, 1875-11-02
WHAT FAITH NOES FOR CURRENCY,


FatA md credit arc pretty mitch the .amo
thing. Faith is n atato Of mind. Giving
credit to d man IL putting faith in his ability
md willingness to keep his promise to pay.
Thus credit fulAlls some Of tho functions Of
currency, inasmuch as it delays the demand
for certain part of tho existing circulating
medium, md 20 enables that part to pass
from hand to hand and satisfy other dobta
before 1t il needed TO satisfy this particular
debt. IT, sclls u 800 worth Of goods md
requires payment in c1sh, i 1nnss hand over
$500 in o1rrcucy. But it hc takes D's note,
due in ninety days, tho 300 that would
otherwise 10 paid st onco may pass
from u to G, 9 to D, etc., and settle a
hundred nccounts before D uses it, or its
equivalent, to pny a. Whom credit is so
common and thus serves, in many caseB, rs
currency, it ia not strange Tint many people
should confuse tho two, Just NJ ono Bchool Of
economists confuses credit md capital, and
imagine that Il permanent currency may be
got by simply using credit rs its baais. 1t Is
important, however, to remember that crodit
exists simply because 1t is not permanent. II
Ns noto wero nevor to DO paid, Awou1d never
ta1;o 1t, II tho United States should an-
nounce that tllo grecnbocks were never to 10
redeemed, tho precarious credit thoy
haye now would utterly disappear,
mud they would 10 worthless, except for
curiositles. Tho Confederate "grnybacks "
became valuo1oss, simply because they will
uoyor bs redeemed. Tho credit they ask is
m eternal one. But oternal credit cannot
exist. Giving credit to man IL believing
that ho will pay what ho promises to pay. If
ho declares that ho will never do SO, this
belief this credit, Of course vanisheB.
It should never ho forgotten TINT credit
merely rostponos tho ugo OF money. It does
not obviato its use. For thin reason, then,
credit can never take tho p1aoe Of mouoy
absolutely.
Credit IN necessarily limited in time. Per-
maneut credit is MI nbsurtity. For this
reason, then, n permanent currency cannot
bo created out Of nero credit.
note il tie sigu Of credit. It ia n
promise to pay money. Its passage from u
to A shows TINT A hns fifth in B's ability to
pay it on maturity. There aro two clements
in this transaction, ono tangible, tie other
intangible. Tho first is the noto, the second
il the state Of mind which induces 4 to rc.
ceive it. Tho lattor is the moro important.
Tor If 1t exists, A may tako Ba spoken
promise inBteal Of his written ono. But
whether the promise ia spoken or written by
nh individual, or printed bY a bank or nation.
the state Of mind must exist in order to allow
the promise to fulfill, oven for IN instant,
tito functions Of currency. And this
mental state is wholly dependent upon
tho supposed ohanco Of tho ultimate
redemption Of tho note, THUS, persons whc
boliovo that q hit Of Government papct, re-
doemable, II ut all, only in other paper thai
is rcdeemablo only in 1t, can circulate as
permanent currency, practically soy that B's
note will buy A'H goods, when A knows thai
B will never take up the noto save with an
/ other, and will never redeem tito second ex
copt with the tirsts This redact1 al a6suriup
etIectually diRposes Of the fallacy that czedl
| or "faith' can be utilized as tho perruanen
| basis Of cnrrency