<p>Well first of all I don't know why someone is going around downvoting legitimate economics questions and answers to the point everything recent on this site is negative. Naturally in the Covid19 crisis people are starting to take an interest in the economy, so we're getting questions that don't quite fit the mould, just as we did during the 2007/8 financial crisis. And those questions turned out to be very helpful because new questions developed new economic perspectives. Besides, this site should be 'be nice'.</p>

<p>Anyway, to answer your question, it's like this: Today the word 'money' is no longer interpreted by economists as being a homogeneous thing. You have M1 M4 etc. There are fundamentally different types of money.</p>

<p>Most money in circulation today is electronic money created under license by commercial banks.</p>

<p>The system in place licenses banks to create money in a framework sometimes called 'fractional reserve banking'. The way this works is as follows:</p>

<ol>
<li>A customer approaches a bank for a loan. The customer already has a deposit account at the bank.</li>
<li>The bank creates an asset on its books for the amount of the loan, X, which according to the laws of the state the customer must repay under contract. </li>
<li>The bank creates a liability on its books by credting the customer's deposit account for amount X, which the customer can 'withdraw' at any time by issuing an electronic payment, or by converting into cash at an ATM, for example.</li>
<li>The amount X is created <em>ex nihilio</em> under license by the bank. Until recently in the West the fraction of reserves the bank was required to maintain compared to X was actually usually 0%. In other words the bank was typically authorized to create commercial loans without legal limit. More recently, fractional reserves and capital controls were somewhat tightened in response to 2008.</li>
<li>However, the customer typically uses the loan to pay for something, typically automotive or construction, and makes an electronic payment to a supplier. That supplier receives the money into their bank deposit account, and we will assume it is a different bank, and that money is credited as an asset to the bank's reserves (and a liability to the deposit account), while the liability to the supplier is reduced through bank fees, loan interest repayments and so on.</li>
<li>The bank uses those deposits to meet the fractional reserve banking limit requirements to issue yet further loans. In this feedback loop involving multiple banks (at least 2) the money created <em>ex nihilo</em> by one bank contributes to  reserves of the next, developing a situation where perpetual 'growth' is required to maintain an ever expanding bubble of credit. </li>
</ol>

<p>In summary, most money is actually somebody else's loan created from nothing at a commercial bank, and the laws governing those liabilities between banks and to you as a deposit holder make up the legal framework for that kind of money.</p>

<p>In theory anyone could replicate this model. For example, if I created an "IOU" for '50 Euros' (or 10 apples, or whatever), to you, and if you trusted me and you knew people who trusted me, you could easily trade that IOU with your friends. Eventually trust would grow and if I did a good job of maintaining it then pretty soon lots of people would be using "Frank IOUs" and calling it 'money'. The difference is that banks today are literally allowed to create "IOU"s (you owe me's) on request and then enforce that you repay them in any legal tender possible for that nominal amount, and those IOUs (you owe me's) are sold. The fact that most people repay them with IOUs from other or the same bank is in my opinion hilarious, but that's what people religiously tout as capitalism and freedom these days (and even go to war for it!)</p>

<p>Cash on the other hand is an example of a different type of money and is not governed by those laws. Cash validity depends a lot on methods of avoiding counterfeiting and does not require a trust pyramid. Ultimately it is also just a virtual IOU but it IS issued by the state, and in so far as people believe the state exists as a real thing, the money is real too.  Surprisingly, many people think that when they 'put money in a bank' they are actually putting cash in a big safe somewhere. In fact what they are doing is converting government controlled currency into a commercial debt between a private bank and you, while the bank takes your hard cash, says 'thank you' and expects you to take their IOU in return. It fascinates me that even today the modern person goes about their daily life talking about political concepts like 'capitalism' with zero clue about how things actually work or who even controls a payment terminal (oh...that wasn't directed at you or anyone in particular, just an observation)</p>

CC BY-SA 4.0
2020-03-30T00:42:40.140Z
This answer would be improved with less exposition about the modern person's alleged ignorance of modern banking or capitalism. It may or may not be true, but it detracts from the answer.
Kitsune Cavalry
CC BY-SA 4.0
2020-03-30T01:54:45.917Z
This answer only addresses fiat currency. But there are other forms of money too. And I don't mean all the M's. I'm talking about cryptocurrencies and other decentralized media of exchange that are not backed by government fiat. Also, I feel like I got a refresher on the fractional reserve banking system as it relates to the money supply as well as the fundamentals of consumer banking but I also feel like you never directly answered the question.
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-30T06:55:27.713Z
@FreeMarketUnicorn well I hardly suspect the op was asking about commodities. Who owns the commodities would be a pretty dumb question
Frank
CC BY-SA 4.0
2020-03-25T10:21:23.773Z
2020-03-25T11:06:57.693Z
2020-03-25T11:06:57.693Z
Frank
<p>It depends on the laws of the state.</p>

<p>The key is the degree to which the sovereign domain protects the individual's right to private property. Most jurisdictions consider money to be property. That's why the right to ownership of private property is so key to the functioning of a free market economy. Without the right to own private property, as exists in many socialist dictatorships, there can be no free market economy.</p>

<blockquote>
  <p>“Government has three primary functions. It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens from crimes against themselves or their property. When government-- in pursuit of good intentions tries to rearrange the economy, legislate morality, or help special interests, the cost come in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.” ― Milton Friedman <a href="https://www.goodreads.com/author/quotes/5001.Milton_Friedman" rel="nofollow noreferrer">[1]</a></p>
</blockquote>

<p>...</p>

<blockquote>
  <p>"Both free speech rights and property rights belong legally to individuals, but their real function is social, to benefit vast numbers of people who do not themselves exercise these rights." — Thomas Sowell <a href="https://www.brainyquote.com/authors/thomas-sowell-quotes" rel="nofollow noreferrer">[2]</a></p>
</blockquote>

CC BY-SA 4.0
2020-03-22T04:00:54.530Z
Can you reference some economists who hold this view?
Geremia
CC BY-SA 4.0
2020-03-22T04:08:53.773Z
@Geremia: Milton Friedman and Thomas Sowell for starters.
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-22T04:09:36.247Z
Please add some quotes and citations of them to your answer.
Geremia
CC BY-SA 4.0
2020-03-22T04:11:53.197Z
The majority of this answer is just exposition on the need for private property to protect free markets. It is extraneous to the question.
Kitsune Cavalry
CC BY-SA 4.0
2020-03-22T05:08:00.820Z
@Geremia: “Government has three primary functions. It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens from crimes against themselves or their property. When government-- in pursuit of good intentions tries to rearrange the economy, legislate morality, or help special interests, the cost come in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.” 
― Milton Friedman
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-22T05:15:23.670Z
@Geremia: "Both free speech rights and property rights belong legally to individuals, but their real function is social, to benefit vast numbers of people who do not themselves exercise these rights." — Thomas Sowell
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-22T05:20:41.013Z
@KitsuneCavalry: No. This answer fully answers the question. The second part of the question asks: "Or do some think only the State or only individuals own currency?" The exposition you allege fully addresses the "who" and, more importantly, the "why" components of the question.
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-22T08:27:30.083Z
The word "money" does not appear in any of the quotes. But they are nice if you enjoy reading pro freedom quotes! And isn't freedom really the answer to all questions, regardless of the actual question?
Giskard
CC BY-SA 4.0
2020-03-22T23:17:34.703Z
@Giskard: The word "property" appears in both quotes. And as my answer points out, all money is property. So the quotes and the answer both directly answer the question.
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-24T21:07:25.050Z
@FreeMarketUnicorn Do the authors you quote say "all money is property"?
Geremia
CC BY-SA 4.0
2020-03-30T00:30:12.520Z
Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/106090/discussion-on-answer-by-freemarketunicorn-who-owns-money).
Kitsune Cavalry
CC BY-SA 4.0
2020-03-30T00:37:55.877Z
@FreeMarketUnicorn I mentioned some of your answer is extraneous because a "socialist" dictatorship may allow agents to own money, but not other property. The question is not asking for the "why" money is considered property or otherwise. You explain that money should be considered private property to support the free market, but the question is not asking about free markets. Money can exist in mixed economies or control economies. That is my only additional comment. Take it for what it is.
Kitsune Cavalry
CC BY-SA 4.0
2020-03-30T00:47:26.313Z
@KitsuneCavalry: Although this question seems simple, the answer is subtle, complex and nuanced. I offered the context of the socialism-capitalism analysis as a way to begin to unpack and understand the real answer: that it depend's. I decided to broaden the scope of the analysis to address the political elements because so much of the answer depends on an understanding of not only the laws but also the politics of the relevant jurisdiction.
FreeMarketUnicorn
CC BY-SA 4.0
2020-03-22T03:37:03.453Z
2020-03-22T05:16:02.550Z
2020-03-22T05:16:02.550Z
FreeMarketUnicorn
<p><a href="https://mises.org/library/nicholas-oresme-and-first-monetary-treatise" rel="nofollow noreferrer">Bishop Nicole Oresme</a> (1320-1382), in <a href="https://isidore.co/calibre/browse/book/3313" rel="nofollow noreferrer">the first monetary treatise</a>, wrote:</p>
<blockquote>
<p>CHAPTER VI: Who owns the Money? (<em>Cuius sit ipsa moneta?</em>)</p>
<p>Although it is the duty of <strong>the prince</strong> to put his stamp on the money for the common good, he <strong>is not the</strong> lord or <strong>owner of the money</strong> current in his principality (<em>non tamen ipse est dominus seu proprietarius monete currentis in suo principatu</em>). […] <strong>money belongs to the community and to individuals</strong> (<em>pecunia communitatis et singularium personarum</em>)</p>
</blockquote>
<p>Is this view, that &quot;money belongs to the community and to individuals,&quot; common among economists? Or do some think only the State or only individuals own currency?</p>

CC BY-SA 4.0
2020-03-21T08:42:52.207Z
What view? That my feudal liege does not own my or my municipality's money? Yes, I do hold that view, in agreement with 14th century bishop Oresme.
Giskard
CC BY-SA 4.0
2020-03-24T21:38:38.677Z
@Giskard "_What view?_" That "money belongs to the community and to individuals".
Geremia
CC BY-SA 4.0
2020-03-25T08:32:39.137Z
I am sorry but I fail to see your counterfactual. Who else could the money belong to? Could you please write two or three sentences explaining what you mean.
Giskard
CC BY-SA 4.0
2020-03-25T08:32:56.087Z
Are you asking if only the state owns the currency, like states own passports and you are just permitted to use them?
Giskard
CC BY-SA 4.0
2020-03-25T17:42:48.943Z
@Giskard I am asking if any economists think only the State owns money (yes, like they do drivers' licenses etc.) or if only individuals own it (so that they could do whatever they want with it, including destroying it).
Geremia
<currency><money><government><history-economic-thought><economic-history>
Who owns money?
Geremia
# Who owns money?

(Asked by: username_0 on 2020-03-20)

[Bishop Nicole Oresme](https://mises.org/library/nicholas-oresme-and-first-monetary-treatise) (1320-1382), in [the first monetary treatise](https://isidore.co/calibre/browse/book/3313), wrote:

> CHAPTER VI: Who owns the Money? (*Cuius sit ipsa moneta?*)
>
> Although it is the duty of **the prince** to put his stamp on the money for the common good, he **is not the** lord or **owner of the money** current in his principality (*non tamen ipse est dominus seu proprietarius monete currentis in suo principatu*). […] **money belongs to the community and to individuals** (*pecunia communitatis et singularium personarum*)

Is this view, that "money belongs to the community and to individuals," common among economists? Or do some think only the State or only individuals own currency?

**Tags:** currency, money, government, history-economic-thought, economic-history
> **Comments:**
> **username_1**: What view? That my feudal liege does not own my or my municipality's money? Yes, I do hold that view, in agreement with 14th century bishop Oresme.  
> **username_0**: @Giskard "_What view?_" That "money belongs to the community and to individuals".  
> **username_1**: I am sorry but I fail to see your counterfactual. Who else could the money belong to? Could you please write two or three sentences explaining what you mean.  
> **username_1**: Are you asking if only the state owns the currency, like states own passports and you are just permitted to use them?  
> **username_0**: @Giskard I am asking if any economists think only the State owns money (yes, like they do drivers' licenses etc.) or if only individuals own it (so that they could do whatever they want with it, including destroying it).  

---

## 2 answers

### Answer by username_2 on 2020-03-25. Score: 1

Well first of all I don't know why someone is going around downvoting legitimate economics questions and answers to the point everything recent on this site is negative. Naturally in the Covid19 crisis people are starting to take an interest in the economy, so we're getting questions that don't quite fit the mould, just as we did during the 2007/8 financial crisis. And those questions turned out to be very helpful because new questions developed new economic perspectives. Besides, this site should be 'be nice'.

Anyway, to answer your question, it's like this: Today the word 'money' is no longer interpreted by economists as being a homogeneous thing. You have M1 M4 etc. There are fundamentally different types of money.

Most money in circulation today is electronic money created under license by commercial banks.

The system in place licenses banks to create money in a framework sometimes called 'fractional reserve banking'. The way this works is as follows:

1. A customer approaches a bank for a loan. The customer already has a deposit account at the bank.
2. The bank creates an asset on its books for the amount of the loan, X, which according to the laws of the state the customer must repay under contract.
3. The bank creates a liability on its books by credting the customer's deposit account for amount X, which the customer can 'withdraw' at any time by issuing an electronic payment, or by converting into cash at an ATM, for example.
4. The amount X is created *ex nihilio* under license by the bank. Until recently in the West the fraction of reserves the bank was required to maintain compared to X was actually usually 0%. In other words the bank was typically authorized to create commercial loans without legal limit. More recently, fractional reserves and capital controls were somewhat tightened in response to 2008.
5. However, the customer typically uses the loan to pay for something, typically automotive or construction, and makes an electronic payment to a supplier. That supplier receives the money into their bank deposit account, and we will assume it is a different bank, and that money is credited as an asset to the bank's reserves (and a liability to the deposit account), while the liability to the supplier is reduced through bank fees, loan interest repayments and so on.
6. The bank uses those deposits to meet the fractional reserve banking limit requirements to issue yet further loans. In this feedback loop involving multiple banks (at least 2) the money created *ex nihilo* by one bank contributes to reserves of the next, developing a situation where perpetual 'growth' is required to maintain an ever expanding bubble of credit.

In summary, most money is actually somebody else's loan created from nothing at a commercial bank, and the laws governing those liabilities between banks and to you as a deposit holder make up the legal framework for that kind of money.

In theory anyone could replicate this model. For example, if I created an "IOU" for '50 Euros' (or 10 apples, or whatever), to you, and if you trusted me and you knew people who trusted me, you could easily trade that IOU with your friends. Eventually trust would grow and if I did a good job of maintaining it then pretty soon lots of people would be using "Frank IOUs" and calling it 'money'. The difference is that banks today are literally allowed to create "IOU"s (you owe me's) on request and then enforce that you repay them in any legal tender possible for that nominal amount, and those IOUs (you owe me's) are sold. The fact that most people repay them with IOUs from other or the same bank is in my opinion hilarious, but that's what people religiously tout as capitalism and freedom these days (and even go to war for it!)

Cash on the other hand is an example of a different type of money and is not governed by those laws. Cash validity depends a lot on methods of avoiding counterfeiting and does not require a trust pyramid. Ultimately it is also just a virtual IOU but it IS issued by the state, and in so far as people believe the state exists as a real thing, the money is real too. Surprisingly, many people think that when they 'put money in a bank' they are actually putting cash in a big safe somewhere. In fact what they are doing is converting government controlled currency into a commercial debt between a private bank and you, while the bank takes your hard cash, says 'thank you' and expects you to take their IOU in return. It fascinates me that even today the modern person goes about their daily life talking about political concepts like 'capitalism' with zero clue about how things actually work or who even controls a payment terminal (oh...that wasn't directed at you or anyone in particular, just an observation)

> **Comments:**
> **username_3**: This answer would be improved with less exposition about the modern person's alleged ignorance of modern banking or capitalism. It may or may not be true, but it detracts from the answer.  
> **username_4**: This answer only addresses fiat currency. But there are other forms of money too. And I don't mean all the M's. I'm talking about cryptocurrencies and other decentralized media of exchange that are not backed by government fiat. Also, I feel like I got a refresher on the fractional reserve banking system as it relates to the money supply as well as the fundamentals of consumer banking but I also feel like you never directly answered the question.  
> **username_2**: @FreeMarketUnicorn well I hardly suspect the op was asking about commodities. Who owns the commodities would be a pretty dumb question  

---

### Answer by username_4 on 2020-03-22. Score: -2

It depends on the laws of the state.

The key is the degree to which the sovereign domain protects the individual's right to private property. Most jurisdictions consider money to be property. That's why the right to ownership of private property is so key to the functioning of a free market economy. Without the right to own private property, as exists in many socialist dictatorships, there can be no free market economy.

> “Government has three primary functions. It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens from crimes against themselves or their property. When government-- in pursuit of good intentions tries to rearrange the economy, legislate morality, or help special interests, the cost come in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.” ― Milton Friedman [[1]](https://www.goodreads.com/author/quotes/5001.Milton_Friedman)

...

> "Both free speech rights and property rights belong legally to individuals, but their real function is social, to benefit vast numbers of people who do not themselves exercise these rights." — Thomas Sowell [[2]](https://www.brainyquote.com/authors/thomas-sowell-quotes)

> **Comments:**
> **username_0**: Can you reference some economists who hold this view?  
> **username_4**: @Geremia: Milton Friedman and Thomas Sowell for starters.  
> **username_0**: Please add some quotes and citations of them to your answer.  
> **username_3**: The majority of this answer is just exposition on the need for private property to protect free markets. It is extraneous to the question.  
> **username_4**: @Geremia: “Government has three primary functions. It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens from crimes against themselves or their property. When government-- in pursuit of good intentions tries to rearrange the economy, legislate morality, or help special interests, the cost come in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.”  ― Milton Friedman  
> **username_4**: @Geremia: "Both free speech rights and property rights belong legally to individuals, but their real function is social, to benefit vast numbers of people who do not themselves exercise these rights." — Thomas Sowell  
> **username_4**: @KitsuneCavalry: No. This answer fully answers the question. The second part of the question asks: "Or do some think only the State or only individuals own currency?" The exposition you allege fully addresses the "who" and, more importantly, the "why" components of the question.  
> **username_1**: The word "money" does not appear in any of the quotes. But they are nice if you enjoy reading pro freedom quotes! And isn't freedom really the answer to all questions, regardless of the actual question?  
> **username_4**: @Giskard: The word "property" appears in both quotes. And as my answer points out, all money is property. So the quotes and the answer both directly answer the question.  
> **username_0**: @FreeMarketUnicorn Do the authors you quote say "all money is property"?  
> **username_3**: Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/106090/discussion-on-answer-by-freemarketunicorn-who-owns-money).  
> **username_3**: @FreeMarketUnicorn I mentioned some of your answer is extraneous because a "socialist" dictatorship may allow agents to own money, but not other property. The question is not asking for the "why" money is considered property or otherwise. You explain that money should be considered private property to support the free market, but the question is not asking about free markets. Money can exist in mixed economies or control economies. That is my only additional comment. Take it for what it is.  
> **username_4**: @KitsuneCavalry: Although this question seems simple, the answer is subtle, complex and nuanced. I offered the context of the socialism-capitalism analysis as a way to begin to unpack and understand the real answer: that it depend's. I decided to broaden the scope of the analysis to address the political elements because so much of the answer depends on an understanding of not only the laws but also the politics of the relevant jurisdiction.  

---

