legal definition of credit and currency

Forex Money for International Curency

Forex Money for International Curency (Photo credit:

re: “JR, my monetarist friends tell me that credit is part of the money supply (M2). It affects the velocity of money. What should I tell them?”

wrong label

Frysk: Jonge dy't it gers meant. Nederlands: J...

Frysk: Jonge dy’t it gers meant. Nederlands: Jongen die het gras maait. (Photo credit: Wikipedia)

Keep in mind that labels are just labels, and measurements are just measurements. If you do not know what I mean by credit and the other terms, you will not be able to coherently relate them to each other.
If I sign a contract to trade you lawn-mowing services for the next 6 months in exchange for a computer that I give you today, that is still a credit agreement. So, credit is a legal category (or accounting category) that is WAY bigger than any particular currency. I will get back to currency later, and it will blow your mind probably, but let’s stay very elementary for the moment.
When there is a huge amount of outstanding invoices of balances due (AKA bills AKA accounts payable), that is PART of what I mean by credit. You could even say that credit (as it relates to currency) IS about the DEMAND for currency. So, yes the velocity of money (as in actual transactions or cash flow) is effected by the demand for currency as in outstanding balances (relative to available funds).
However, keep in mind that credit is far more than outstanding balances. Credit is actually the proportion of outstanding balances to the willingness of people to issue new “accounts payable” credit (without being paid cash in advance, obviously).

TAJ MAHAL HOW TO MOW LAWN (Photo credit: Michael Marcus)

When people enter contracts like a lease or a mortgage, that involves future promises. Credit, roughly, is any future promise of any economic activity, not just involving currency.
Judiciary Committee Hearing in Wilmington

Judiciary Committee Hearing in Wilmington (Photo credit: senatorchriscoons)

If we limit credit to “legally enforceable future promises,” that adds a huge element of controversy since different legal jurisdictions have different rules which can change suddenly. However, that element of controversy is important to recognize, since the entire global network of courts accepting fiat currency is legally bankrupt and operates under the Holy Roman Empire‘s Vatican-controlled court systems of admiralty canon law, as in martial law.

Khadafi (Photo credit: ghostofgoldwater)

That is why when Khadafi or Hussein threaten to accept gold dinars instead of fiat currency, then a huge media conglomerate of international coercion rallies against them, vilifies them, then says they are using government military force against civilians (which every government does of course), then invades their countries and bombs their civilians “to protect the civilians from being killed by government military force.” (Of course, it is also relevant that Libya and Iraq had huge deposits of oil, but that is basically how they got all that gold.)

If you do not understand that the foundation of all currency systems is the organized extortion of courts, that is a possible confusion. The courts demand a certain form of payment under threat of violence, which is called extortion (or taxation). That is what the “full faith and credit of the United States of America” means. It is the threat of the use of military power. police
Cien Pesos

Cien Pesos (Photo credit: Alex E. Proimos)

When the Confederacy operated its court system of organized coercion, the paper they accepted had functional value. When the Confederacy ceased to function, their paper currency was like an expired coupon.
All fiat currency is, from the beginning, just a form of credit (as in a negotiable instrument or a financial contract). It is a contract issued by the rulers over court systems of organized violence. If you want to hire the court’s militia to come and evict a tenant, you need to use their currency contracts to hire them and to get the local warlord (judge) to issue the marching orders. If you want to hire the court’s militia to come and perform a foreclosure on a debtor of yours, you need to use their currency contracts to hire them and to get the local warlord (judge) to issue the marching orders. If you want them to allow you to operate on their plantation, you need to pay them taxes according to the demands of the one in charge of the plantation’s system of extortion.
English: Twenty shilling note, Colony of Conne...

English: Twenty shilling note, Colony of Connecticut. “wenty Shillings. No. 10343. The Possesor of this Bill shall be paid by the Treasurer of the Colony of Connecticut, Twenty Shillings, lawful Money, by the 31st Day of December, A.D. 1779. By order of Assembly, Hartford, July first, One thousand, seven-hundred seventy-five.” 9.5 cm. Courtesy of the General Collection, Beinecke Rare Book and Manuscript Library, Yale University, New Haven, Connecticut. (Photo credit: Wikipedia)

tank protester
Time to Mow the Lawn Again!

Time to Mow the Lawn Again! (Photo credit: Just Us 3)


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