One of the biggest challenges I have confronted in trying to discuss money is the difficulty many people have in thinking of money as a type of debt. On a personal level we use money in ways that can make this concept very counter-intuitive. We use currency to settle debts and make purchases. We get paid in money. There’s no obvious creditor and debtor relationship with money as there is with the contract for a housing loan or a car loan.
When a person has paid for something with money I don’t think it’s easy for them to reconceptualise that transaction as actually being an assignment of a debt. Yet, on a system level we can clearly show that money is a type of debt. We can identify the sources of the stock of money and point to their balance sheets where the liabilities (debts) reside that correspond to the total stock of money in the economy. (Incidentally we can, as Jacques Rueff does in “Balance Of Payments”, also apply these insights to the international monetary, financial and trade system.)
My interim solution to this problem is to apply two different approaches to defining money. I think we need to use multiple functional definitions of money to describe people’s personal relationship with it as a way to try to establish some common ground. But we cannot discuss money from a monetary systemperspective without agreeing that it is a type of debt regardless of where that system lies on the spectrum between ‘realist’ and ‘nominalist’. We need a “systems thinking” approach to get the big picture perspective.
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