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Conclusions

Although we have considered simple and limited examples in this article, we have hopefully shown how the credit theory of money can explain monetary phenomena such as money creation and destruction.

The principles should help when analysing aspects of money and monetary policy. In particular, armed with these insights, it should be easier to comment critically on other monetary theories and ideas such as fractional reserve banking, modern monetary theory, and whether a modern debt jubilee would even be possible.

Because the credit theory of money is based on elementary and discrete mathematical rules, we can scale up examples to look at much more complicated and larger systems using computer programs to simulate or model certain scenaros, like credit expansions and credit contractions. Majenka has published a few results on such models on this website, and will publish more in the future.

If you found this article useful, please consider a double entry to Majenka. Donations help us keep providing content, analysis and tools that are free to everyone. It also helps keep our website free from advertisements and subscription fees.

This is the first of what will be several articles on the credit theory of money. Future articles will also look at how the theory applies to economics more generally.

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