60 Wisconsin Academy of Sciences, Arts, and Letters. 



gather of what is left, afraid to trust anybody more. "Would to 

 Grod this sad experience might open men's eyes to understand the 

 nature of credit and to hold it henceforth within its true limita- 

 tions under wise regulation. 



As I novNT pass to speak of the functions of credit, I must no- 

 tice two or three false notions which are more or less current. 



1. Credit is not wealth nor capital. It is only a means or occa- 

 sion for transferring wealth from one to another. A farmer takes 

 from the manufacturer a plow, and gives in return his note pay- 

 able at the end of six months. When the contract is made, there 

 is but a single item of wealth, the plow. The note given is but 

 the symbol or evidence of its value transferred. ISTeither the 

 promise on the part of the farmer, nor the trust on the part of the 

 manufacturer has value in itself. The payment of the note, then, 

 is only the return in another form of the one value. If during 

 the period of the contract new wealth has been created, by the 

 use of the plow, it is only as that item of wealth has been made 

 capital, so as in union with labor to become productive. The 

 credit received has merely adjusted the transfer of the one value. 

 Proceeding on the false notion that credit is capital, ninety out of 

 every hundred merchants fail. The false notion still governs the 

 legislation of almost every state in our land, and leads to double 

 taxation, because symbols, mere evidences of debt, are regarded 

 as of the very substance of wealth. 



2. Credit does not of itself create capital. It has no original 

 power to make something out of nothing. Wealth does not grow 

 by the mere act of passing from hand to hand. Its increase 

 comes only from its union with labor. The mere multiplying of 

 promises to pay does not make a man rich, as many a deluded 

 creditor has learned to his sorrow. Can a nation, any more than 

 an individual grow rich by that process? 



3. The trusted promises of credit in certain forms may be 

 thrown into general circulation, but they are ever simple evi- 

 dences of debt, and as they pass from hand to hand they do noth- 

 ing more than transfer the debts for which they were originally 

 issued. This is only saying that an item of wealth cannot be 

 used at the same time by both its owner and the man to whom it 



