CHAPTER V
THE USE OF LOAN CREDIT
Credit serves two main uses in the regular course of such business as is occupied with the conduct of industry: (a) that of deferred payments in the purchase and sale of goods — book accounts, bills, checks, and the like belong chiefly under this head; and (b) loans or debts — notes, stock shares, interest-bearing securities, deposits, call loans, etc., belong chiefly here. These two categories of credit extension are by no means clearly distinct. Forms of credit which commonly serve the one purpose may be turned to the other use; but the two uses of credit are, after all, broadly distinguishable. For many purposes of economic theory such a distinction might not be serviceable, or even practicable; it is here made merely for present use. It is chiefly with credit of the latter class, or rather with credit in so far as it is turned to use for the latter purpose, that this inquiry is concerned.
Suppose due credit arrangements have already been made — in the way of investments in stocks, interest-bearing securities and the like — such as to place the management of the industrial equipment in competent hands. This supposition is not a
