t, in round numbers, to $200,000,000,000, and the money
in the world amounts in round numbers to $10,000,000,000. That is,
there are twenty dollars of credit to one dollar of money; and if
credit exercises the same influence in fixing the general level of
prices that money exercises, then it is absurd to say that the volume
of money available for use fixes the general level of prices, and at
the same time to contend that credit, dollar for dollar, is an equal
factor in fixing prices. If credit affects the general level of
prices in the same manner and to the same extent that money does, then
credit exerts an influence on prices twenty times greater than that
exerted by money, and we should say: The general level of prices is
fixed by credit, modified, it may be, to some extent by the amount of
money in circulation.

The difficulty seems to be in distinguishing between money and credit.
If we keep in mind the fact that anything which closes the transaction
between the parties to the transaction (barter excluded) is money, and
anything which leaves something still to be done is credit, we shall
have no difficulty in making the distinction.

Can credit affect the general level of prices? One of the most
familiar and common illustrations given by those who contend that
credit will raise the general level of prices, is that of a man
entering the market to buy cotton.

They say: "Suppose a person with $5,000 in money enters the cotton
market, and with his money purchases $5,000 worth of cotton. His
demand for cotton and his purchase of $5,000 worth will tend to
advance or stimulate the price of cotton." "Now," they say, "suppose
he has a credit of $5,000 and with this credit he purchases an
additional $5,000 worth of cotton. The second purchase, made on
credit," they contend, "will tend to still further advance the price
of cotton in the same manner and to the same extent that the cash
purchase did." Is this true?

Let us suppose that he purchased the second bunch of cotton on ninety
days' time. At the end of the ninety days he must pay for this cotton.
If he draws the $5,000 with which he pays this debt from money
invested in the cotton trade, the withdrawal of that sum from money
invested in that industry will tend to depress the price of cotton to
the extent that it was stimulated by the credit. If he withdraws it
from the grain trade or from some other industry, the withdrawal of
that sum of money will tend to depres