ABSTRACT
Credit transactions in a capitalist economy take a large variety of forms: credit card purchases, consumer loans, mortgages, buying ‘on tick’, bank loans, money market loans, government bonds sales, and so on. Despite the variety of forms, all credit transactions have one thing in common; namely, the absence of immediate exchange of equivalents. In credit transactions value is advanced (even as a mere paper claim) against a promise to return its equivalent later. The lack of immediate exchange of equivalents sets credit transactions apart from regular commodity transactions. Commodity buying and selling is premised on immediate quid pro quo: value in the form of commodities is balanced at once with value in the form of money. In contrast, the balance of value in credit transactions is reconstituted at a later point in time. For this reason, the party that advances credit must have trust in the counterparty making the requisite transfer of value in due time. Trust between participants is also necessary in plain commodity exchange, for instance, to avoid violence or robbery. However, the trust required to part with capital value against a mere promise to pay is of different order of magnitude.
