Principles of Political Economy · John Stuart Mill
CREDIT.
165. How do you define credit? Form a classification of credit documents. 166. It has been said that “credit is capital.” Is this so or not? 167. Define capital, and examine the meaning of the term in the following statements: (_a._) Demand for commodities can not create capital. (_b._) Credit is not a creation, but a transfer of capital. (_c._) Wages depend upon the proportion between population and capital. 168. State the law of the value of money which governs general prices. What change is to be made in the statement, if credit is to be taken into consideration? 169. What is the part which instruments of credit, other than bank-notes, play in the exchange of commodities? 170. Mention some of the principal features of a credit crisis. 171. What are inconvertible notes? What objections are there to currency of this description? 172. Can an inconvertible currency be made to maintain the same value as a convertible currency, and, if so, how? Supposing that it can, what objections are there, nevertheless, to it? 173. “Nothing is subject to more variation than paper money, even when it is limited, and has no guarantees; for this simple reason, that, having no value of its own, it depends on the idea that each person forms of those guarantees.” Comment on this passage. 174. How is it that a bad dollar does the work of buying as well as a good one until it is found out? Is it that it makes no difference whether it is made of gold or not?
175. To what extent is a government capable of giving fictitious value to a paper or a metallic currency? 176. In a country with an inconvertible paper currency, how can it be determined whether the issues are excessive or not, and why? 177. What will be the effect if the circulating medium of a country is increased beyond its natural amount— (1) when the medium is coin? (2) when it is coin and convertible paper? (3) when it is inconvertible paper? 178. What is the error involved in the assumption, frequently made by writers and public speakers, that the currency of a country ought to increase in like ratio with its wealth and population? 179. On what does the desire to use credit depend? What connection exists between the amount of notes and coin in circulation and the use of credit? 180. Compare the advantages and disadvantages of a metallic and paper currency. 181. A member of Congress advocated expansion of the paper currency by the following argument: “Our currency, as well as everything else, must keep pace with our growth as a nation.... France has a circulation _per capita_ of thirty dollars; England, of twenty-five; and we, with our extent of territory and improvements, certainly require more than either.” State your opinion of this argument. 182. Trace the effects, immediate and ultimate, on general prices of (_a_) an extended system of credit, (_b_) an enlarged issue of paper money, and (_c_) an addition to the stock of precious metals, respectively. 183. What is the error in the common notion that “a paper currency can not be issued in excess so long as every note _represents_ property, or has a _foundation_ of actual property to rest on”? 184. Explain the action of the check and clearing-house system, and state what is meant by the restoration of barter.
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