TeachMeFinance.com - explain Credit currency
Credit currency -- Currency issued by a bank for use in
transactions where ordinary bank credit available through the
medium of checks is not practicable.
For example, a merchant or a manufacturer in New York
needing extra funds borrows from his bank, but he does not
borrow actual money ; he in reality borrows credit against
which he draws his checks.
When a farmer needs extra money to harvest his crops or
move them to market it is not practicable for him, as a rule,
to borrow credit and draw checks against it. He must have
the actual money. Advocates of credit currency hold that
the banks should be authorized to issue currency for such purposes
secured by their general assets in the same manner that
the credits which they loan to be checked against are secured.
Such a currency, they urge, would be perfectly safe and would
be elastic, supplying temporary and local needs and obviating
the danger of currency famines.
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