3 Money and Credit

Subject(s):

Credit — Money

This chapter explores the attempts to argue that credit money is a late creation, and that there are societies (or states of society) in which all money is commodity money. These arguments are clearly mistaken since exchange based on credit obligations was a feature of Babylonic economic activity in the twenty-fifth century BC, and it is clear from the historic record that payment systems existed thousands of years before the invention of coin in the West in the 7th-century BC. The reason for this is simply that it is inevitable—it is impossible to imagine any society in which all reciprocal dealings are always immediately settled with physical transfer of the relevant goods.