Tag: Credit money

Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services. Examples of credit money include personal IOUs, and in general any financial instrument or bank money market account certificate, which is not immediately repayable (redeemable) in specie, on demand.
Credit money is naturally used as money, and may even be the primary type of money. Banknotes which are not backed by specie (see fiat money for the latter case), may be categorized as credit money, whether or not they are legal tender, inasmuch as they are simply promissory notes issued by a certain bank, or system of banks.
An example of a credit money banknote which is not legal tender is seen in Scotland, where banknotes from a well-trusted bank function as currency. Scotland technically recognizes no legal tender, and thus functions nationally on private banknote credit money, which is represented by promissory Pound Sterling notes. These notes are issued by three…