The RURAL NEW-YORKER 
927 
A Primer of Economics 
By John J. Dillon 
Part XXXIII 
What is credit? 
Credit is the right to demand money at 
some future time. In the ordinary trans¬ 
action, goods or service is delivered and 
the money is paid on the spot. When 
credit is introduced, the time for handing 
over the money is delayed to a future 
time, and to a large extent avoids the use 
of money. 
What are the forms of credit in com¬ 
mon use? 
The familiar forms of credit are notes, 
bills, drafts, bonds, mortgages and bank 
accounts. A verbal promise to pay or a 
book account is also a credit. Our paper 
money is a credit. It gives us the right 
to demand real money—gold. A distinc¬ 
tion is sometimes made of bank credits, 
but the bank credit is really the proceeds 
of a note deposited with the bank. The 
borrowing depositor may then draw the 
full proceeds of the note, less discount, at 
one time or at various times by checks 
on the bank payable to himself or to oth¬ 
ers. In effect it is not different from bor¬ 
rowing from a neighbor, when the money 
is paid over then and there in exchange 
for a note. 
Upon what does credit depend? 
Credit depends primarily on property, 
but every credit transaction involves what 
we call a “moral risk.’’ A man’s charac¬ 
ter, habits, reputation and record affect 
his credit favorably or unfavorably, as 
circumstances seems to warrant, but the 
general basis for credit is the property 
value behind the promise to pay later on. 
Does credit act as an extension of cap¬ 
ital? 
Credit is not an extension of capital. 
It is merely a transfer of wealth or capital 
from one person to another, but if the 
lender held the wealth unproductively, 
by lending it to another who used it for 
production, the credit would in that case 
increase capital. 
Do bank deposits increase capital ? 
Bank deposits undoubtedly increase the 
funds available for production purposes. 
When the people of a community put their 
ready money in the bank on deposit, a 
larger fund results from the combined de¬ 
posits. The bank does not need more 
than from a fourth to a third of the total 
deposit to meet its obligations, and can 
safely loan the remainder for production 
purposes. All the deposits that would 
otherwise be hoarded and the greater part 
of all deposits add to the 1 capital fund 
and increase productive forces. The 
greater the production the better for all, 
and since capital is a factor in produc¬ 
tion, the increase of tin' capital fund is 
a service to the community. 
Do all deposits tend to increase capital? 
Deposits are sometimes devoted to un¬ 
productive uses, and serve no useful pur¬ 
pose. When men borrow money from the 
banks from day to day to gamble in Wall 
Street stocks, the money is diverted from 
its proper uses. It is not employed pro¬ 
ductively. No new wealth is created. 
Whatever one wins, another must lose, 
and money that might otherwise be used 
for productive purposes serves only the 
game of chance. 
What effect does credit have on prices? 
Credit, is a purchasing power, and 
whenever this power is used as a substi¬ 
tute for money, it. serves the same pur¬ 
poses as money. It has the same pur¬ 
chasing power as money, and affects 
prices in the same way and to the same 
extent as money. Hence, an increase of 
credits tends to increase prices. A re¬ 
striction of credits tends to decrease prices. 
MONET STANDARDS 
What is the money unit of the United 
States? 
The money unit of the United States 
is the dollar. It contains 23.22 grains 
pure gold and 2.58 grains silver, or 25.80 
grains standard gold nine-tenths fine. 
Are 25.80 grains of standard gold 
worth more coined than in bars? 
Coining adds no value to the gold. The 
Government coins gold free, so that it is 
worth as much in bars as in coin. 
Is gold an invariable standard of 
Value? 
Gold is not invariable in value. It 
fluctuates in value like other commodi¬ 
ties, depending in the first, place on sup¬ 
ply and demand and ultimately on the 
cost of production. There is, however, 
always a demand for money, while the 
demand for most other things has more 
limitations. Gold, too, being indestructi¬ 
ble. the annual production does not af¬ 
fect its supply as much as commodities 
that are more perishable. Money also is 
peculiar in that it measures the value of 
all other commodities and services, and 
this value is expressed in what we call 
price. 
Is gold the universal standard of 
values throughout the world? 
Gold is the standard of value adopted 
as money by practically all the countries 
of the civilized world, but a few coun¬ 
tries yet use silver as a basis of their 
money systems. 
What metals are used as money in the 
United States? 
We use the so-called precious metals, 
gold and silver, as money, and also nickel 
and bronze for the smaller coins. 
What form of paper money do we use? 
Our paper money includes Government 
notes, called greenbacks, national bank 
notes, Federal reserve notes and gold and 
silver certificates. 
What is fiat, money? 
F*at money is a term used to designate 
paper money that is not a promise to pay 
a definite amount of metal or other com¬ 
modity, but depends for its value on the 
Government dictum “this is a dollar.’’ 
This form of currency was advocated by 
the Greenback party in the Presidential 
campaign of 1876. The proposed bills 
differ from the national notes or green¬ 
backs issued during the Civil War in 
that the notes issued were promises to 
pay, though payment was for a time sus¬ 
pended, while the proposed currency 
promised nothing and was to be frankly 
irredeemable. A certain amount of such 
money might have circulated in domestic 
trade, but it could have no purchasing 
power in foreign countries, and without 
well defined restrictions and regulations 
there would be a sure temptation to in¬ 
crease it beyond the limits of prudence 
and safety. 
Is the metal in silver, nickel and 
bronze coins worth the face value of the 
coin ? 
The metal in silver, nickel or bronze 
coins is not worth as much as the gold 
in a gold dollar. 
Why then does a dollar in the cheaper 
metals and a paper dollar always ex¬ 
change for as much of other things as a 
gold dollar? 
The metal coins other than gold and 
the paper money are always at a parity 
with gold because they are interchange¬ 
able for gold. The Government will ex¬ 
change gold at any time except in emer¬ 
gencies for any of the other forms of 
money in use, and this interchangeable 
privilege keeps them at a par with gold 
so long as^he people have confidence that 
the Government will continue to do so. 
During the late war gold could not be 
shipped out or carried out of the country, 
and the Government would not, exchange 
it in any quantities for paper money or 
subsidiary coins. It. however, held more 
than one-half the gold in the world, and 
the people’s confidence in the Government 
kept all money at par. Gold payments, 
however, have been suspended all over 
the world, and the volume of paper money 
has been greatly increased. Prices of com¬ 
modities rose in consequence. The policy 
of the Government adopted in 1020 to 
reduce the volume of credit money in 
safer proportion to the volume of gold had 
the tendency to reduce prices and to 
bring on business depression and panic. 
Home Use of Wool 
Can you tell us how to make one of the 
old-fashioned wool “comforters”? We 
used to sleep under one, and this might 
make a good outlet for some of our wool. 
J. p. 
“Comforter” is the proper name for a 
bedspread carrying wool, because it surely 
brings maximum warmth for minimum 
pressure. It does not take much science 
to make it. but quite a little work and 
patience. Use three-eighths wool, if pos¬ 
sible, Decause half-blood and Delaine are 
too fine, and many wools too coarse. 
Scour in a tub of hot, soft, soapy water, 
then repeat with less soap and rinse. Pile 
it and squeeze all the water possible out 
and shake apart to dry. This you know 
how to do, but it will be tedious unless 
spread on something like wire netting, 
so the air can get to the largest surface, 
and when dry, pick it all to pieces. Spread 
it loosely between cheesecloth and quilt it 
to hold the fibers in place, and when cov¬ 
ered. knot it closely. Begin the work with 
7 or 8 lbs. of raw wool, enough to cover a 
sheep, or bring “comfort” to all the chil¬ 
dren who can pile in a bed. 
Gentle readers, that query may seem 
trifling to some of you, but I am real glad 
to get it. and all others of that class. 
That query for the cover of a bed in 
Cayuga Co., N. Y.. carries part of the 
secret to preserve the sheep industry of 
the world from destruction, to bring com¬ 
fort and happiness to millions, and to put 
in circulation the real value of billions of 
pounds of raw virgiu wool that is a night¬ 
mare to the world now. Millions of men 
are out of work and hungry, and hundreds 
of millions are not wearing wool, and the 
wool of the whole earth is piled up, use¬ 
less. Everyone is penalized because this 
wool has not been sold, paid for, and the 
money paid again to make the wheels of 
commerce, the factories and the railroads 
turn, and the sheep men, who were hit 
first, understanding the trouble, as bus¬ 
iness men and patriots are doing every¬ 
thing possible to lower this awful pile of 
unused wool. ,w. w. u. 
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worth being made thoroughly weath¬ 
erproof. 
When you roof with Ruberoid Roll¬ 
roofing you are sure, that, year after 
year, it will give you perfect protec¬ 
tion from every weather condition. 
Excessive heat or cold, driving rain, 
sleet or snow—Ruberoid Roll-roofing 
is proof against all these. 
The extreme care devoted to the 
selection of raw materials and to 
every detail of manufacture enables 
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Many Ruberoid Roofs, laid over a 
quarter century ago, are still intact, 
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Smooth-surfaced Roll-roofing 
Mineralized Roll-roofing 
Strip-shingles 
Roof-coating 
I nsulating a n d Sheath in g-papers 
Wall-board 
Floor-covering 
Deck-cloth 
Waterproof-felt 
Asphalt-saturated Felt 
Cement-waterproofing 
Plastic 
Paints 
Varnish 
When you are in the market you will find in 
Ruberoid a roofing which will give you full 
protection for years to come—which, although 
its first cost may be a trifle greater, will more 
than pay for itself in actual service. Buy 
Ruberoid Roll-roofing. 
The RUBEROID Co. 
FORMERLY THE STANDARD PAINT COMPANY 
Chicago 
95 Madison Ave., New York 
Boston 
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HERE IS A BOOK 
YOU ARE SURE TO ENJOY 
It contains more than 25 stories which will hold 
your interest from start to finish. The author 
has seen many sides of life and few men know 
human nature so well or can tell a story so enter¬ 
tainingly. 1 housands of country people have already enjoyed 
these stories which are so full of human interest, humor and phil¬ 
osophy. The stories have been selected from the best of the 
Hope Farm Notes which have appeared in the R. N.-Y. during 
the past twenty years. The book is well printed, cloth bound, 
and makes a most desirable present to a friend or to your grange 
or town library. 1 be price is $1.50 a copy postpaid. Just fill 
. out the coupon below and enclose with check or money order. 
RURAL NEW-YORKER, 333 West 30th St., New York 
Gentlemen—Enclosed find remittance of $1.50 for which send me 
postpaid a copy of “Hope Farm Notes.” 
Name. 
Town. 
State.. 
• ••••••••••••• »R« F. D. or Street No* 
