishes marvels

(3) Credit brings capital into the hands of those who will make the best use of it.

New capital is for the most part created by persons unoccupied in any industry and thus unable to employ it remuneratively. The means of drawing an income from it is to lend it, either directly, or through the medium of a banker, to those who will pay most for the use of it, i.e. to those who will employ it most productively. Credit is thus constantly transferring capital to the places and hands in which it brings in the most. As a consequence it affords an incentive to saving by assuring to thrift a reward, not only immediate, but as high as can be paid.

(4) Credit allows of the immediate execution of great works, or of the meeting of extraordinary needs, such as those which arise in time of war, by discounting the revenues or produce expected in the