chapter  Chapter III
12 Pages

Commercial Credit

ByRobert E. Wright, Richard Sylla

The peculiarity with credit—and it is of great importance—is that producers, though entitled to a full money equivalent for goods furnished, and frequently in effect receiving it, do not retain it in possession, but at once pass the larger portion forward to others in discharge of liabilities. ‘Whenever merchants have a want of confidence in each other, which disinclines them to deal on credit, or to accept in payment each other’s cheques, notes, or bills, more money, whether it be paper or metallic money, is in demand.’ The proportion of money to commodities now given as retained is intended to represent the sum required before banks were established, or cheques brought into use. The trades engaged in production are frequently in places remote from each other; the importer is in Liverpool, the manufacturer in Manchester, the warehouseman in London, or elsewhere; in which case they have recourse to bankers when settling.