as horse, sheep, wheat, house.  Again, the thing to which the value of debts is referred may be a thing quite different from the goods borrowed and, with the growth of the monetary economy and the use of the interest contract, money comes more and more to be used as the standard.  At length the law declares that, in the absence of any other agreement, the amount of a debt is to be payable in terms of the unit of standard money, which thus is made legal tender as well as the customary standard of deferred payments.  A standard of deferred payments is the thing of value in which, by law or by contract, the amount of a debt is expressed and payable.

Sec. 7. # Increasing importance of the standard.# Until the use of money develops, the use of credit is difficult and limited; it becomes easy when the value of all things is expressed in terms of a common circulating medium.  It therefore generally is true that the importance of money as the standard of deferred payments increases with the use of money as a medium of trade.  The volume of outstanding debts expressed in terms of money now very greatly exceeds the total value of the circulating medium.  Changes in the general level of prices have, therefore, great effects upon all existing debts.  The value of all debts changes in the same proportion as does that of the standard unit of money; when this rises or falls in value, it means increase or reduction, in the same ratio, of the purchasing power of every creditor.  It is as if he had in his possession metal dollars equal in amount to the face of the debt, and they had changed by so much in purchasing power.  The debtor’s interests in such changes are, of course, just the reverse of the creditor’s interests.

Outstanding contract debts may be roughly divided into two classes:  short-time loans, running less than a year; and long-time loans, running for a year or more.[9] Fluctuations are rarely rapid and great enough to affect appreciably the debtors and creditors in the case of short-time loans.  The results are appreciable in the case of loans running from one to five years, and may be very great in the case of loans made for still longer periods, such as the bonded indebtedness of nations, states, municipalities, and business corporations, and as mortgages given by farmers on their land or by owners of city real estate.  A multitude of interests are thus affected by a change in the value of money.  When money rises in purchasing power, receivers of fixed incomes are gainers.  When it falls in purchasing power, they lose.  Receivers of fixed incomes from loans include not merely private investors, but also many educational and charitable institutions which dispense their incomes for public purposes.  Wages and salaries of many kinds go up and down less rapidly than do other prices, and thus to some extent wage-earners are in the position of passive capitalists[10] as regards changes in the monetary standard.  In a capitalistic age, therefore, almost every individual is affected in some way by a change in the value of money.