14. Now when persons take a piece of money in exchange for services or products, they can neither eat it, nor drink it, nor clothe themselves with it. The only reason why they take it is, as we have seen, because they believe they can exchange it away again whenever they please for other things which they do require. It is therefore what is called Credit. As Edmund Burke says of Gold and Silver - "The two great recognized species that represent the lasting conventional Credit of mankind."

Hence we obtain the fundamental conception of Credit - Credit is anything which is of no direct use, but which is taken in exchange for something else, in the belief or confidence that we have the Right to exchange it away again.

Credit is therefore the right or property of demanding something else when we require it. It is the Right to a future payment: and it must be particularly observed that Credit is not the Transfer of something, but it is the Name of a certain species of Right or Property.

15. So long as nations continue in a low state of civilisation all this Credit, or Money, is of some material substance. But when they advance in civilisation they use Credit in another form. To revert to the case from which we shewed how the necessity for Money originated, that of unequal exchange, suppose that the Debtor instead of the general merchandise called Money, gives the Creditor a simple Promise to render the balance of service when required. Then the Creditor has the Right to demand an equivalent in future. But it is only a Right against a particular person. Suppose for instance that a person holds a tea merchant's promise to pay five pounds of tea. The Creditor may sell or transfer that Right to any one else. Suppose he happened to want bread, and the baker happened to want tea, the Creditor might sell the Right to demand so much tea in exchange for so much bread. Now that Right is only to demand a particular thing; and only from a particular person: and that person may die, or become insolvent, and may not be able to fulfil his promise.

Hence the Value of the Promise is particular and precarious. But if the tea merchant can fulfil his Promise, that Promise is of the Value of the tea. The tea is the Value of the Promise. And to any one who wants tea, the Promise is of exactly equal Value with Money. So if any one wants anything, an Order for that thing is of the same Value as Money with regard to that particular thing. If a person wants a shilling's worth of bread, an Order for that amount of bread is of the same Value as a shilling with respect to bread: if a person wants a shilling's worth of milk, an Order for that amount of milk is of the same Value as a shilling with respect to milk: and so on of everything else. The only difference is that each of these Orders only entitles a person to that particular thing, whereas with a shilling he can buy a shilling's worth of bread, or a shilling's worth of milk, or wine, or anything else he pleases. Hence each of these Orders has only got one Value, but Money has a multitude of Values. Again if the person who has made the Promise cannot perform it, the Promise has lost its Value; but if a person has Money he can always find some person to give him the equivalent he wants for it. Hence such an Order has only 'particular and precarious Value, but Money has general and permanent Value.

This Order or Promise is what is usually called Credit; and it is clearly seen that though it is of a lower and inferior form, yet it is of the same general nature as Money. And because such Orders, or Promises, can be exchanged or bought and sold like any material chattel they are called Pecunia, Res, Bona, and Merx in Roman Law.

16. From this it will be seen that it is perfectly possible to carry on the exchanges of society without material Money. During the late civil war in America gold and silver money entirely disappeared from circulation, and private tickets of the nature described above, took its place. Instead of Money, people had their pockets filled with bread tickets, milk tickets, railroad tickets, etc. If a man had his hair cut and tendered a dollar in payment he could not get change in money, but he received so many tickets promising to cut his hair so many times; We saw a case in an American paper where payment was made in tickets promising to pay strawberries when the season came on.

17. This Paper Credit which we have described would in its simplest form have the particular service or product, it was intended to command stated on the face of it, as we have just seen was done in the American war. This however would manifestly limit its utility, so by universal consent it is almost invariably the custom to make the Paper Credit of a country a Promise to pay in Metallic Money, which is the generally received power of commanding all services and products. Paper Credit, therefore, in modern practice instead of Promising that the Debtor will render any amount of particular service, almost always Promises that he will give a certain amount of Metallic Money either on demand, or at some fixed time.

"What we have said now is sufficient to explain the true Nature of Money and Credit. The fundamental conception of Money is that it represents Debt or Services due: but of course the value of the material which it is composed of with respect to other things is governed by the general laws of Value: which however are not necessary for the purpose of this work, in which we have only to do with the exchange of Money for Credit, or Promises to pay Money. It is now clearly shewn that Money and Credit are homogeneous quantities and that Money is only the highest and most general form of Credit.