the mercantile mind, render many persons desirous of stretching their credit to an unusual extent, that the distinctive properties of the different forms of credit display themselves. Credit already stretched to the utmost in the form of book debts, would be susceptible of a great additional extension by means of bills, and of a still greater by means of bank notes. The first, because each dealer, in addition to his own credit, would be enabled to create a further purchasing power out of the credit which he had himself given to others: the second, because the banker's credit with the public at large, coined into notes, as bullion is coined into pieces of money to make it portable and divisible, is so much purchasing power super-added, in the hands of every successive holder, to that which he may derive from his own credit. To state the matter otherwise; one single exertion of the credit-power in the form of book credit, is only the foundation of a single purchase: but if a bill is drawn, that same portion of credit may serve for as many purchases as the number of times the bill changes hands: while every bank note issued, renders the credit of the banker a purchasing power to that amount in the hands of all the successive holders, without impairing any power they may possess of effecting purchases on their own credit. Credit, in short, has exactly the same purchasing power with money; and as money tells upon prices not simply in proportion to its amount, but to its amount multiplied by the number of times it changes hands, so also does credit; and credit transferable from hand to hand is in that proportion more potent, than credit which only performs one purchase.
§ 5.All this purchasing power, however, is operative upon prices, only according to the proportion of it which is used; and the effect, therefore, is only felt in a state of circumstances calculated to lead to an unusually extended use of credit. In such a state of circumstances, that is, in speculative times, it cannot, I think, be denied, that prices are
