12. The operations on Credit, which we have hitherto been considering, were all based on an anterior operation, or one in which an exchange of commodities was effected by the creation and sale of the Credit, which Credit was afterwards sold or exchanged for another Credit. Such Credit is therefore manifestly limited by operations which have been made, and by commercial exchanges. The number of bills created could by no possibility exceed the number of transfers of commodities, although they might be greatly less, because, as we have seen, a single bill might be used to effect many transfers of property. In all these cases, a Debt has been created which was expected to be paid out of the proceeds of the sale of existing property.

But since Credit is, as we have shewn, exchangeable Property and a substitute for Money, it is clear that it may be applied as well as Money to bring new products into existence. The limits of it in this case will be exactly the same as those in the former case, namely, the power of the proceeds of the work to redeem the Credit.

As an example of such a creation or formation of a product we may take such a case as the following - Suppose the Corporation of a town wishes to build a market hall, but has not the ready cash to buy the materials, and pay the builder's and workmen's wages. It may be a matter of certainty, that if the market were once built, the stalls in it would be taken up immediately, and the rents received from them would liquidate the debt incurred in erecting it. But as the workmen cannot wait until that period, but require immediate cash to purchase necessaries, it is clear that, unless there is some method of providing ready money they cannot be employed. In such a case, they might borrow money on their bonds repayable at a future time. Now here we observe that these bonds are the creation of Property. They are the Right to demand a future payment, and are valuable exchangeable property, which may be bought and sold like anything else. In this case we observe there is an exchange. But the Corporation need not borrow money. They might make their own Obligations payable at a future date. And if these were made small enough, and were readily received by the dealers in the town, they might be used in the payment of the workmen's wages, and perform all the functions of a Currency, and be equivalent to Money. Each of them is a new Right created, and valuable Property which is exchangeable, and, therefore, Wealth by the definition. They would be quite as efficacious in producing, or forming, the market hall as real Capital. And the market hall itself would be Capital, because it produces a profit. As the stalls were let and rent received for them, the bonds might be redeemed, and the Debt cleared off. It is said that many market places have been built by adopting such a plan. This case shews the utter futility of the notion that Credit cannot be applied to the formation of products, and here we see it was not based on any anterior operation.

13. This is an instance of the creation of a product by Credit, and not merely the transfer of an existing product. The result to the Corporation would be precisely the same, whether they accomplish their object by borrowing real Capital and paying interest for it, or by issuing bond3, bearing interest, payable at fixed periods. In the one case they would be liable to the full extent of their property to the persons from whom they had borrowed the money; in the other to those who held their bonds. If the operation was successful, its profits would in the first case pay the persons who had lent the money; in the second, the profits would pay the persons who held the notes, and extinguish the liability of the Corporation. If the operation were unsuccessful, the Corporation would equally have to make good the loss out of their general effects, either to the lenders of the money.

or to the holders of the notes. It would therefore be a matter of no consequence whatever to the Corporation which way they adopted to accomplish the work: but it would be a matter of importance to the town at large, because, if they borrowed real Capital to do it, that would by so much diminish the fund of moving power applicable to other species of industry, and raise its price. It is clear, therefore, that the second method would be so much clear addition to the Capital of the community, and would therefore be most advantageous for them.

This second method of utilising Credit, from not being based upon real Capital, is an instance of what is usually called fictitious Capital, a name of extreme inaccuracy, which too many persons are in the habit of using, from the hasty assumption that what is not real must necessarily he fictitious, and are more led away by a jingling antithesis of words than an accurate perception of ideas. If the bonds issued by the Corporation were not redeemable, and represented nothing, the epithet fictitious would be accurate. But such is far from being the case. In both cases it resolves itself into the Present Value of a future payment. In the first instance, the Obligation incurred by the Corporation to the lenders of the money would not be limited to the Specific Capital they advanced, but would be a general charge on the whole property of the Corporation. The bonds issued in either case would be precisely the same; they would confer upon the holders of them a general charge upon all the property of the Corporation. The security to the holder of the Corporation's Obligations would be absolutely identical in either case. If the Corporation spend the money, it is absolutely gone away from them for ever, and is no more a security to the holders of their notes than if it had never existed. In either case, then, it is the permanent Property of the Corporation which is the real security of the holders of their notes: and they have the same general charge over it in both cases. It is, therefore, to the last degree inaccurate and untrue to distinguish one case by the term Real Capital, and to brand the other as fictitious. There is absolutely no distinction at all between the two cases, as far as regards the Corporation, and the holders of its Obligations; the profits and the losses are identical in their effects in either case. The true difference is to the community at large, and the general fund of Capital available for its use, and its only effect is to make Capital somewhat cheaper than it would otherwise be: and a judicious and successful employment of it eminently conduces to the national prosperity.