Banks - whether central or commercial - issue money by loaning it. The acts of loaning and issuing that money are the same. Conversely, when the borrower repays the loan (which governments around the world no longer even dream of doing) the money vanishes.

Neither central nor commercial banks issue money "backed by nothing." What "backs" the money central banks and commercial banks issue is respectively public and private debt: the money central banks issue is a loan to public entities just like the money commercial banks issue is a loan to private entities.

The confusion between debt and money turns money into a self-inflating debt principal because, for being debt, it becomes its own interest. Paying the interest on such a debt requires more money, hence more debt. This creates inflation, which makes it increasingly difficult for people to pay the interest on their debt due to the decreasing unit-value of money. So they go deeper into debt, becoming slaves of whoever controls money (debt) issuance.

This was before central banks issuing almost all reserves as a public debt. Now even when you withdraw your money it remains a promise.

Unfortunately, the trick is not the IOU itself. It is not even its mistaking for money. The trick is using this confusion between debt and money to control other people.

Money does not necessarily (and should not) represent its own exchange value: rather, it necessarily represents the exchange value of all commodities it can buy.

If merely having an exchange value in the future made anything money, then we could only buy or sell things that lacked future exchange value: otherwise, those things would be the money with which we buy them or for which we sell them, rather than what we buy with money or sell for it. Many things have once represented money, but not only because of their future exchange value (otherwise, almost anything would always be money, leaving us just a few, quite uninteresting things to buy - and serious problems in choosing the money to buy them with).


It was you to say that merely having a future exchange value made anything money.

Still, gold also has a use value independently of being money, as does cattle, silver, and salt. They are also useful "regardless of whether or not I trust you," and even so they can be - as once were - money.


So its metallic utilities would make it useless, then credit, hence money?


It is not a matter of just "presuming" things, but rather of explaining how things are the way we "presumed" them to be: the circularity arises from trying to explain, by using your own argument, how money and credit could be the same.

(It was me to accept an ounce of gold for half the exchange value of my pair of shoes, but never mind: taking your slightly modified example instead...) If the "only reason" for you to accept my ounce of gold in return for your knife were your trusting me, than you would be just as willing to accept anything else instead. Anything else would be as good as gold: your trust in me would enable me to declare anything as money. Clearly, that trust is not the only reason for you to accept my gold (as you pointed out yourself right after saying this): trust cannot constitute a motivation for you to accept my gold but rather is just a requirement for it.


According to this logic, the prospect of having exchange value in the future would turn anything into credit.

Just like gold, my knife will also have an exchange value in the future. Does that make it credit? Perhaps only money becomes credit just for having an exchange value in the future. Yet if so, then what makes it money? Let us assume it must be credit in order to be money. Then, how can money be the only thing to become credit for having an exchange value in the future (if it must already be credit)?

All this mess vanishes once we remember that credit is merely the promise of repaying someone else's money after some time, so money must already exist in order for credit even to be possible (this requires a whole new level of trust going far beyond not being killed: it requires trusting the borrower to repay the loan).

A representation of debt is an object representing "I owe (money to) you": an IOU.

Money can itself be an IOU. For example, when a commercial bank loans money deposited with it, this bank does not withdraw that money from the borrowed account. So the loaned money must belong to both its borrower and its loaner. Then:

1. To the borrower, an IOU becomes the loaner's money.

2. To the loaner, the borrower's money becomes an IOU.

This way, whether loaner and borrower are aware of that or not, their money has become an IOU. Thus, if I am the borrower and you are the loaner, this IOU is an object representing "I owe you" that money. So even as an IOU, our money remains what IOU.

Then, "I owe you" an... IOU: as long as we mistake debt for money, I owe you... the circumstance that I owe you... the circumstance that I owe you...

If I have an ounce of gold and a pair of shoes worth two ounces of gold and you have two ounces of gold and a knife worth an ounce of gold, I can give you my pair of shoes while you give me an ounce of gold and your knife. In the end, we still own three ounces of gold each, both in monetary (golden) and commodity form.

How could money (gold) be credit in this example?

You mean you were referring to the practical advantages of Bitcoin rather than to its conceptual understanding.


People want their money to have all properties money must have, not only to be a trustful store of value. Knowing which properties are those, and why, depends on a conceptual understanding of money.

For example, the most fundamental property money must have is that its monetary value must be private while its representation must be public. Our current monetary representation is partially private: banks control its creation, which allows them to "relocate" monetary value privacy, hence ownership, through inflation. In contrast, public keys are an inherently public way of representing money, which leaves monetary value privacy, hence ownership, intact.

Our problem is not just inflation, but systemic inflation in a centralized monetary system where monetary representations are privately public.


A lot of people will not see that coming, and another lot will not fully understand it despite becoming aware of it to a certain degree. However, some people should fully understand it.

The expression "fiat money" designates the myth of money as individually created (think of God saying "fiat lux") while it is rather socially created: even if privately controlled, or centralized, its creation always requires the participation - whether active or passive - of the whole society.


Gold is not money because of its non-monetary utility, but rather because of its monetary utility, which results from its divisibility, homogeneity, durability, and so on. Bitcoin has the same properties of gold, some in a greater degree, and more: in addition to being more divisible, more homogeneous, and practically just as durable, its ownership is much more easily transmittable at a distance, much more easily and securely stored, and inherently private.


The "linkage" of money to something else is precisely the problem Bitcoin solves: the confusion between money and its representation (in Bitcoin, respectively a private key and its corresponding public key).

This is not at all true. The form of money of which Bitcoin is an instance never existed before: we are neither used to it nor conceptually equipped to understand it without a huge conceptual overhaul.

Despite most people being able to use Bitcoin and other cryptocurrencies without much conceptual effort (yet still not without some technical effort), that does not mean they understand the money they are using. We can hope this new form of money becomes widely adopted because of its practical advantages, like deflation, low fees, transaction speed, and possible transaction privacy, but we should not fool ourselves into mistaking this with conceptual understanding.

Bitcoin is no "virtual gold": in order to understand it we must abandon the conceptual standard of gold money. The fundamental originality of Bitcoin is that it distinguishes money from its representation: it first represents money with a private key, then metarepresents it with a public key (see https://bitcointalk.org/index.php?topic=249803.msg2653364#msg2653364).

In contrast, gold makes no distinction between money and its representation.

The money I have in my (physical) wallet consists in paper notes, or bank notes. These notes have a monetary value, which belongs to me. However, the notes themselves do not belong to me (so I have no right to destroy them). They are public: they belong to society. While their monetary value is private: it belongs to me or else to whoever controls its representing notes.

It is precisely this monetary value - of the notes I have in my (physical) wallet - that constitutes money as distinct from its representation. It is just an abstraction - despite a social one - unlike the notes that represent it. Still, without this abstraction, its representing notes would have no monetary value.

You are absolutely correct: as no monetary representation can exist without money, conversely money cannot exist without its representation - distinction is not independence.

Consequently, different forms of money are merely different monetary representations.

Sheer gold is only money when it represents that money, so even if we could create the metal (instead of mining it), it would not necessarily be money. For example, gold was not money for the Aztecs decimated by Cortes. Thus, despite money always being a social creation, the object representing it is not: unlike dollars and bitcoins, monetary gold is a form of money of which the representing object itself is not a social creation. Finally, we can borrow money without turning it into debt: for example, I could borrow bitcoins. Money can only become debt when mistaken by its representation.


The confusion between debt and money already happens "behind the scene." However, what confuses people is a form of monetary representation: it makes them confuse itself with money. This is part of what makes the confusion between debt and money possible.


The problem is not credit, but rather its confusion with the money on which it depends, which in turn results from the confusion between that money and its representation (representational monetary identity).

I am glad you came to that view.

However, your conceptions of wealth and labor are not where I see the fundamental problem. The dominant form of money today confuses it with its representation, which indeed corrupts the concepts of wealth and labor, but only after corrupting the general concept of money by turning it into debt and greed. Bitcoin solves that problem because it finally distinguishes money from its representation. I investigated that issue here: http://omniequivalence.com/representational-monetary-identity/.

You do not simply sell yourself to your boss; you rent yourself to him. During the day of work, when he owns you, you cannot enjoy your wealth without his permission, so it does not belong to you without also belonging to him. After that, or when in vacation, you can freely enjoy your wealth, so it belongs to just you. In other words, your wealth only belongs to just you during the time you do not belong to your boss.


Before 1971, dollars were legally a proxy representation of gold. You can say they were a "claim" on gold as long as you remember that both were money: gold was directly money while dollars were just indirectly so. However, although now money is purely debt, it still is a claim on wealth, just as it was before (when people talk about the collapse of the dollar, they are precisely talking about the day the dollar will no longer be a claim on wealth).


Wealth is a useful product of labor. So the means of production (machines, commodity resources, etc), which are indirectly useful products of labor (they are useful in producing useful things), are also wealth. However, the process of production itself is not wealth: it remains the process by which the means of production become wealth.


A consumer good may be useless to you, but if somebody else regards it as useful (even if you disagree), then it is a useful product of labor, which is the very definition of wealth.


Nobody has to be a Kennedy to be wealthy. Even if I am far less wealthy than the Kennedys were, I am still wealthy.


Now you talk about a "claim on labor" to mean a different thing: a claim on the money you earned with your labor. The fundamental problem with this system - of which the scenario you described is a late consequence - is that the public aspect of money has been long privatized: money has long become debt. For decades now, this has concentrated money (which is ultimately power) in the very few hands of the so-called 1%, and will continue to do so as long as money remains a form of debt.

Wealth is food, clothes, a house, a car. Money is not wealth, but rather a claim on it.


Having assets is to own useful things, not for the sake of their utility, but rather for the sake of their monetary value. Then, it is the same as having money. So you are correct: this does not make you "wealthy" (you have no "wealth"), but only "rich" (you have money or something of monetary value, with which you can buy wealth).

However, being able to "extract labor" makes you a capital owner, not necessarily a wealthy person. Usually capital owners are also wealthy (they usually have good clothes, good cars, good houses, etc), but having capital is to have the means of producing new wealth and control over the workers needed to produce it. It is like having money since both can give you access to wealth that does not yet exist.


Money being a claim on wealth simply means that it can buy useful products of labor (wealth).


Again, that is being a capital owner. People can be wealthy without having capital, by working for money and buying the useful products of their own work and those of the work of other people.


You are confusing between wealth and capital. Wealth is any useful product of labor while capital is a social form of producing wealth (other such forms are servitude, slavery, etc). The "political connections, family ties, ethno-cultural belonging etc" belong to the social form of production - not to the wealth it produces.


Both slavery and capital are claims on the workers themselves, and not on labor (this is one of Marx's mistakes). The difference is that slavery is an absolute, unlimited claim on workers while capital is a relative, limited one (limited in both time and form). Money can be a claim on capital by being a claim on workers along with the means they need for producing new wealth, or it can be just a claim on wealth directly.