A great deal has been said and written about the difference between Real and Accommodation Bills, and while no terms of admiration are too strong for the first, no terms of vituperation are too severe for the latter. Thus Mr. Bell says - "The difference between a genuine commercial bill and an accommodation one is something similar to the difference between a genuine coin, and a counterfeit;" as if the act of negotiating an Accommodation Bill were in itself an act of moral turpitude. It is also generally assumed that Real Bills possess some sort of additional security because it is supposed that there is property to represent them. We have already seen, however, the entire delusion of such an idea, and that it is a great mistake to suppose that Commercial Bills have any specific relation to the Property from the transfer of which they originally sprang. In truth, both Real and Accommodation Bills have precisely the same security - they constitute a general charge upon the whole estates of all the obligants upon them. The objections to Accommodation Bills, therefore, on that ground are perfectly futile.

The essential distinction between Real and Accommodation Bills is, that a Real Bill represents a past, and the other a future transaction. But even this is no ground for any preference of one over the other. A transaction which has been done may be just as wild, foolish, and absurd as the one that has to be done. The intention of engaging in any mercantile transaction is, that the result of it should repay all the outlay with a profit. There is no other test of its propriety but this, in a mercantile sense. Such things have been heard of in the mercantile world as consignments of skates to tropical countries. Now, a Bill drawn against such a shipment as this would pass muster, in technical language as a Real Bill, while one drawn to forward some other operation, however sound and judicious it might be, if it were not yet accomplished, would be an Accommodation Bill, and be branded as fictitious. Mr. Bell would call the former genuine coin, the latter counterfeit.

We see therefore that the common objections urged against Accommodation Bills are perfectly futile, and quite wide of the mark. Whether a Bill be a good and safe one, has no reference to whether it represents a Past or a Future transaction, but whether it is a safe and judicious one itself, and the parties to it able to meet their liabilities. The whole Cash Credit system of Scotland, which has conduced so eminently to the prosperity of that country, is a system of Accommodation Paper, which is sufficient to disprove in the mind of any dispassionate person, that the system is in itself necessarily dangerous and pernicious, but is proof enough that, if it is judiciously managed, it may be of great advantage.

The true objection to Accommodation Paper is of a different nature. When the Credit system is carried on duly and properly, and within legitimate limits, it is the most ingenious method ever devised for promoting commerce, and where it has been cautiously used, has marvellously succeeded in so doing. But it is a very trite remark, that the best things when corrupted, become the worst. This is eminently true of Paper Credit. Universal experience proves that there is nothing so dangerous and pernicious as for individuals to have an undue facility for obtaining Credit. When Capital is to be had on too easy terms, it fosters to an extravagant extent, the fatal propensity for embarking in all sorts of wild speculations, and pushing trade far beyond the possibility of being remunerative.

The considerations we presented shewed the exaggerated ideas of the security of Real Bills. But there is at least this security in Real Bills, that as they only arise out of real transfers of Property, their number must be limited in the very nature of things. However bad or worthless they may be individually, they cannot be multiplied beyond a certain extent. There is therefore a limit to the calamities they cause. But with Accommodation Paper there is no limit. A beggar may write upon bits of paper a million "Promises to pay" as easily as a Rothschild: and it is far more probable that he will do so; a man without a farthing is proverbially the most reckless, because when the bubble bursts, it is a matter of no consequence to him; he has nothing to lose: the misery and the ruin fall upon his unfortunate dupes. A man of real Capital will be cautious in his operations. A loss to him will be real, but a man who is not worth a sixpence is indifferent whether he loses £1,000 or £1,000,000.

This system of Accommodation Paper of different descriptions is one of immense importance in modern commerce, and its abuse has led to some of the most terrible mercantile catastrophes on record. It is, however, so intimately interwoven with banking, that we shall defer any more mention of it till the next chapter, which treats of the operations of Banking.

16. We have observed that so far as regards Production, which in a scientific sense includes the Formation and Transfer of products, Credit, whenever it is applied, performs exactly the same function as Money. All commercial transactions on Credit are Sales. The absolute Property of the article passes from the vendor to the purchaser just exactly as if the price had been paid in Money. The only difference to the purchaser is that his profits are less, because the Credit price is higher than the Money price. So long as matters proceed smoothly, and transactions are profitable, the Bills generated by commerce are equivalent to so much Money. The difference arises when the sales are unprofitable and losses ensue. If the wholesale dealer buys from the manufacturer with ready money, and the speculation is unfortunate, the whole loss falls upon the dealer, the manufacturer does not lose; he has got his money. But if the manufacturer sells for Credit and the speculation is unfortunate, and a loss ensues, or if the wholesale dealer fails from other reasons, the loss may fall upon him. When he has sold on Credit to the dealer his power over the goods is absolutely gone; and if the bill is unpaid he cannot reclaim the goods, even if they are still in the possession of the purchaser: he has no more claim to them than any other creditor. Consequently if the dealer has not sufficient funds to pay his debts, the loss falls upon the original manufacturer. In this then consists the whole difference between sales on Credit and sales for Money, that if losses ensue, they may be differently distributed. No doubt the manufacturer finds that a Bill of Exchange is not so negotiable as a Bank Note or Money, but it is of the same nature, and must be placed in the same category. The Money is nothing but a Bill upon the whole community. Good bills do, to a considerable extent, circulate in commerce like money; but the manufacturer generally finds it more convenient to sell the bill to his banker, and how the banker buys it will be explained in the next chapter.

Now we have shewn that Capital, in its most general sense, is not any particular thing, but simply an Economic Quantity, be it Currency or anything else, employed in reproductive operations. In its general sense it is the Purchasing Power of the merchant, or it is the moving power at his command to generate a circulation of commodities, out of which he reaps his profits. The Money he has is the fruit of the services he has formerly done to the community. Credit is also the power he has of drawing the goods from the possession of the manufacturer, and is the pledge of his skill in rendering future services to the community, by discerning their wants and supplying them. The effect upon the market and upon prices is exactly the same whether purchases, i.e. circulation of commodities, be generated by Credit or by Real Capital, and the profits and losses are exactly the same to the community, whether the operation be effected by Credit or by Real Capital. Hence it is seen how Mercantile Credit is Mercantile Capital.

It has frequently been observed that all great inventions have an equalising tendency: the invention of gunpowder equalised the condition of the poorest foot soldier and the wealthiest knight, and it destroyed the supremacy of the knights: the invention of printing opened up the paths of knowledge to the poorest as well as to the rich, and destroyed the supremacy of wealth in the acquisition of science: the invention of steam and railroads has equalised the means of locomotion to the humble and to the wealthy; so the invention of Credit has destroyed the supremacy of Money, and has provided the means for the most humble to place his foot on the ladder of opulence. It is a matter of common observation that nothing is so difficult as the first step to wealth: that many men could get on if they could only make a beginning. Now Credit supplies the means of attaining that first step to all. Credit is a mighty power, and no doubt, like other great engines, is liable to be abused: but it is entitled to take rank with gunpowder, printing, and steam, among the marvels of human ingenuity; and it has been the chief cause of the magnitude of modern commerce.