BANK CREDIT AND TRADE CREDIT [To the Editor of THE
SPECTATOR.] SIR,—In his recent letter on banking Mr. Biddulph makes an astonishing blunder in confusing " book debts and trade credit with " bank credit," when he takes me to task for saying, that only banks may create credit, i.e., create new cheque money, by granting loans. " Bank credit " is the technical term for a bank loan which, as Mr. McKenna admits, is a creation of new " cheque " money, increasing the total of buying power extant at the time of its granting, by its own amount ; for which reason it is added to the total of a bank's deposits. Trade credit is simply an arrangement whereby a business man allows a customer to obtain gOods On tick." Trade credit dePrives the creditor of the money outstanding,- since he has less goods left for sale by reason of his temporary " gift " of goods to the person to whom he allows credit. Bank credit, on the other hand, increases the assets of the bank, the buying power of the person to whom credit is granted and the total of buying power in the country. Trade credit is no more Iike bank credit than is the credit " Mr. Biddulph and I take to ourselves for exposing (in our own estimation) each other's fallacies ! Seeing that the true " available resources " of a great modern civilized community, i.e., its raw material, scientific knowledge, plant and labour, are colossal, and in certain directions almost unlimited and incalculable, I cannot see any particular necessity for restraining, by financial shackles, enterprising business men from helping themselves—and the community --,to them ; nor can I see why it should be wicked to give those who supply and demand goods and services enough money to enable those goods and services to be fully utilized. When debts can be created by a stroke of the pen the injustice of the amount of remuneration going to dealers in debts, as Mr. Biddulph rightly cans banks, depinds not on the ratio of interest charges to debt totals, but on the amount of the interest charges and the degree of hard work involved in pricing a nation's real wealth at so many millions.
Glentrool Lodge, Newton Stewart, Scotland. TAVISTOCK.
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