164 MONEY AND CREDIT 



of exchange. Also, silver dollars, and French five-franc pieces, in 

 the so-called " limping gold standard,", could not be called true 

 money in all senses, because their value is dependent on a primary 

 form of money. Like national bank notes and greenbacks, they are 

 only " surrogates; ' they are, perhaps, legal, but not economic, 

 money. 



One may well doubt if the function of a means of payment can 

 be distinguished from that of a medium of exchange. At least, 

 most writers seem to agree that the medium-of-exchange function 

 is essential to money; but if the standard function be neglected, 

 could we possibly define that which acts only as a medium of 

 exchange as true money? Of course not. Deposit-currency (i. e., 

 bank-checks) certainly act as a medium of exchange, and as a means 

 of payment; but we should, in all common sense, be obliged to place 

 such currency in a very different class from gold coin. 



Therefore every one must agree that the critical discussion of 

 the meaning and functions of money is fundamental to scientific 

 progress and to all serious treatment of the main problems of 

 money, such as the theory of prices. 



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111 



Credit 



In regard to another unsettled problem of money, credit, it is 

 to be said not only that it has been very much misunderstood, but 

 that it has been given very little real study. There is to-day no 

 commonly accepted definition of credit; the element of futurity in 

 a credit transaction is generally admitted, but " confidence " is by 

 some regarded as the essential element; and yet " confidence " can 

 play its role only because futurity exists in the credit operation. 



Nor is there any received opinion as to the real nature and func- 

 tions of credit. We seem, in the whole field of credit, to be on the 

 frontier of knowledge. In any true sense, the economic end of 

 society is the possession and use of goods which satisfy wants. Credit 

 has been devised as one of many means to aid in accomplishing this 

 end. In its fundamental relations it has to do with goods and their 

 increase. To some, however, it is related only to money. The 

 truth of this concept, to my mind, depends upon the nature of money. 

 If it be only a means to an end, and if it does not alter the elemental 

 principles of value, but aids and cheapens the exchange of goods, 

 then it is easy to understand that a borrower in reality obtains the 

 use of goods, as the purpose of a loan, and that money and credit 

 are but the instruments devised by society for effectually carrying 

 out that purpose. Hence the credit operation, as regards extension 



