abstract Duty to pay residing in the person of the Debtor. The Credit and the Debt together constitute a CONTRACT, which is thus composed of two opposite quantities, which spring into existence together, which can only exist together, and which vanish together. A contract, therefore, in society exactly corresponds to Polar Forces in nature. The importance of this view is easily seen, and we will shew how it applies to a case in which Peacock's view wholly fails. Suppose a man is utterly insolvent, has no property whatever, and is in debt £100. Then the Creditor has the Right to demand £100, and the Debtor's Duty to pay exists quite irrespective of the fact that he has any money or not. If the Debtor cannot pay his Debt, the Creditor's Right may lose its Value; but that does not destroy its existence. So the Debtor's inability to pay does not in any way destroy his Duty to pay. Hence the Contract, the Right and the Duty, exists quite independently of any money. Now suppose the Creditor generously presents his Debtor with his Right to Demand. Then the Debtor has both the Right to demand and the Duty to pay in his own person. They cancel each other; and the Debtor is now freed from his Debt. And it is very clear that it is not by changing money owed into money possessed, because there has been no money at all in the case, but by annihilating the Duty. And the Debtor is now £100 richer than he was before. So De Savigny, confessedly one of the greatest modern jurists, in exact accordance with the preceding, says "Every release of a debt enriches the debtor. The amount of the donation is always equal to that of the debt, even although the debtor is insolvent. Although the release from a debt destined never to be paid seems a thing of no consequence, the augmentation of property does not the less exist. In effect not only does property represent a quantity always indeterminate, but its total value also can be either positive or negative. If then property is reduced to a negative value, the diminution of minus is, in Law, a change identical with the increase of plus for a positive value." So also "The remission of a debt always constitutes a donation in money equal to the amount of the debt, and that although the debtor be insolvent." Traité de droit Romain, Liv. ii., ch. 3, § 158. 2 lbid. § 166. We shall have more to say on this subject in the section on the Extinction of Credit. 24. In popular commercial language, Credit means purchasing power, over and above money. If a merchant is said to be in great Credit, it means that people would be willing to sell him goods, and take his "promise to pay" instead of actual payment." If a person be said to have lost his credit, it means that he has lost the power of purchasing with his promise to pay, and can only buy with ready money. But such a vague, indefinite, meaning of Credit does not come within Economics. Economics has only to do with property in commerce. It has nothing to do with money itself, unless it be in commerce. Consequently Economics has nothing to do with Credit until it is brought into commerce, and a purchase has actually been made by means of it. Now when a man comes to trade, with his Credit, as we have before observed,' considerations of a complex nature arise. If a man buys goods, not with money, but only with a "promise to pay" money at some future time, or with Credit, directly the seller of the goods transfers the property in the goods to the buyer, a CONTRACT, or nexus, springs into existence, or is created between the buyer and the seller. At the very instant that the property in goods passes to the buyer, there is CREATED in the person of the seller the RIGHT to DEMAND their price in money at the stipulated time: and at the very same instant there is CREATED in the person of the buyer the DUTY to PAY their price in money at the stipulated time. Now these two Quantities created at the very same instant of time are INVERSE and OPPOSITE to each other; and therefore they may be designated by opposite signs. And just in the same way as Peacock says that receiving and paying are examples of the signs and, so if the Right to Demand be Positive, the Duty to Pay is NEGATIVE. Now it is this actual definite Right to demand which in the language of Law, Commerce, and Economics is termed CREDIT, and the person in whom this right resides is termed the CREDITOR. It is very frequently the custom to write this Property, or Right, on paper, for the purpose of fixing, recording, and transferring it; there are several forms of these paper documents, such as Bank Notes, Bills of Exchange, &c.; they are very com1 Ante, p. 183. monly called Instruments of Credit, as is more fully explained in When, therefore, we speak of Credit in Economics, it must be 25. We now at length perceive clearly what is the true interpretation of saying that Money is a Positive Quantity. It means that Money is a Right, but Debt is a Duty. And this exactly corresponds with the common Algebraical doctrine that Quantities passing through 0 change their sign. Because when a man has spent all his money, his property being then 0, and then runs into Debt, he has spent all his Right (+) and incurred a Duty (—). Now a merchant's purchasing power consists in his money and his Credit. But he cannot purchase with his Credit without incurring a Debt; that is, without incurring the Duty to pay for the goods he buys with his Credit. If he buys goods with money, he makes a profit or a loss according as the price he gets for the goods is more or less than the money he paid for them. If he buys with Credit, he makes a profit or a loss, according as the price he sells the goods for, is more or less than the Duty to pay which he has incurred. Supposing, however, that his speculation in either case has been profitable, his Money and his Credit have been equally Capital to him, exactly in the same way and in the same sense. 26. It is a matter of considerable interest to discover what are the proportions which credit and money bear to each other in Schilden & Hadirge freichen 'I nicht dour Besch & Schelden. Inter Rption freehen sich mir die erser modern commerce. The difficulties, however, which prevent private inquirers arriving at any reliable information, are very great, and those opportunities which are presented by Parliamentary inquiries into Commercial Crises are very rarely made use of for any but their immediate purpose. In the Report, however, of the Committee of the House of Commons on the Commercial Crisis of 1857, there occurs a very interesting statement made by Mr. Robert Slater, the managing partner of the great house of Morrison, Dillon, and Co. Having analysed the operations of the house for the year 1856, he gave in the following statement, as showing the proportions in which each million of payments and receipts were made in money, bank notes, and other instruments of credit: : In Bankers' Drafts and Mercantile Bills of In Cheques on Bankers, &c., payable on ... ... 533,596 ... 68,554 PAYMENTS. By Bills of Exchange, payable after date ... 302,674 ... 663,672 ... ... 22,743 33,654 £1,000,000 Here we have it shewn, that in this great house, which there is no reason to suppose we may not consider a fair representative of commerce in general, it appears that in receipts, gold and silver only entered to the extent of 3 per cent., and Bank of England notes to the amount of less than 7 per cent., the remaining 90 per cent. being entirely in credit. Of the payments, gold and silver were only 1 per cent., and bank notes 2 per cent., the remaining 97 per cent. being effected by pure credit. In Scotland specie enters even in a far less degree into payments. This will give some idea of the stupendous power of Credit in this country. 27. And this Right, or this Credit, is property which may be bought, sold, or exchanged, imported or exported, or sent from one country to another, in exactly the same manner as money, corn, cotton, hides, or any other merchandize. Such Rights are Incorporeal Property-" Incorporeal things are those which cannot be touched; such as those which consist of a Right, as an inheritance, a usufruct, use, or obligations in whatever way contracted. Nor does it matter that corporeal things are contained in an inheritance; for fruits gathered from a farm are corporeal; and that which is due to us from an obligation is generally corporeal such as a farm, a slave, or money; but the right itself of the inheritance; and the rights itself of usufruct; and the Right itself of the Obligation is Incorporeal." The correlative Duty in the person of the Debtor was called an Obligation." An Obligation is the bond of the Law, by which we are absolutely bound to pay something by the terms of the Law." 2 The word Debt is unfortunately used in common parlance to denote both the Right to Demand and the Duty to Pay. This double use of the words leads to much confusion of idea on the subject. It would be a great improvement if it could be confined to the Duty to Pay, as it really means that. But this is an improvement in popular language which is scarcely to be hoped for. Instruments of Credit are called indiscriminately Credit, Debts, or Obligations. Now the Duty to Pay always remains fixed in the person of the Debtor. But the Creditor may sell or transfer his Property like any other; hence the Right is, by the Definition which we 1 Institut. Just. ii., 2. See also Gaius, ii., 14. Digest i., 8: 1. 1. 2 Institut. Just. iii., 13. Digest xliv., 7, 3, |