_Credit by accounts._--The most obvious method of avoiding the use of coin in exchanges is a current account between individuals having many transactions in trade. A farmer carries his butter, eggs, fruits, grains and live stock, perhaps, to a single dealer in all these articles, and takes in return articles of household use or for any necessity as he requires them, from a spool of thread to a harvester. If both keep accurate accounts, a settlement once in six months satisfies most conveniently all the requirements of perfect trade. Indeed the settlement is needed only that the accounts may be verified. Except for the dangers of waste in unlimited credit and carelessness in expenditure where future wealth is drawn upon, this method of exchange is simple and inexpensive. In the nature of the case, however, it must be limited, for safety, to trade between people having confidence in each other's honesty of purpose and ability to keep correct accounts. It also requires a mutual expectation of ability on the part of either to meet indebtedness at any future time of settlement.
_Credit by due-bills._--An extension of this credit in well established countries, so as to take in other persons than the two involved in book account, is found in due-bills, notes of hand payable on demand, or more formal securities, any of which may require a final decision in court. These pass from hand to hand, often in connection with coin, and under ordinary circumstances serve their purpose cheaply. In some countries a note of hand, with endorsement of each user, may make exchanges until it is covered with endorsements. The danger of waste is considerable from the impossibility of knowing the financial standing and honesty of the various endorsers, and the system is limited, of course, to the range of confidence in such trustworthiness. So easy is it to extend this credit of individuals beyond the range of safety that most governments have found it necessary to protect their citizens against its dangers by limiting or prohibiting its use as currency.
_Credit currency._--So convenient, however, and so economical is the use of credit, that all well established nations have developed systems for the issue of a credit currency founded upon the stability of strong corporations or upon the national credit. Nations themselves have often issued bills of credit in the form of notes, or promises to pay at the national treasury. If these are payable on demand in the coin of the realm, they are said to be redeemable. If the time of payment is uncertain, or indefinitely postponed, they are said to be irredeemable. Thus we have the many forms of paper money so familiar to everybody and the various practices and speculative theories regarding it, which make a large part of the discussion of financial questions throughout the world.
