The midland journal. (Rising Sun, Md.) 1885-1947, 1897-11-19
Credit and rlOneX.


animation of Griffen's book OIL the above
subject. In discussing credit the Judge
makes the following statement, which in
our judgment is radically wrong
"If we could imagine country where
credit was not used, and money was the
only medium of exchange. the prices OF
commodities, or, what is the same thing,
the value of money, would be determined
exclusively by the quantity of money in
use; and prices would rise or fall proper
tionately to the increase or diminution of
the currency. But where the credit sys-
tenn prevails, and the predominating use
for money is as basis for credit, which
is the case with foreign exchanges, the
same principle (the quantitive theory
operates quite differently; for here credit
becomes the dominating factor in deter
mining prices, aud prices are more extern
slvely affected by expansion or eontrac-
tion-as the immediate cause-than by
the increase or diminution of the quantity
of money. Hence Mr.. Giffen is quite
right in saying that, In consequence of
changes i'll credit alone, the serviceable-
ness of the same amount of money varies
indefinitely i'll comparatively short
periods, and that no conceivable changes
in the quantity of money::could at all have
the effects which are constantly produced
by changes in credit alone;' and so he
aud other monometallists are also right
i'll asserting that. having regard to the
immediate cause, the amount of credit is
a more potent factor i'll the determination
of prices then the quantity of money"
We think Mr.. Giffen or Judge Smith
would find it difficult to find case where
credit determines prices. Credit promotes
the increase of production but the quantity
of money in circulation always deter
mines the price those products sell for.
Supply and demand is credited with the
function of controlling prices, and credit
can play but an Incl lental part in the
game of price, by increasing the supply of
given article of staple goods. If the
money in circulation keeps up to the
supply or rises and falls with the supply
and demand, prices will undoubtedly
remain at the same ratio.
Let us trace the action till it completes
the cycle. We will choose the manufac-
ture and sale of any staple article. The
| manufacturer purchases the raw material
on credit and uses credit all the way
through till the goods are in the hands of
the jobber. The jobber uses credit also
in handling the goods, which he passes
on to the retailer, who also satisfies the
jobber by the process Of credit. These
three parties have shifted the debt against
the goods from one to the other. The
bank has been watching the process and
shifting the obligation or debt, which rep
resents the credit furnished by the bank,
from one party to the other till it has
reached the retailer Credit can carry the
load no further. The consumer now
enters to complete the circuit, and he
cannot purchase to consume with credit.
There is not another party to shift this
credit debtor credit is debt-onto. The
consumer must pay the cash. The cash
in circulation is i'll the hands of the con-
sumner. 1t matters not that the consumer
is many times a million. The million
stands as one person i'll this transaction,
and the money in the hands of that party
must foot the entire bill. The bank has
steadily shifted its credit along with the
goods as they passed down the line,
steadily increasing as interest, expense,
profits or commissions were added, till all
rests on the retailer and his only avenue
of escape from the multiplied obligations
is at the hand of the consumer and the
amount of money in the latter's hands
determines the price. Credit has had
nothing to do with determining the price.
If the debt or expense contracted by the
use of credit is larger than the sum of
cash i'll the consumers hands, then there
is fall in price, and loss among the
parties who staked all upon credit. Credit
is powerful factor in producing or
accommodating the articles to be exchanged
by the use of money, but in order to effect
the exchange, the values to be exchanged
must be equalized, for two articles of
unequal value cannot be exchanged, no
more than two articles of unequal weight
can be weighed with an even beam. The
only way to equalize large amount of
produce or property with small amount
of money is to double up the units of
property till they equal the units of
money, or in common parlance, lower the
price of the property till the sum of
money will pay for, or exchange for it.
Hence Mr.. Giffen is quite right
Wrong, ED. i'll saying that, In conse-
quence of changes i'll credit alone the
serviceableness of the same amount of
money varies indefinitely in compare
lively short periods and that mo con-
ceivable change in the quantity of money
could at all have the effects which are
constantly produced by changes in credit
alone "
1t is self-evident that if the quantity of
money is correspondingly increased with
that of production that prices will remain
the same, and that money and not credit
is the sole architect ofprice.
In pursuing the subject of credit in its
relation to price Judge Smith often mis-
takes, or seems to, the increase in pro-
ducts caused by the stimulous of credit,
which causes decline in price, the vol
ume of money remaining the same. 1t is
evident that the money invariably con-