“[Credit] is an evidence of banking, but it is not the money itself. Money is gold, and nothing else.”

—  J. P. Morgan

Testimony to the Pujo Committee (1912)

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J. P. Morgan photo
J. P. Morgan6
American financier, banker, philanthropist and art collector 1837–1913

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“The first thing [in credit] is character … before money or anything else. Money cannot buy it.… A man I do not trust could not get money from me on all the bonds in Christendom. I think that is the fundamental basis of business.”

J. P. Morgan (1837–1913) American financier, banker, philanthropist and art collector

Testimony to the Pujo Committee (1912)
Untermyer: Is not commercial credit based primarily upon money or property?
Morgan: No, sir; the first thing is character.
Testimony to the Pujo Committee (1912)

Ralph George Hawtrey photo

“By its means the banker creates the means of payment out of nothing, whereas when he receives a bag of money from his customer, one means of payment, a bank credit, is merely substituted for another, an equal amount of cash.”

Ralph George Hawtrey (1879–1975) British economist

Source: Currency and Credit (1919), Chapter II, "Metallic Money", p. 20 (2nd ed. 1921)
Context: The use of money does not disestablish the normal process of creating credit. Money, it is true, is always being paid into the banks by the retailers and others who receive it in the course of business, and they of course receive bank credits in return for the money thus deposited. But for the manufacturers and others who have to pay money out, credits are still created by the exchange of obligations, the banker's immediate obligation being given to his customer in exchange for the customer's obligation to repay at a future date. We shall still describe this dual operation as the creation of credit. By its means the banker creates the means of payment out of nothing, whereas when he receives a bag of money from his customer, one means of payment, a bank credit, is merely substituted for another, an equal amount of cash.

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“So: if the chronic inflation undergone by Americans, and in almost every other country, is caused by the continuing creation of new money, and if in each country its governmental "Central Bank" (in the United States, the Federal Reserve) is the sole monopoly source and creator of all money, who then is responsible for the blight of inflation? Who except the very institution that is solely empowered to create money, that is, the Fed (and the Bank of England, and the Bank of Italy, and other central banks) itself?”

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“The predecessor of the Reform party, the Social Credit party, was very much like this. Believing in funny money and control of banking, and a whole bunch of fairly non-conservative economic things.”

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“Money is different from all other commodities: other things being equal, more shoes, or more discoveries of oil or copper benefit society, since they help alleviate natural scarcity. But once a commodity is established as a money on the market, no more money at all is needed. Since the only use of money is for exchange and reckoning, more dollars or pounds or marks in circulation cannot confer a social benefit: they will simply dilute the exchange value of every existing dollar or pound or mark. So it is a great boon that gold or silver are scarce and are costly to increase in supply.
But if government manages to establish paper tickets or bank credit as money, as equivalent to gold grams or ounces, then the government, as dominant money-supplier, becomes free to create money costlessly and at will. As a result, this 'inflation' of the money supply destroys the value of the dollar or pound, drives up prices, cripples economic calculation, and hobbles and seriously damages the workings of the market economy.”

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“Gold and silver are constituted, by the nature of things, money, and universal money, independent of all convention, and of all laws.”

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§ 43
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