Money, as a medium of exchange, has existed throughout human history in many different forms. For centuries, there has been a constant tension between those who advocate hard, metallic money and those who defend credit money or debt money.



Already during the Babylonian era, hard money and credit money coexisted. In addition to a reference monetary standard (grain, livestock, etc.), immaterial debts were inscribed on tablets (at the origin of writing 5,000 years ago) which, through their circulation as a means of payment, became credit money. (Barter was extremely marginal, and was never used on a national scale, except in periods of economic and monetary collapse).

With the accelerated development of science and economic systems, profound monetary transformations took place, including a major one six centuries BC in ancient Greece. Hellenic society was responsible for the creation of metallic money, characterized by coins. In its original state, it was made primarily of gold, but also of silver and even bronze. 

The Italian financial revolution of the 12th and 13th centuries marked a major turning point. During the second half of the Middle Ages, an anthropological shift took shape, a change in the relationship with time. Time became man's business, and the economy entered a new dynamic. The perfection of accounting methods and double-entry bookkeeping gave rise to the concept of "profit", which arose from the forward sale of receivables represented by bills of exchange. Through their circulation, these bills of exchange also became credit money. Until the end of the Middle Ages, their volume was equivalent to around 10% of the total stock of money, as Fernand Braudel has shown. 

Such a forward-looking society is gradually returning to the acceptance of interest-based loans, usury, i.e. the pricing of time. Despite prohibition by the Church, and in many other religious societies, certain methods made it possible to circumvent interest-bearing loans, including lending in one currency and repaying in another, implying a hidden gain in the variation of the weight in gold. However, the interpretation of this practice, which took on a new meaning with the Protestant Reformation in 1517, which deemed it legitimate in the case of "productive lending", intensified its use and enabled an increase in the stock of money. 

Pre-humanist societal aspirations, and the technical progress that followed, led to new monetary changes. The invention of printing in the 15th century led to universal literacy, and the advent of banknotes two or three centuries later during the Renaissance, i.e. a new form of debt money (or rather, an IOU) convertible into gold.

As money became bankable, central banks began circulating these IOUs alongside gold. Their quantity invariably evolved with the stock of yellow metal that central banks held in reserves, with the aim of private banks profiting from their circulation.

Despite this invention, metallic and credit money continued to coexist in the 19th and 20th centuries, although gold remained dominant. After a succession of economic and financial crises due to bankruns (massive deposit withdrawals), but also inflationary crises, the major powers introduced the gold standard at the end of the 19th century, to fix the value of a currency on a weight of gold and limit its quantity, depending on precious metal reserves.

We all know what happened next: the two world wars of the last century led to several monetary reforms that maintained this system, until 1945, when parity was no longer based on gold but on the dollar, and then in 1971, when U.S. President Nixon confirmed the end of the gold standard. Currency was no longer convertible into yellow metal, and became exclusively an IOU. Since then, money and debt have become two inseparable aspects of the same phenomenon.  

Today, money is created by commercial banks, out of thin air, when credit is granted. The interest received represents money creation, since the nominal value borrowed is destroyed once it has been repaid, so that any debt is not directly money, but money creation requires the granting of credit. Money is also created, to a lesser degree, in the form of "central bank money", when central banks buy back debt on the secondary market. But this money circulates only on the interbank market, or in the form of coins and banknotes (which are central bank IOUs, and today represent less than 5% of the total volume of money). With the emergence of the Internet and the digitization of the economy, money has essentially taken the form of an accounting line in everyone's bank account. 

After these brief historical reminders, we come to the first question: what are the differences between gold and debt money? 

There are several fundamental opposites. At first glance, both fulfill the three functions of money as defined by Aristotle: a store of value, a unit of account and an intermediary for exchange. A store of value, because economic agents can store them (in safes or a storage account in the case of gold, or in their bank account in the case of debt money), in order to use them at a later date. A unit of account, because they can be used to measure the value of any good or service. Last but not least, they are an intermediary for exchanges, as they can be accepted by all, thus facilitating exchange (unlike barter).

While the last two functions have always been respected by these two money, debt money does not conform, to the letter, to being a store of value. By its very nature, this function allows the holder to keep his money without running the risk of its value diminishing over time. However, if the volume of debt money increases on its own as a result of interest ("money that makes money", as Aristotle put it), or if its issuance is simply not correlated with the production of economic activity, it runs the risk of losing its value and therefore of not fulfilling this function. This is what we've been witnessing since 1971, with the sharp and lasting depreciation of currencies. In the words of Voltaire, "paper money, based solely on confidence in the government that prints it, eventually returns to its intrinsic value, i.e. zero."

This flaw, almost inherent to debt, and little understood by historians and economists alike, poses the main contradictions between debt money and gold, the metallic money par excellence. Three fundamental and human notions, intimately linked, separate these two money: trust, scarcity and time. 

Trust. Unlike gold, which has a value in its own right (that of its weight), debt money has none at all, and relies solely on the trust of its users. The value of a €10 banknote, for example, has no value other than the value assigned to it by the banking system. Just as the value entered on a bank account only represents the bank's acknowledgement of its debt to its customer. For debt is, by its very nature, a promise that commits both parties involved (creditor and debtor). So much so that a synchronized cancellation of all the world's debts would result in an almost total absence of money.

Scarcity. The phenomenon of scarcity, fundamental to any money, can be summed up in one sentence: gold is in limited supply, while debt money can be in unlimited supply. To date, after extraction, there are around 200,000 tons of gold in various forms (bars, coins, jewelry, etc.). This quantity is limited by nature. Debt money, on the other hand, is physically unlimited (or almost, if we take into account the metals used to manufacture electronic devices). This difference creates a gulf between the two money, in terms of their respective functions as stores of value. Since gold is scarce, its value remains theoretically neutral and may even increase over time. Debt money, on the other hand, risks losing its value, as explained above.

Time is the most important value in this comparison. On the one hand, gold is inalterable, imperishable, retaining its qualities over time. As the precious metal is never destroyed once issued, it becomes a permanent money. Conversely, debt money is cancelled once a debt has been repaid. This is because once a loan, which gives rise to the creation of new money, has matured, the money is destroyed and only the interest is retained as money (which, incidentally, has itself been paid by other people's debts over this period).

Debt money and gold therefore differ in essential respects. The transition from one to the other has taken place gradually over the course of history, and has accelerated as a result of an anthropological shift that has led to a new vision of the relationship with time. The market society has essentialized a money that is a very narrow bridge between the present and the future (debt money) in order to feed a growing economic model, towards perpetual evolution. Once issued by public authorities as hard money (gold, silver, bronze), money is now created out of thin air, both by private entities and by central banks, whose members are not democratically elected. All these issues are worthy of debate.

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