Foreword: When we began writing this post, Saule Omorova’s appointment for the Office of the Comptroller of the Currency and her academic credentials were being dragged through the media. The process famously did not go her way but we are nonetheless grateful for it as it gave us the opportunity to become acquainted with some of her work. So although we're hopelessly late for the party, perhaps this post will contribute to keeping the discussion alive in a more fruitful, i.e. non media-frenetic, manner.
In our previous writing, we have focussed solely on constructing and explaining the Accounting View (AV) of ‘money’. Our claim being, that what is usually considered a ‘special good’, i.e. fiat money, must actually be seen as multilateral credit. So, according to the AV, all things financial, including notes and coins, are actually just types of credit. Money, as it is generally defined, does not exist.
All modern schools of thought of course accept that credit exists and that it forms a large part, if not virtually the whole of the banking system[1]. The difference to the AV is that, because we claim that money does not exist, credit can not be seen in relation to it. Within the AV, credit is not the act of borrowing money! Credit is the act of receiving goods without giving goods of equal value -- a fact which is recorded by an accountant (banker). As we shall argue below, this definition is not only useful for thinking about credit in the abstract or for describing babysitting cooperatives but can be used for studying our actual financial system, including arrangements among firms, banks, governments and even countries as a whole.
