The Nature and Functions of Credit. 61 



is lent. Sixteen years ago, a woolen manufacturer furnished the 

 United States government with four pairs of array blankets, and 

 accepted in return its promise to pay ten dollars, — the term 

 dollars meaning a certain weight of gold or silver. A., the first 

 receiver of that bill of credit, could have no use of the article he 

 had loaned the government, or its value, till he passed it to an- 

 other, B., for an equivalent item of real wealth. B. passed it in 

 like manner to C, and so it has been moving on through five 

 hundred different hands, till it has come to me. In every trans- 

 fer it has just passed along that original debt of the United 

 States government. It is to me just what it was at first, a mere 

 promise of a certain weight of gold or silver to be rendered at 

 some future time. Suppose that to-morrow the government, by 

 word or act should break its contract by turning the word dollars 

 into a mythical term meaning neither gold or silver, or any other 

 form of real wealth, only an ideal something to count by, who 

 then will take it at my hands in exchange for any substance of real 

 wealth? It and the thirty-five millions of outstanding promises 

 like it, would drop like the leaves in Vallambrosa's vale, dead 

 and worthless. 



Now to speak more positively, we may define four distinct and 

 important functions of credit. 



1. Credit is a most effective means of uniting capital and labor 

 for the production of wealth. It is not itself capital and cannot 

 create capital, but it does greatly increase the sum of wealth 

 available as capital for profitable uses. A thrifty mechanic leaves 

 as the fruit of his life's labor, a large shop well appointed with 

 machinery and tools. But his widow who inherits the estate can 

 do nothing with the property in this form. Across the way, is a 

 young man who has strength and skill and all needed qualifica- 

 tions for business, but is destitute of capital. The widow rents 

 her establishment to the young workman, and so credit joins the 

 labor of the past with present labor for fruitful production and 

 profit to both. But for this interposition, both must have been 

 idle. In every community there are many engaged in active in- 

 dustry who yearly lay by little savings which they cannot use 

 themselves. If there was no such thing as credit, all this wealth, 



