<p>Sovereign money can be considered an &quot;everlasting&quot; token, either physical or electronic. It gets created by the government and can circulate in the economy essentially forever more unless the government decided to withdraw it for some reason.</p>
<p>An example of an everlasting token would be coins.</p>
<p>Bank money can be considered a &quot;spendable IOU&quot;. These get created by private banks when loans are made and expire when the loans are repaid. During their temporary existence they can circulate in the economy. Bank money is continuously being created and destroyed and so the total amount of it in the economy will go up and down depending on the rate at which new loans are being taken out compared to the rate at which preexisting loans are being paid back.</p>
<p>An example of a spendable IOU would be the type of money that got transferred if you wrote somebody a cheque or made a debit card payment. And talking of examples, I should mention that spendable IOUs have an amazing number of alternative names you may see in the literature: &quot;credit&quot;, &quot;demand deposits&quot;, &quot;sight deposits&quot;, &quot;bank money&quot;, &quot;checkbook money&quot;, &quot;inside money&quot;, &quot;broad money&quot;, &quot;bank liabilities&quot;.</p>

CC BY-SA 4.0
2021-11-19T22:07:53.687Z
Thanks Mick. Is there any example to clarify it, please?
Phil Nguyen
CC BY-SA 4.0
2021-11-19T22:41:07.333Z
See edits to my answer.
Mick
CC BY-SA 4.0
2021-11-19T22:45:20.927Z
I am a little bit confused here. So, **cash note** is not sovereign money just because it is not token? But cash note has all the properties of sovereign money right?
Phil Nguyen
CC BY-SA 4.0
2021-11-19T22:51:54.840Z
Cash notes are a grey area - it's a long messy story - too long for this forum. Coins are a more clear cut example.
Mick
CC BY-SA 4.0
2021-11-19T21:03:34.053Z
2021-11-19T23:06:00.993Z
2021-11-19T23:06:00.993Z
Mick
<p>From this <a href="https://sovereignmoney.site/what-is-sovereign-money" rel="nofollow noreferrer">link</a>, I saw something relating to &quot;sovereign money&quot;</p>
<blockquote>
<p>Sovereign money is legal tender, on hand or on account as well as on
mobile storage device, in the future maybe also in the form of
so-called cryptocoins....Today, sovereign money exists in the form of cash (coins and banknotes) and non-cash central-bank money, called reserves</p>
<p>For a better understanding of what sovereign money is and what it
implies, it is useful to compare it with bankmoney. Normally,
bankmoney is as liquid as sovereign money, i.e. available any time on
demand. But sovereign money does in fact exist; it is the safe
property of the customer who owns the money. Bankmoney, by contrast,
is not money proper, not legal tender, but just a claim on money, a
claim on having paid out cash. Bankmoney is but a balance-sheet item
of a bank, thus basically unsafe and unstable. In a banking crisis,
money in a bank account might disappear.</p>
</blockquote>
<p><strong>From reading these definitions, I got lost regarding distinguishing &quot;bank money&quot; and &quot;sovereign money&quot;. Is there any intuitive way to understand these two concepts separately?</strong> From my understanding, we can distinguish that bank money is the bank deposit, the &quot;paper&quot; that bank claim that we have money in their system. The sovereign money is the coin, cash-at-hand, something protected by the government. For example, when the bank goes bankruptcy, the 'bank deposit&quot; (bank money) is invalid, but the cash and coins (sovereign currency) still remain their own value. It also explains why the sovereign currency is legal tender but bank money. I am wondering whether it is a correct understanding.</p>

<money>
Is there any intuitive way to distinguish "sovereign money" and "bank money"?
Phil Nguyen
# Is there any intuitive way to distinguish "sovereign money" and "bank money"?

(Asked by: username_0 on 2021-11-19)

From this [link](https://sovereignmoney.site/what-is-sovereign-money), I saw something relating to "sovereign money"

> Sovereign money is legal tender, on hand or on account as well as on
> mobile storage device, in the future maybe also in the form of
> so-called cryptocoins....Today, sovereign money exists in the form of cash (coins and banknotes) and non-cash central-bank money, called reserves
>
> For a better understanding of what sovereign money is and what it
> implies, it is useful to compare it with bankmoney. Normally,
> bankmoney is as liquid as sovereign money, i.e. available any time on
> demand. But sovereign money does in fact exist; it is the safe
> property of the customer who owns the money. Bankmoney, by contrast,
> is not money proper, not legal tender, but just a claim on money, a
> claim on having paid out cash. Bankmoney is but a balance-sheet item
> of a bank, thus basically unsafe and unstable. In a banking crisis,
> money in a bank account might disappear.

**From reading these definitions, I got lost regarding distinguishing "bank money" and "sovereign money". Is there any intuitive way to understand these two concepts separately?** From my understanding, we can distinguish that bank money is the bank deposit, the "paper" that bank claim that we have money in their system. The sovereign money is the coin, cash-at-hand, something protected by the government. For example, when the bank goes bankruptcy, the 'bank deposit" (bank money) is invalid, but the cash and coins (sovereign currency) still remain their own value. It also explains why the sovereign currency is legal tender but bank money. I am wondering whether it is a correct understanding.

**Tags:** money

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## 1 answers

### Answer by username_1 on 2021-11-19. Score: 4 | Accepted answer

Sovereign money can be considered an "everlasting" token, either physical or electronic. It gets created by the government and can circulate in the economy essentially forever more unless the government decided to withdraw it for some reason.

An example of an everlasting token would be coins.

Bank money can be considered a "spendable IOU". These get created by private banks when loans are made and expire when the loans are repaid. During their temporary existence they can circulate in the economy. Bank money is continuously being created and destroyed and so the total amount of it in the economy will go up and down depending on the rate at which new loans are being taken out compared to the rate at which preexisting loans are being paid back.

An example of a spendable IOU would be the type of money that got transferred if you wrote somebody a cheque or made a debit card payment. And talking of examples, I should mention that spendable IOUs have an amazing number of alternative names you may see in the literature: "credit", "demand deposits", "sight deposits", "bank money", "checkbook money", "inside money", "broad money", "bank liabilities".

> **Comments:**
> **username_0**: Thanks Mick. Is there any example to clarify it, please?  
> **username_1**: See edits to my answer.  
> **username_0**: I am a little bit confused here. So, **cash note** is not sovereign money just because it is not token? But cash note has all the properties of sovereign money right?  
> **username_1**: Cash notes are a grey area - it's a long messy story - too long for this forum. Coins are a more clear cut example.  

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