Theory of Money and Credit – Credit Money Question

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    This is probably an oddly specific question for one of the economists in the LC faculty:

    In the theory of money and credit, Mises defines three types of money, commodity, fiat, and credit money. Credit money is exchange of present goods for future goods.

    I’m trying to apply this to history, but I’m finding the classification to be muddier. In the Virginia Colony in the 17th century, a lot of transactions took place without any money changing hands, but calculations were made in units of British Sterling. In some cases, this was clearly credit money; tobacco was exchanged for Bills of Exchange or goods were traded for tobacco due at the next crop.

    However, in instances when goods were exchanged for tobacco on the spot, the transaction was merely accounted for in the Merchant’s books, and calculations were made in Sterling.

    I am trying to understand if this would be classified as credit money (as in, the present and future goods may only be separated by a matter of minutes) or if this would be more accurately classified as an exchange with commodity money, with the commodity being British Sterling even though no coin actually exchanged hands.

    Additionally: I did ask David Gordon about this at Mises University this year and he suggested that what I was looking at were credit *transactions* rather than credit money, but in double checking Mises’ book and Bob Murphy’s study guide, the classification is clearly credit money, so I’m not sure where these distinctions should be made.


    Addendum: As soon as I posted this question, I looked back at the book and noticed the definition of credit money that “these claims must not be both payable on demand and absolutely secure” or there “would be no difference between their value and that of the sum of money to which they referred.”

    This may answer my question (which means I posted this about 5 minutes too early), in that I now assume that the transactions which changed goods for tobacco on the spot were taking place in commodity money, and the actual presence of the coin was not necessarily.

    If there is anything I’m still missing or getting wrong, I would love clarification, but Mises appears to have answered my question better than I realized on the first read through (go figure).


    For more on credit money, take a look at Guido Huelsmann’s book, The Ethics of Money Production:

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