CREDIT, in political economy, is a term used to express the lending of wealth, or of the means of acquiring wealth, by one individual or set of indi viduals to another. The party who lends is said to give credit, and the party who borrows to obtain credit. Bence credit may be defined to be the acquisition by one party of the wealth of another in loan, according to conditions voluntarily agreed on between them. Very exagge rated notions are commonly entertained of the influences of credit : but, in fact, all operations in which credit is given or ac quired resolve themselves into a new dis tribution of wealth already in existence. The "magical" effect that is every now and then asseribcd to credit is imaginary. A party who purchases goods payable at some future date obviously acquires the command of so much of the capital of the seller of the goods as their value amounts to, iu the same way that a party who discounts a bill acquires the command of a corresponding portion of the capital of the discounter. Wealth is not created by the issue of bills; and all that their nego tiation does is to transfer already exist ing property from one individual or party to another. In the great majority of eases loans am made by individuals who wish to retire from business, or who have more capit;t4 than they can advantage ously employ, to individuals entering into business, or who wish to extend their con cerns and to acquire a greater command of capital. The probability is, that capi
tal will be more likely to be efficiently employed by the latter than by the former class of persons ; and the advantage of credit, in a national point of view, con sist* in that circumstance. Loans made to prodigals or spendthrifts, or to indi viduals who expend them on unprofitable undertakings, are, in so far, publicly in jurious; but, speaking generally, these bear but a very small proportion to the other class of loans, or those made to in dividuals by whom they are advantage ously expended. Public credit is the phrase used to express the trust or confi dence placed in the state by those who lend money to government. The interest or premium paid by the borrowers to the lenders depends on a great variety of eireumstances.—partly on the rate of profit that may be made by the employ ment of capital at the time, partly on the duration of the loan and the security for its repayment, and partly on the facili ties given by the law for enforcing pay ment. The only way, indeed, in which a government can advantageously interfere to encourage credit is by simplifying the administration of the law, and by giving every facility for carrying the conditions of contracts into effect.