Edward Kellogg
A New Monetary System

Chapter VI.
The Necessity of Credit.

To credit is to trust our property, or the reward for our labor, in the hands of others for a limited time.  Governments could not exist, nor legislative bodies meet, without credit.  The members of Congress trust the Government to pay their travelling expenses, and the nation trusts the Government with funds for that purpose.  We continually trust our fellow-men.  The laborer who works by the day trusts his employer until evening for his wages.  If the employer pay in advance, he trusts the laborer.  Daily laborers are supposed to incur little risk by trusting their employers, but in the city of New York they have lost large amounts in this way.  The clergyman trusts his parish for his salary;  the teacher the parents of the children;  colleges their students, etc., etc. Houses could not be rented without credit;  the owner credits the tenant with the use of his property;  the tenant may injure or destroy it.  If it be insured, he trusts the insurance company to indemnify him for loss by fire.  If the tenant pay rent in advance, the house may be burned, and he may lose his money.  Banks could not exist without credit.  The people credit the banks on their banknotes, and the banks credit the people on their endorsed notes.  The people, too, trust the banks with deposits.  A very large proportion, at least ninety or ninety-five percent of the exchanges of productions, is made on a longer or shorter credit.  All merchandise sent by manufacturers to commission merchants in our cities, is trusted in the hands of the latter.  A very large proportion of this merchandise is sold on a credit of six or eight months to jobbers, and is then resold by them to retailers on credit, who again sell to consumers mostly on credit.  Nearly all our internal improvements are contracted for on a certain time of credit.  A considerable proportion of these contracts is paid for by borrowing money on mortgage of the improvements.  Even goods sold for cash are usually delivered before payment.  Except on an exceedingly limited scale, exchanges of productions could not be made without credit.  Neither the General Government nor the State governments could raise money at home or abroad without it.  Our country could never have achieved its independence without the money it obtained upon credit.