The nature of money as an expression of social obligations

Economic theory went through profound changes when the understanding of money shifted from pure commodity theory to viewing social relationships. For a long time, the assumption that means of payment must be made of valuable metals dominated. But profound analyzes reveal that money essentially represents nothing more than the depiction of credit and guilt. thisKnowledge revolutionized the understanding of economic cycles and laid the foundation for modern finance.

The fundamental nature of economic exchange

Every purchase or sale essentially represents the exchange of goods for credit. This main thesis gives the compelling conclusion that the value of credit or money does not depend on the value of certain metals. Instead, the value is based on the right the creditor acquires for satisfaction for the loan granted. At the same time, the obligation ofdebtor to pay his own debt. Conversely, the debtor has the right to free himself from his own debt by offering equivalent liabilities, whereby the creditor is therefore obliged to accept this payment as the fulfillment of the loan.

Central offsetting of mutual obligations

In practical application, it is by no means necessary for debtors to acquire credits exactly to those people to whom they owe something. All economic operators act as buyers and sellers at the same time, which means that they act as debtors and creditors on each other. through the highly efficient machinery of the banks to which the economic subjects aresell, these institutes become the central clearing offices of the trade. There, the debts and loans of the entire community are centralized and offset against each other. In practice, any solid credit can therefore pay any debt.

The creation of promissory notes in everyday trade

The origin of the money as a promissory note can be traced back to real transactions, where the provision of services is delayed. This delay occurs if trading partners can only deliver later or if the transactions do not match in terms of value. If trading parties have valuable cow skins and want to buy milk for this, the skins are too valuable for directswap. It makes sense to divide the skins virtually and only give a partial promissory note to the farmers. Since this level of abstraction is already database entries that express prices in virtual goods, this technical implementation is possible without any problems.

The state means of payment as a standardized acknowledgment of debt

There is therefore a considerable need for such promissory notes to simplify the exchange between the economic operators. It should now be emphasized that the promissory notes always have the basis of what is already in their designation: the debt relationship. State-ordered means of payment is therefore always in debt, since parties made advance paymentsand have given others real goods before receiving consideration for them. The recognition of this advance payment is expressed in the promissory note. Since state fines are nothing more than standardized promissory notes, constantly new loan agreements in the division of labor are created, which are an expression of common economic activity.

The material embodiment of abstract guilt relationships

The quality of money as a debt relationship is by no means limited to state fines. Let’s imagine the economy for moments where there are limited quantities of special gemstones that serve as a material database because of their suitability. The gems are always given from person to person when it is to be expressed that performance has been achieved but notimmediately received consideration. The gems are thus nothing more than other material forms of promissory notes, which are based on physical properties that predestine them as a promissory note. It remains guilt acknowledgment that express the inherent debt relationship.

The expansion of the debt relationship through future services

In theory, economic subjects are responsible for buying goods and earning credit when they sell. But this theory is practically modified in advanced trading companies by accumulating successful trader balances at banks. These actors can then buy without creating new debt by giving their sellers parts of their accumulated loantransferred. Because credit is often spoken of in the literature instead of a debt relationship, there is frequent confusion with the bank loan. If, on the other hand, economic subjects do not have accumulated credits at a certain point in time, they can agree with their bank to borrow credit on their account and pass on this loan to their sellers.

The creation of funds through future consideration

This is done with the obligation to transfer the same amount and surcharge to the bank, which you will later receive through your own sales. It becomes obvious that money is always a debt relationship, but economic subjects can take out loans on debt on a secondary level. This perfectly accurate representation has been overlooked for a long time. Through this procedureFunds in advance are generated without having to face the past benefit. Instead, it is now also about future achievements that form the basis for the secondary level of money creation.