6. We now come to the next ambiguity which has been the cause of great confusion in the Theory of Credit in recent times.

All the older writers, who were chiefly men having a practical knowledge of business, seeing that Credit causes exactly the same circulation of commodities as Money, said that Credit is Capital, without entering into any very nice definition either of Credit or Capital.

Smith expressly classes Paper Currency, such as Bank Notes, Bills of Exchange, etc. - which are Credit - under the title of Circulating Capital.

Since the time of the French Economist, Say, however, this doctrine has been the subject of much ridicule. He says in one passage which has been repeated by a multitude of writers, that those who say that Credit is Capital, maintain that the same thing can be in two places at once. They conceive that Credit is the material thing lent, or the transfer of it; and then they ask - How can the same thing be in two places at once, and be used by two persons at the same time?

The whole misconception is founded on an ambiguity in the meaning of the words Loan and Lend, which words are used to denote two operations of a perfectly distinct nature.

There are two kinds of Right - the Right of Possession and the Right of Property.

Suppose that I lend my friend a Book or a Horse: that is I allow him to have a Right of Possession and use of them for a certain time. Then it is clear that I and my friend cannot both have the Book, or the Horse, at the same time. But though I lend him the Book or the Horse, they still remain my Property. I do not transfer my Property in them to my friend. He is not my Debtor nor am I his Creditor, and if I wanted to have them back, and went for them, and found him not at home, I should have no scruple in taking them away.

But suppose that I had lent my friend £5 and if as before, wanting them back, I went and found him not at home, would I, if I happened to see his purse lying on the table, open it, and take £5 out of it? I should instinctively feel that I should do no such thing. I should have no scruple whatever in taking back the Book or the Horse I had lent: but I should never dream of opening my friend's purse, and taking out £5 I had