3. We have seen that all modern Economists admit that human Abilities, Energy, Skill, and Character are Wealth, because men can make a Profit by their employment. These Moral Qualities and Character may be used for the purpose of purchasing Merchandise with a Promise to pay instead of actual money: and when they are so they are in popular language termed Credit.

Thus Demosthenes says - "There being two kinds of Property, Money and General Credit, our greatest Property is Credit."

And also: - "If you were ignorant of this, that Credit is the greatest Capital of all towards the acquisition of Wealth, you would be utterly ignorant."

So Melon says - "To the calculation of Values in Money there must be added the current Credit of the merchant, and his possible Credit."

So also Dutot says - "Since there has been regular commerce among men, those who have need of Money, have made Bills, or Promises to pay in Money. The first use of Credit therefore is to represent Money by Paper. This usage is very old: the first want of it gave rise to it. It multiplies specie considerably, it supplies it when it is wanting, and which would never be sufficient without this Credit: because there is not sufficient gold and silver to circulate all the products of nature and art. So there is in commerce a much larger amount in Bills, than there is specie in the possession of the merchants.

"A well-managed credit amounts to tenfold the funds of a merchant: and he gains as much by this credit as if he had ten times as much Money. This maxim is generally received among all merchants.

"Credit is, therefore, the greatest Wealth to every man who carries on commerce."

Now though in popular language the merchant's general Purchasing Power is called his Credit, yet it does not enter into Economics until he actually purchases something with it.

When such a sale on Credit takes place the Property in the goods passes absolutely to the buyer as fully and completely as if the Price had been paid in Money. But at the very same instant that the Property in the goods passes to the buyer, there is a Contract, Nexum, or Obligation, created between the buyer and the seller, which consists of two parts -

1. The Right to demand payment, in the person of the seller.

2. The Duty to pay, in the person of the buyer.

These two Quantities constitute the Contract, or the Obligation, which is the bond of Law between these two persons.

It may be necessary to observe that the word Obligation is very often used erroneously to mean only the Duty to pay. But Von Savigny has clearly pointed out this error. The Obligation is the bond between the two parties: it includes the Eight as well as the Duty: it is in fact synonymous with Contract.

In this Contract, or Obligation, the Eight to demand payment residing in the person of the Creditor is termed Credit.

Thus Credit is the Name of a kind of Incorporeal Property: it is the lowest form of an Annuity : it is an Annuity of one term: an Annuity in general is the Eight to demand a series of payments: Credit is the Right to demand a single payment.

Now this Eight is Property: it may be bought and sold: and hence we see the force of Roman Law - "Under the term Wealth .. Eights are included."

Though therefore in popular language a merchant's Credit is often understood to mean the general estimation he is held in, and the power of purchasing goods with his Promise to pay instead of actual money, it must be understood that this Credit does not come within the science of Economics until he exercises this power, and actually buys some goods with his Promise to pay; and when he does exercise this power, it is the Promise to pay, or the Eight of action which is created at the very instant of the transfer of the Property in the goods to him which in the language of Law, Commerce, and Economics is termed Credit.

Thus a Credit in bank means a Eight of action against the bank for a sum of money: a Letter of Credit is a letter giving its holder a Eight to demand a sum of Money: Paper Credit means Eights of action recorded on paper, such as Bank Notes, Bills of Exchange, etc.

It is sometimes supposed that the subject of Banking and Credit is peculiarly mysterious and difficult of comprehension. But in reality the whole difficulty consists in grasping the conception that Credit, as an Economic Quantity, is a species of Property, Merchandise, or Goods, or a Commodity exactly similar to a bale of cotton, a quarter of corn, a ton of coals, a horse, or a table, and may be bought and sold precisely like any other goods. Not only may Credit be exchanged against goods, but also one piece of Credit may be exchanged against another piece of Credit, just as one piece of goods may be exchanged against another piece of goods: and every person can make a catalogue of his Rights of action against every one else, precisely in the same way as he can make a catalogue of his other goods and chattels.

4. So far all is clear: but now comes the first ambiguity in the subject, which has given rise to much misconception.

When an Obligation is created by the transfer of the Property in goods and money, the Right to demand payment is the Credit, and strictly speaking the Duty to pay is the Debt.

Here is the first subtlety to be remarked. It is very often supposed that a Debt is Money owed by the Debtor: this however is a great error. The Debt is never, under any circumstances, the Money owed by the Debtor: it is the Personal Duty to pay the Money. Thus Mr. Williams says - "Every person who borrows Money on mortgage or not incurs a Debt, or Personal Obligation, to repay it out of whatever means he may possess."

Now this is a point of the greatest importance in the due understanding of the Theory of Credit, and has led to great error. The common and wide-spread fallacy that a Debt is Money owed by the Debtor, and belonging to the Creditor is expressly provided against in Roman Law - "The essence of an Obligation does not consist in this that it makes any specific goods our Property; but that it binds some Person to give us something."