New Private Forms of Money and the State

What the paper says

This essay explores the issue of whether financial collateral embedded in particular contracts that provides bankruptcy protection to creditors may be considered money from the viewpoint of the credit theory of money. The point is whether these claims secured by financial collateral or simply the financial collateral embedded in them can be used to settle debts and to fulfill regulatory obligations to the State. The answer to that question is articulated by resorting to Commons’s theory of money and Ingham’s hierarchy of acceptability. Commons focuses on the entanglements between private and public forms of money rather than on a hierarchy. Ingham depicts a hierarchy based on inequality and power: a social hierarchy of money. The answer is that acceptability for these liabilities has been built upon a set of legal rules that nowadays most jurisdictions share. Those rules favor the cross-border compensation of credits and debts by overcoming the national laws on bankruptcy. Their application and their extension to a larger set of debt securities through judicial courts has made financial collateral a form of international money. The use of financial collateral will be compared to the use of bills of exchange in the past as a means of paying off debts across countries. The emergence of this new form of money reflects a change in the balance of power between the global financial elite and the State.