Archive for July, 2014

“[The ability to transfer debts to another person is] what determines money’s value–and why money, even though it is nothing but credit, cannot just be created at will by anyone. For sellers to accept buyers’ IOUs in payment, they must be convinced of two things. They must have reason to believe that the debtor whose obligation they are about to accept will, if it comes to it, be able to satisfy their claim: they must believe, in other words, that the money’s issuer is creditworthy. This much would be enough to sustain the existence of bilateral credit. The test for money is more stringent. For credit to become money, sellers must also trust that third parties will be willing to accept the debtor’s IOU in payment as well. They must believe that it is, and will remain indefinitely, transferable–that the market for this money is liquid. Depending on how powerful are the reasons to believe these two things, it will be easier or harder for an issuer’s IOUs to circulate as money.”

— Felix Martin, Money : The Unauthorized Biography (New York : Alfred A. Knopf, 2014), pg. 28.


By inscribing dollar bills with “This Note is Legal Tender for All Debts, Public and Private,” the United States government, because of its ability to both honor and enforce that inscription, can persuade people around the world to use those bills in their daily commerce in a way that a random guy with a laser printer could never match.

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