In any financial discussion we shall soon go astray if we lose sight of the place and potency of credit. It is estimated that 90 per cent. of all business transactions are done on credit, and the currency used in the majority of cases composing the other 10 per cent is only credit in another form. In credit modern finance lives, moves, and has its being. It is not merely the means by which you buy and buy and pay by-and-by.

It is difficult to define, but we may say credit is the medium through which the representatives of property or value may be exchanged. The bank customer's note is in one sense only a slip of paper, but it represents all the property owned by the makers. In the same way bonds represent the property they are based upon; certificates of stock represent the capital of the company which issues them, and bank deposits stand for actual cash. Credit rests on confidence, which is simply a reflection of the existing conditions. When confidence prevails, credit expands easily - that is, the representatives of property and cash are readily interchanged. When confidence is shaken, credit contracts in proportion to the gravity of the cause, and interchange becomes correspondingly difficult. If confidence be destroyed, there is a panic, when it is almost impossible for the bank customer to negotiate his note, the railroad to sell its bonds, or the industrial company to float its stock. And all this happens while the money in circulation is little, if any, reduced.