Money

Money is any marketable good or token used by a society as a store of value, a medium of exchange, and a unit of account. Since the needs arise naturally, societies organically create a money object when none exists. In other cases, a central authority creates a money object; this is more frequently the case in modern societies with paper money.

Credit as money

Credit is often loosely referred to as money. However credit only satisfies items one and three of the above "Essential Characteristics of Money" criteria. Credit completely fails criterion number two. Hence to be strictly accurate credit is a money substitute and not money proper.

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This distinction between money and credit causes much confusion in discussions of monetary theory. In lay terms credit and money are frequently used interchangeably. Even in economics credit is often referred to as money. For example bank deposits are generally included in summations of the national broad money supply. However any detailed study of monetary theory needs to recognize the proper distinction between money and credit.

Related Topics:
Monetary theory - Money supply

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The rest of this article frequently uses the term money in the looser sense of the word.

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