What is "bill of credit"

Credit \Cred"it\ (kr[e^]d"[i^]t), n. [F. cr['e]dit (cf. It. credito), L. creditum loan, prop. neut. of creditus, p. p. of credere to trust, loan, believe. See Creed.]

1. Reliance on the truth of something said or done; belief; faith; trust; confidence.

   When Jonathan and the people heard these words they gave no credit unto them, nor received them.
   --1 Macc. x. 46.

2. Reputation derived from the confidence of others; esteem; honor; good name; estimation.

   John Gilpin was a citizen Of credit and renown.
   --Cowper.

3. A ground of, or title to, belief or confidence; authority derived from character or reputation.

   The things which we properly believe, be only such as are received on the credit of divine testimony.
   --Hooker.

4. That which tends to procure, or add to, reputation or esteem; an honor.

   I published, because I was told I might please such as it was a credit to please.
   --Pope.

5. Influence derived from the good opinion, confidence, or favor of others; interest.

   Having credit enough with his master to provide for his own interest.
   --Clarendon.

6. (Com.) Trust given or received; expectation of future playment for property transferred, or of fulfillment or promises given; mercantile reputation entitling one to be trusted; -- applied to individuals, corporations, communities, or nations; as, to buy goods on credit.

   Credit is nothing but the expectation of money, within some limited time.
   --Locke.

7. The time given for payment for lands or goods sold on trust; as, a long credit or a short credit.

8. (Bookkeeping) The side of an account on which are entered all items reckoned as values received from the party or the category named at the head of the account; also, any one, or the sum, of these items; -- the opposite of debit; as, this sum is carried to one's credit, and that to his debit; A has several credits on the books of B. Bank credit, or Cash credit. See under Cash. Bill of credit. See under Bill. Letter of credit, a letter or notification addressed by a banker to his correspondent, informing him that the person named therein is entitled to draw a certain sum of money; when addressed to several different correspondents, or when the money can be drawn in fractional sums in several different places, it is called a circular letter of credit. Public credit.

   1. The reputation of, or general confidence in, the ability or readiness of a government to fulfill its pecuniary engagements.

   2. The ability and fidelity of merchants or others who owe largely in a community.

      He touched the dead corpse of Public Credit, and it sprung upon its feet.
      --D. Webster.

Bill \Bill\, n. [OE. bill, bille, fr. LL. billa (or OF. bille), for L. bulla anything rounded, LL., seal, stamp, letter, edict, roll; cf. F. bille a ball, prob. fr. Ger.; cf. MHG. bickel, D. bikkel, dice. Cf. Bull papal edict, Billet a paper.]

1. (Law) A declaration made in writing, stating some wrong the complainant has suffered from the defendant, or a fault committed by some person against a law.

2. A writing binding the signer or signers to pay a certain sum at a future day or on demand, with or without interest, as may be stated in the document. [Eng.]

   Note: In the United States, it is usually called a note, a note of hand, or a promissory note.

3. A form or draft of a law, presented to a legislature for enactment; a proposed or projected law.

4. A paper, written or printed, and posted up or given away, to advertise something, as a lecture, a play, or the sale of goods; a placard; a poster; a handbill.

   She put up the bill in her parlor window.
   --Dickens.

5. An account of goods sold, services rendered, or work done, with the price or charge; a statement of a creditor's claim, in gross or by items; as, a grocer's bill.

6. Any paper, containing a statement of particulars; as, a bill of charges or expenditures; a weekly bill of mortality; a bill of fare, etc. Bill of adventure. See under Adventure. Bill of costs, a statement of the items which form the total amount of the costs of a party to a suit or action. Bill of credit.

   1. Within the constitution of the United States, a paper issued by a State, on the mere faith and credit of the State, and designed to circulate as money. No State shall ``emit bills of credit.''
      --U. S. Const.
      --Peters.
      --Wharton.
      --Bouvier

   2. Among merchants, a letter sent by an agent or other person to a merchant, desiring him to give credit to the bearer for goods or money.

      Bill of divorce, in the Jewish law, a writing given by the husband to the wife, by which the marriage relation was dissolved.
      --Jer. iii. 8.

      Bill of entry, a written account of goods entered at the customhouse, whether imported or intended for exportation.

      Bill of exceptions. See under Exception.

      Bill of exchange (Com.), a written order or request from one person or house to another, desiring the latter to pay to some person designated a certain sum of money therein generally is, and, to be negotiable, must be, made payable to order or to bearer. So also the order generally expresses a specified time of payment, and that it is drawn for value. The person who draws the bill is called the drawer, the person on whom it is drawn is, before acceptance, called the drawee, -- after acceptance, the acceptor; the person to whom the money is directed to be paid is called the payee. The person making the order may himself be the payee. The bill itself is frequently called a draft. See Exchange.
      --Chitty.

      Bill of fare, a written or printed enumeration of the dishes served at a public table, or of the dishes (with prices annexed) which may be ordered at a restaurant, etc.

      Bill of health, a certificate from the proper authorities as to the state of health of a ship's company at the time of her leaving port.

      Bill of indictment, a written accusation lawfully presented to a grand jury. If the jury consider the evidence sufficient to support the accusation, they indorse it ``A true bill,'' otherwise they write upon it ``Not a true bill,'' or ``Not found,'' or ``Ignoramus'', or ``Ignored.''

      Bill of lading, a written account of goods shipped by any person, signed by the agent of the owner of the vessel, or by its master, acknowledging the receipt of the goods, and promising to deliver them safe at the place directed, dangers of the sea excepted. It is usual for the master to sign two, three, or four copies of the bill; one of which he keeps in possession, one is kept by the shipper, and one is sent to the consignee of the goods.

      Bill of mortality, an official statement of the number of deaths in a place or district within a given time; also, a district required to be covered by such statement; as, a place within the bills of mortality of London.

      Bill of pains and penalties, a special act of a legislature which inflicts a punishment less than death upon persons supposed to be guilty of treason or felony, without any conviction in the ordinary course of judicial proceedings.
      --Bouvier.
      --Wharton.

      Bill of parcels, an account given by the seller to the buyer of the several articles purchased, with the price of each.

      Bill of particulars (Law), a detailed statement of the items of a plaintiff's demand in an action, or of the defendant's set-off.

      Bill of rights, a summary of rights and privileges claimed by a people. Such was the declaration presented by the Lords and Commons of England to the Prince and Princess of Orange in 1688, and enacted in Parliament after they became king and queen. In America, a bill or declaration of rights is prefixed to most of the constitutions of the several States.

      Bill of sale, a formal instrument for the conveyance or transfer of goods and chattels.

      Bill of sight, a form of entry at the customhouse, by which goods, respecting which the importer is not possessed of full information, may be provisionally landed for examination.

      Bill of store, a license granted at the customhouse to merchants, to carry such stores and provisions as are necessary for a voyage, custom free.
      --Wharton.

      Bills payable (pl.), the outstanding unpaid notes or acceptances made and issued by an individual or firm.

      Bills receivable (pl.), the unpaid promissory notes or acceptances held by an individual or firm.
      --McElrath.

      A true bill, a bill of indictment sanctioned by a grand jury.

n. A bill issued by a state, on the mere faith and credit of the state, and designed to circulate as money.

Bill of credit is a phrase from Article One, Section 10, Clause One of the United States Constitution. It refers to a document, similar to a banknote, that is issued by a government representing its indebtedness to the holder and typically designed to circulate as money. Legal writers—as opposed to economic historians—incorrectly assume that the constitutional phrase "Bills of Credit" was simply a synonym for paper money, but it only refers to one, though very important, type of paper currency. The Constitution explicitly prohibits the states from issuing bills of credit and coining money. States are only permitted to make gold and silver legal tender.

British colonies in North America would issue bills of credit in order to deal with fiscal crises, although doing so without receiving them as revenue in like amounts would increase the money supply, resulting in price inflation and a drop in value relative to the pound sterling. The documents would circulate as if they were currency, and colonial governments would accept them as payment for debts like taxes. They were not always considered legal tender for private debts.

Colonial decisions on the issuance of bills of credit were also frequently the subject of disputes between differing factions within the colony, and with royally appointed governors. Between 1690 and 1750 the matter was regularly debated in the Province of Massachusetts Bay, where merchants and lenders stood to lose value when new bills were issued, and borrowers stood to gain, because they could repay their debts with depreciated bills. The Massachusetts bills were finally retired in 1749 when the province received a large payment in coin for its financial contributions to the 1745 Siege of Louisbourg. The Province of New Jersey issued bills of credit beginning in the 1710s, but successfully managed to avoid significant inflationary effects.

During the American Revolutionary War the Continental Congress frequently issued bills. Because of inflation they rapidly declined in value, leading to the unfavorable comparison that something was "not worth a Continental".

United States Notes as obligations of the United States, are examples of Bills of Credit as they used to be inserted by the Treasury into circulation free of interest (production of USN halted in 1971 during termination of the Bretton Woods system). By comparison, Federal Reserve Notes are backed by debt purchased by the Federal Reserve, and thus generate seigniorage, or interest, for the Federal Reserve System, which serves as a lending parent to the Treasury and the public.