Brief History of Money's Misrepresentation and "Credit"

By Marc Gauvin

Copyright © 2/10/2018
Reproduction expressly granted provided attribution is given and original link is provided.

If money is a measure of value then it cannot also be a commodity including what is called "credit" or "trust". That is, while money may measure the amount of value that parties concede in a spirit of credit/trust, it itself is not the trust but just a measure of the amount of value being entrusted. Every "seller" forfeiting value to the community is an issuer of trust to the community and every buyer whose balance falls below zero is a recipient of trust again from the community.

How has the irrational conflation of value, commodity and credit/trust come about? Well, historically the use of fungible commodities as relatively durable, divisible, and transportable embodiments of value, ultimately gold and silver,  became for those reasons both widely desirable as well as particularly at risk for theft, or debasing.  Thus,  intermediaries were entrusted with the safe keeping of these. These intermiediaries were compensated with percentages of those same commodities,  which was what has come to be known as interest.

Once that scenario became common, it was easy to fall into the intuitively compelling but erroneous notion of assuming that the universal desire for such commodities somehow conferred on measures of these the properties of a universal measure of all and any value. Only once that misrepresentation had taken root,  was the issuance of trust disassociated from the delivery of goods and services to that of the delivery of society's most desired commodities i.e gold and silver.

Following the above, the practice of marking the gold and silver, initially to authenticate its purity gave rise to coins and then as an extension of this,  issuance of bills representing amounts of coins became a further measure for both maintaining the purity as well as reducing the risk of loss or theft in transport.

Subsequently, the idea of manipulating the quantity of bills to match the required levels of trust in trade rather than the actual gold, became irresistible not just for illicit ends but legitimate ends too. But the link to the gold maintained the general notion of relative scarcity of the bills as well as the idea of proportional retribution for the administration of the bills in terms of the bills and proportionately amounts of the underlying commodity (gold/silver).  This is what gave rise to what is known as "fiat" currency.

Finally, in the 20th century the link between these bills (money) and gold was abandoned yet the same operative model of money as a circulating commodity paid for itself in terms of itself and proportionally,  as well as the disassociation of trust from the provision of goods and services to that of money instead were maintained. That is, we came full circle from a commodity being conferred properties of a universal abstract measure of the all value to a record empty of any intrinsic value being conferred the attributes of a commodity. In both cases, the same erred conflation of interpreting money as both a measure of value as well as a commodity persisted as an intuitively compelling logical error that mathematically destablises money's necessary function as a stable record (measure) of universal value.

The (il)logic of that error is what the MSTA and projects point out in unequivocally conclusive formal logical and legal terms,  as well as demonstrating how correcting that error allows for maintaining the use of money as a means of "liquidity" without divorcing the issuance of trust from the delivery of real value (goods and services) in each and any instance independently but pursuant to a common standard stable measure of value.

For more on money as a measure vs credit see  Money vs Credit  and The Austerity Fallacy.




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