Money actually hands the exchangeable value; credit only promises it. But to him who delivers his produce on credit, the promise of money has the same value as money, and this value in opinion, or imaginary value, maintains itself till the stipulated term of payment. If at that term the creditor pays the promised money, credit has not been a single instant without having the value of money, and has produced all its effects.

These effects are various.

The first is to operate the exchange of an existing produce for a produce which possibly may not exist at that time, and to procure an actual consumptionon the faith of a future equivalent; which circumstance facilitates and accelerates the consumption of commodities.

The second effect is to force him who consumes. upon credit to labour in order to perform his promise; which circumstance is favourable to industry, and increases the sum of produce.

The third effect is to circulate commodities without the assistance and intervention of gold and silver; which circumstance restricts the use of the precious metals, and insures their plenty notwithstanding the unproductiveness of the mines or the unfavourableness of foreign commerce.

But these advantages derived from credit, and credit itself, exist only as far as money is of gold and silver, and as its monetary value is as nearly as possible equal to its exchangeable value. Any other money than that of gold and silver, of whatever materials it may be composed, whether it consists in cattle, in agricultural produce, in the productions of industry,

or even in land, will always be liable to considerable chances, to which neither creditors nor debtors will be willing to expose themselves, whatever may be the measures adopted to give it a monetary value exactly proportioned to its exchangeable value. Cattle, corn, wine, hides, cloth, or any of the productions of the labour of man, vary much in themselves. A quarter of corn may vary from one year to the other a third, a half, or even be worth double; without experiencing any extraordinary fluctuation, the mere difference of quality may within the same place increase or diminish its value by a fifth, or a sixth; the case is the same with wine, cattle, &c.; consequently the result of such a money would almost always be that the debtor would pay more or less than he has promised, or than he owes. Credit of course would not be equal to money, and consequently there could be no credit.

I am not alluding to the other advantages of a gold and silver currency over any other money, such as its incorruptibility, divisibility, homogeneity, facility of being conveyed to a distance, and every-where converted at will in any kind of merchandize; these properties must give it the preference before any other money; and it is my opinion that any other than a gold and silver currency is radically defective, and opposes an insurmountable obstacle to the progress of wealth, for the sole reason that with such a money there can be no credit, because the lender would not be sure to receive back the same value which he has lent.

The case is the same when a gold and silver currency is altered in its standard and weight, and its

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monetary value does not come up as near as possible. to its exchangeable value. Credit, of which money is the basis, is more or less impaired by such an alteration, and frequently receives a mortal blow. Thus credit is intimately connected with a gold and silver currency, and cannot exist but through such a currency.

But what ought to be the proportion of credit to a gold and silver currency?

I believe that, on this head, there are none but peculiar, local, and accidental data, which it is almost impossible to generalize. We shall hereafter investigate whatever is known on the subject.

There are three sorts of credit; commercial, private, and public credit. Their nature, their object, and their end, are not the same; and it is evidently through mistake that they have been confounded and assimilated.

Commercial credit must have taken place the instant when the labourer, the primitive producer of a production, was enabled by his savings to wait, for the wages of his labour, or the price of his produce, till the end of the week, of the fortnight, of a month, of three months, of six months, or a year.

By affording this facility to the undertaker, the labourer enabled him to sell his articles to the merchant or wholesale dealer without requesting immediate payment in money.

The merchant, in his turn, was enabled to grant the same indulgence to the retail dealer.

And the retail dealer could grant the same favour to the consumer.

So that, on the very first outset, or from the first effort of commercial credit, commodities were pro

duced; they ran the whole career of circulation and were even consumed without the assistance and use of a single piece of coin.

Were this the only advantage afforded by commercial credit, it would still deserve the highest consideration. The facility of consuming without handing an actual and present equivalent is one of the greatest encouragements that can possibly be given to production, and one of the most fruitful elements of wealth. It affords a just notion of the power of credit, and yet it is only its very first advantage and one of its least benefits.

When the day of payment or term of credit arrived, the consumer was under the necessity of furnishing the promised monetary equivalent; and this equivalent being carried from the retail dealer to the merchant, from the merchant to the undertaker of the manufacture, and from the manufacturer to the labourer, and being distributed among them in the proportion of their co-operation in the value of the produce, required the same quantity of money as if it bad been paid in small payments at every partial formation of the produce, and during its circulation, before it reached the consumer. The only advantage of credit in this hypothesis was therefore reduced to delay the delivery of the monetary equivalent, which was, no doubt, a considerable advantage, as has been shewn just now; but not to be compared with its other benefits and properties which time and circumstances have successively displayed,

The Jews, being creditors of considerable sums in several states of Europe, whence their blind cupidity

and the ignorance of governments had banished them, contrived to collect their debts by letters, addressed to their debtors; and the bearer of the letters acted as if he had become, and frequently was in reality, the owner of the demand. The debts were actually discharged at the delivery of the letters, and through this circumstance it was discovered that a creditor may transmit or make over his demand to another person, and by this transfer pay what he owes to his own creditor, or acquire the objects of his desire.

*

This discovery was a ray of light to trade; and from that instant metallic money became as it were a stranger in all purely commercial transactions. It is well known, that, materially considered, such transactions consist in forwarding the productions of the producers to the consumers; and it is easy to conceive that, after the invention of bills of exchange, commercial transactions required no longer the assistance and intervention of money.

Bills of exchange, according to De Paz, were used at Athens. Gibbon, in his History of the Decline and Fall of the Roman Empire, remarks, that bills of exchange were known among the Arabs. The Abbé Raynal, in his Philosophical and Political History of both the Indies, asserts that bills of exchange were used in the East Indies at the time the Portuguese arrived there. Whether the Arabs availed themselves of the discovery of the Athenians, and transmitted it to the Jews, and to the people of Hindostan, is a problem of history which I shall not attempt to resolve.

+ David Macpherson, in his Annals of Commerce, vol. i. page 405, states that bills of exchange are mentioned for the first time in 1255. Ile says Though the recellent accommodation of remitting money by bills of exchange was pron known, long