2 Minnie Tliroop England 



another part of his discussion he says that credit exaggerates the 

 movement of market prices, as though there were other forces 

 than credit at work to cause these short-time fluctuations. "The 

 possibihty of buying, however, on an enlarged scale b}- the use 

 of credit, no matter what its perils, exists. It is a means of 

 throwing a vast purchasing power into any one direction ; and, 

 as we shall soon see, it is capable of abnormal extension in gen- 

 eral. The immediate efifect of elation, hopefulness, and prosper- 

 ity is certain to cause an extension of unsupported or false credit, 

 and to aid in the irregular and extreme movements of market 

 (not normal) prices. Hence the cycles of rising and falling 

 prices are exaggerated by this possible use of credit."^ 



It is held with ]McLeod that prices are determined by the ag- 

 gregate of money and credit, and that "All credits payable in 

 Gold — whether Bank Notes,' Banking Credits, Bills of Exchange, 

 or any others — have identically the same efifects on the value of 

 Gold and on Prices as an equal quantity of Gold itself."- At a 

 given moment prices are dependent upon the relation between 

 the quantity of goods on the market and the purchasing power 

 offered for the goods. As far as its efifect on prices is concerned, 

 it is maintained that whether this purchasing power consists of 

 coin or credit is a matter of indifiference. 



To the writer it seems that the major part of the basis for the 

 extension of credit is expected or future production. Professor 

 Laughlin, on the other hand, centers his attention on goods al- 

 ready produced or present goods as the basis. He says : "A 

 typical loan transaction, containing the essentials of all. may be 

 taken by way of illustration. A business firm sells to jobbers on 

 ninety da\s" time cotton sheetings to the amount of $10,000. If 

 confined to the actual capital owned by the members of the firm, 

 or company, their operations would be restricted ; but if they can 

 borrow of others additional capital, on the strength of the goods 

 thev have sold, thev can coin the cotton sheetings held by job- 



' Laughlin. Priiicit^hs of Money, 87-8S. 



"McLeod. 'I'hc Theory of Credit, II, '<'^?>- Professor Lauglilin says 

 these statements of AIcLeod's about gold and credit do not seem true. 

 See his Principles of Money, 110, footnote. 



42 



