Excerpt from The Principles of Money and Banking, Vol. 2
Credit operations involve confidence and time - How the mechanism of producing and distributing goods is aided by the use of saved capital which has been intrusted to banks - The evolution from simple forms of credit to those more complicated - The granting of credit is not the creation of capital - Erroneous theories on the subject - Close relations between commercial credit and the ability to pay metallic money - Relation of credit to goods.
One of the most important factors in the mechanism of modem finance is the use of credit. Credit has so greatly economized the use of money that it has led in some quarters to the belief that it was capable of superseding money entirely. The use of credit in one form or another has become so nearly universal that money, if it did not retain the important function of the standard of value, would be to a great extent reduced to the subordinate role of settling retail transactions. The greater part of the commerce of the world is carried on by a refined system of barter, in which banking credits of one sort or another are the chief factors; but sound banking involves the promise to pay metallic money, and, therefore, is based upon such money.
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