Table Of ContentCredit and Creed
Money is a legal institution with principal economic and sociological consequences.
Money is a debt, because that is how it is conceptualised and comes into existence:
as circulating credit – if viewed from the creditor’s perspective – or, from the
debtor’s viewpoint, as debt. This book presents a legal theory of money, based on
the concept of dematerialised property. It describes the money creation or money
supply process for cash and for bank money, and looks at modern forms of money,
such as cryptocurrencies. It also shows why mainstream economics presupposes,
but avoids an analysis of, money by effectively eliminating money from the
microeconomic market model and declaring it as merely a neutral medium of
exchange and unit of account. The book explains that money rather brings
about and influences substantially the exchange or transaction it is supposed to
facilitate only as a neutral medium. As the most liquid of all assets, money enables
financialisation, monetisation and commodification in the economy. The central
role of the banks in the money creation process and in the economy, and their
strengthened position after the bank rescue measures in the wake of the financial
crisis 2008–9 are also discussed.
Providing a rigorous analysis of the most salient legal issues regarding money, this
book will appeal to legal theorists, economists and anyone working in commercial
or banking law.
Andreas Rahmatian is Professor of Commercial Law at the University of
Glasgow. His research interests are in intellectual property and commercial law,
property theory, comparative law and legal theory, and intellectual history and
the law.
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Credit and Creed
A Critical Legal Theory of Money
Andreas Rahmatian
For more information about this series, please visit: w ww.routledge.com/Routledge-
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Credit and Creed
A Critical Legal Theory of Money
Andreas Rahmatian
First published 2020
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
52 Vanderbilt Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2020 Andreas Rahmatian
The right of Andreas Rahmatian to be identified as author of this
work has been asserted by him in accordance with sections 77 and 78
of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or
reproduced or utilised in any form or by any electronic, mechanical,
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retrieval system, without permission in writing from the publishers.
Trademark notice : Product or corporate names may be trademarks
or registered trademarks, and are used only for identification and
explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Rahmatian, Andreas, 1967– author.
Title: Credit and creed : a critical legal theory of money /
Andreas Rahmatian.
Description: Abingdon, Oxon ; New York, NY : Routledge, 2019. |
Series: Routledge research in finance & banking law | Includes
bibliographical references and index.
Identifiers: LCCN 2019041890 (print) | LCCN 2019041891 (ebook)
Subjects: LCSH: Money—Law and legislation.
Classification: LCC K4431 .R34 2019 (print) | LCC K4431 (ebook) |
DDC 343/.03201—dc23
LC record available at https://lccn.loc.gov/2019041890
LC ebook record available at https://lccn.loc.gov/2019041891
ISBN: 978-0-367-18103-1 (hbk)
ISBN: 978-0-429-05980-3 (ebk)
Typeset in Galliard
by Apex CoVantage, LLC
Contents
Preface xi
1 The legal concept of money 1
1. Money as a legal concept of property as opposed to an
economic concept of a medium of exchange 1
a) The disappearance of money from law 1
b) The current definition of money by economists 5
2. The legal conceptions of ‘property’ and ‘dematerialised
property’ 6
a) The legal conception of dematerialised property in
general 6
(i) Meaning of the term ‘property’ 6
(ii) Property objects ( res ) created by the property
right 8
(iii) Dematerialised property and social reifier 9
(iv) Propertisation – commodification – monetisation 11
b) Specific applications of the concept of dematerialised
property: company shares and debts (including debts
formalised in writing) 11
(i) Company shares 11
(ii) Debts in general 13
(iii) Negotiable instruments 14
(iv) Banknotes 17
3. Classification of money 18
a) Introductory comments 18
b) Definitions of forms of money 20
(i) Cash 20
(ii) Bank money 23
(iii) Credit 25
vi Contents
(iv) Legal tender; fiat money; distinction between
theories of money: Chartalism, institutional and
functional theories of money 28
(v) Central bank money, narrow money and broad
money; categorisations of money (M1–M4) 31
(vi) Definitions of money by the English courts 32
(vii) The limited use of money definitions by
economists 34
(viii) Historical forms of money: commodity money and
commodity-backed money 38
4. Money as dematerialised property: a legal conception 39
a) Money as dematerialised property 40
b) Expectation, not entitlement through money 43
5. The concept of money as dematerialised property and the
judicial reality 45
6. Historical legal theories of money: a short outline 46
7. Conclusion 50
2 The creation of money and its legal basis 52
1. Theories of money creation or money supply 52
a) Financial intermediation theory of money 52
b) Fractional reserve theory of money 54
c) Credit creation theory of money 58
2. The creation of money by central banks 61
3. The creation of money by commercial banks 65
a) The creation of bank money in the banks’ accounts 65
b) The problem of money creation ‘out of nothing’: the
banks’ privilege of not being required to hold clients’
accounts 73
c) The practical relevance of the fractional reserve
system 78
d) Bank money creation: increase of banks’ own capital
and price making through lending 79
4. The enforcement of the debt that money constitutes: legal
enforcement makes the r es to money. The janiform nature
of the money-debt res 82
5. The problem of interest 85
6. The legal basis for the creation of money by central and
commercial banks 89
a) The normative text of money and the presumed legal
sources 89
b) Examples: UK and Germany 91
Contents vii
7. New technologies: digital currencies, electronic forms of
money 94
a) Electronic money 94
b) Private digital currencies: cryptocurrencies – Bitcoin 97
8. Conclusion 103
3 Money as a static concept: money in economics 105
1. The (non)recognition of money by economists in
microeconomics 105
a) Sale as a form of barter and the absence of money in
microeconomics 105
b) Just price and market price 106
(i) The price in sale and ‘barter’ 106
(ii) Historical-philosophical and religious ideas of the
‘just price’ 109
c) The orthodox economic model of the market forces of
supply and demand 110
d) Outline of some flaws of the orthodox economic model of
supply and demand 112
e) The limited informative value of economic models; the
irrelevance of much economic modelling for lawyers 117
f) The incorrect equation: money = price 120
2. The suppression of money in classical economics and from
neo-classical market equilibrium concepts 121
a) The classical school of economics: polemic suppression of
the relevance of money for capital formation 121
b) Neo-classical economic theory as the perfection of the
classical school 125
3. The current neo-classical concept of money: modern
quantity theory of money 128
4. The relevant elements of the monetarist approach
in economics for a legal theory of money, and for a
critique 136
5. Some critical points by ‘heterodox’ economists; the spurious
historical basis of the ‘barter’ narrative for the introduction
of money 139
6. Conclusion: the disregard of time, and consequently money,
in the static market conception of microeconomics 143
4 A dynamic concept of money. The alienation cycle 146
1. The time-bound nature of money 146
viii Contents
2. The framework of relations that money designs: the four
cases or aspects of money 147
3. The quasi-alchemistic transformation of assets by
money 152
a) The reference to ‘alchemy’ in the literature on money
and banking 152
b) An outline of the philosophical concepts of alchemy 154
c) Ideas of alchemy in the modern system of money 162
4. The alienation cycle I: the externalisation or transfer
cycle 170
a) Externalisation or transfer through money: the model of
the transfer cycle 171
b) The transfer cycle in practice 180
5. The alienation cycle II: the estrangement cycle 183
5 The legal underpinnings for the functioning of money
as money: the faith in money and the power of the
banks 192
1. Money as a legally enforced creed 192
2. The genuine transfer of value through enforcement of
money and debt 198
3. The idea of the ‘strong debtor’ and the ‘weak creditor’ and
the relevance of the corporate structure of banks 204
4. Strengthening the power of banks by the European Stability
Mechanism (ESM) 215
5. Alternative concepts of money 221
Conclusion 229
Bibliography 240
Index 256
Quotes on Money and Credit
Remember that Credit is Money. If a man lets his money lie in my hands after it is due,
he gives me the interest, or so much as I can make of it during that time. This amounts
to a considerable sum where a man has good and large credit, and makes good use of it.
Benjamin Franklin, Advice to a Young Tradesman (1748)1
The use of money produced a great alteration in the human heart. Money having at com-
mand the goods of fortune, introduced inequality of rank, luxury, and artificial wants
without end. No bounds are set to hoarding, where an appetite for artificial wants is
indulged: love of money becomes the ruling passion: it is coveted by many, in order to be
hoarded; and means are absurdly converted into an end.
Henry Home, Lord Kames, Sketches of the History of Man (1778) 2
We are dealing with a systemic crisis, with a dictatorship of the financial markets. The
big private banks, funds, insurances and hedge funds stop at nothing, break down all
remaining dams and break all taboos. They do not have the strength and the courage to
finally do something about it. But that is urgently needed. This is not just about countries
like Greece, Portugal, Spain or Ireland; it’s about the core countries of capitalism. The
United States, France and Italy are also under attack. Private American rating agen-
cies dependent on large banks downgraded the US. Come on! That does not matter to
them anymore; they have meanwhile become so powerful. I have heard from you for years:
‘We need a public rating agency in Europe’. Where is it? It is high time to create it. It is
not the Left but the financial markets that are destroying capitalism from within. The
rating agencies are now even toppling governments, as in Ireland and Portugal. Nobody
gets upset about it. Once upon a time, there was a voting right of the population; today
it’s completely different. Even if you do not want to admit it: we have to deal with a crisis
of democracies all over the world because we are dictatorially dominated by the financial
markets.
Dr Gregor Gysi MP, German Bundestag, 7 September 20113
1 Franklin (1961: 306). See Bibliography for details.
2 Henry Home, Lord Kames, Sketches, Vol. III, Appendix, ‘Sketch I (Scotch Entails)’, (2007:
907).
3 Dr. Gregor Gysi, Die Linke, Plenary protocol 17/123, 123rd session, Wednesday, 7 Septem-
ber 2011, pp. 14474–14745.
