Graeber Explained: What is Money?

The State and Credit Theories of Money

“All this would be much less of a problem, however if Henry were, say, Henry II, King of England, Duke of Normandy, Lord of Ireland, and Count of Anjou.”

  • Money and currency are not identical. Currency is a physical representation of money, which can be thought of as a unit of measurement for “value”. I can say “you owe me $3”, but it’s possible for you to “pay” me in a thing or a service worth $3 instead. This doesn’t happen at a large scale (at least not within the US) anymore, but it does still happen at a small scale (friends covering each other for brunch back and forth, for example.)
  • Money, currency, and markets did not spontaneously emerge. They were created by governments and rulers. This is proven both by the historical record and by the logic of taxation used by ancient rulers.
  • Governments created markets by circulating currencies and demanding taxes. They distributed currency to their employees (in the past, armies), which paid the populace for goods and services, and the populace paid their taxes in the government currency. The markets arose as a side effect once everyone got used to the pattern of exchanging goods and services for currency.

References & Additional Reading

  1. Debt: The First 5000 Years by David Graeber The edition that I reference with page numbers is the October 2014 paperback, ISBN 978–1–61219–419–6.
  2. The truth is out: money is just an IOU, and banks are rolling in it” — a shorter article by Graeber for The Guardian.
  3. Money Creation in the Modern Economy” — a paper written by three UK economists, referenced in [3]. Includes discussions on quantitative easing.



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