Money

Author(s): John R. Searle

Source: Cambridge Journal of Economics , August 2017, Vol. 41, No. 5, Special Issue:
Cambridge Social Ontology: Clarification, Development and Deployment (August 2017), pp.
1453-1470
Published by: Oxford University Press

Stable URL: https://www.jstor.org/stable/10.2307/26784174

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Cambridge Journal of Economics 2017, 41, 1453–1470
doi:10.1093/cje/bex034

Money: Ontology and Deception

John R. Searle*

Money is a status function. This article works out the implications and conse-
quences of that fact. There are ten functions and features of money and a number
of common mistakes and deceptions in the institution of money. The most impor-
tant of deceptions is the illusion that money, in order to function, must be ‘backed
by’ something.

Key words: Ontology, Money, Status function

JEL classifications: B4, E42

I hold in my hand a US twenty-dollar bill. It is, like most things we take for granted,
philosophically astounding. (One mark of a philosopher is to be amazed by what any
sane person takes for granted.) The bill contains a lot of writing, much of which is the
repetition of the number twenty, eight times in numerals and three times in words,
‘Twenty Dollars’ twice and ‘Twenty’ once under a seal. It contains only two sentences:
‘This note is legal tender for all debts public and private’ (How do they know?) and
‘In God we trust’ (What happens to those who do not trust in God? Is it not money
for them?). It also contains pictures of Andrew Jackson and the White House, and vari-
ous seals and serial numbers as well as the words ‘Federal Reserve Note’. ‘The United
States of America’ occurs on both sides. This article is primarily concerned with the
question: What fact or facts make this piece of paper money? To understand why it is
money and what it means to be money, you have to understand a whole civilization.
I will not explain the whole civilization, but I will explain some of the money part. In
writing the article, I discovered a series of deceptions (illusions, systematic falsehoods)
in the institution of money, and I will try to identify them.
I  also have on my computer screen a photograph of a Confederate $100 bill. It
is even more amazing. It says ‘the Confederate states of America will pay the bearer
$100 on demand’; all of that is in large print. But in much smaller boxes on each
side of a picture of an unnamed woman, it says, ‘two years after the ratification of
the treaty of peace’, then in the next box, ‘between the Confederate states of America
and the United States of America.’ Though both bills are supposed to function in
the same way, as money, their status as speech acts is quite different. The American
bill is a Declaration. By Declaration, this piece of paper counts as $20 in the USA.
The Confederate money is a Commissive, a complex conditional promise. It says the
government promises to pay the bearer on two conditions, first that there is a ratified

Manuscript received 18 July 2016; final version received 6 March 2017.

Address for correspondence: University of California, 1900 Yosemite Road, Berkeley, CA 94707, USA; email:
[email protected]
© The Author 2017. Published by Oxford University Press on behalf of the Cambridge Political Economy Society.
All rights reserved.

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1454  J. R. Searle
treaty of peace between the Confederate states of America in the United States of
America, and second that two years have passed since the peace was ratified.

1.  The functions of money and the definition of money

What, then, is money? It is not easy to find explicit definitions of ‘money’, but text-
book accounts of the function of money, I think, implicitly contain a definition. Money
performs two functions, and on some accounts, three. First, money is a medium of
exchange. Second, it is a store of value. And third, on some accounts, it is a measure
of value. These characterizations are not as clear as they might be, but examples will
give them more substance. ‘I bought this shirt for $20’ reports the use of money as
a medium of exchange; ‘I have $1000 in my bank account’ reports the use of money
as a store of value; ‘My car is worth $10,000’ reports the use of money as a measure
of value.
Are these sufficient to define money? I don’t think so. First off, the money, when
I  buy a shirt, is not a ‘medium’ of exchange. It is an object of exchange. So I  gave
one object, a $20 bill, and I got another object, a shirt. No ‘medium’ was involved.
Furthermore, when I  buy something, I  don’t need to give a physical object. With
debit cards, for example, you can just transfer money from one account to another
with no physical objects actually being exchanged. In order to clarify the definition,
we would have to explain what exchange is, and what value is. Exchange is not hard
because it involves giving one object for another object, as when I trade my $20 bill
for a shirt. With the giving of the objects, deontic powers of ownership are transferred.
Value is harder because it involves desire and one can knowingly and consistently hold
inconsistent desires in a way one can knowingly and consistently hold inconsistent
beliefs. I will not discuss exchange and value further, but assume that we can use both
notions. We can take ‘store’ more or less for granted because it is not specifically tied
to human civilization. Squirrels store nuts for the winter. Furthermore, this ‘medium
of exchange’ talk leaves out one of the most important functions of money, payments
where no exchange is made, for example taxes.You have to pay taxes in money, but you
get nothing by way of ‘exchange’.
Again, before explaining money, we should note that the textbooks identify three
types of money. First, there is commodity money. This is the use of a commodity as
money. The commodity can be gold, silver, squirrel pelts, seashells, or whatever the
community decides. In its simplest form, commodity money is like barter. You trade
one type of object for goods and services. Not all trade involves money. If I give you a
piece of silver for your shirt, so far no money has changed hands. If pieces of silver or
shirts are standardly used for the purposes of such exchanges, then they can become
money for reasons I hope to make clear. Second, contract money. Here, the object used
as money is a contract to pay the bearer such and such on demand. Paradoxically, many
such money contracts promise to pay the bearer so much money, as was illustrated by
the Confederate $100 bill. How can money consist in a contract to pay money in return
for the contract when the only money you could get would be another contract? As we will see
later, this is one of the common forms of deception involved in money. It still says on
British currency, and until fairly recently used to say on US Federal Reserve notes, that
the Treasury promises to pay the bearer so much money on demand. But of course, in
the USA and the UK there is no such thing as money with which they can pay you in
addition to the sort of thing you are holding in your hand when you have the currency.

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 Money: Ontology and Deception   1455
So the promise to pay is, in effect, meaningless because what you would be paid in is
exactly what you already have. I will say more about this later. Finally, and most com-
monly nowadays, there is fiat money. Such and such a type of entity is money because
some authority, such as the State, declares it to be money by fiat. But now, our puz-
zlement increases: What facts about these three different kinds make them all money?
One way to answer that question is to tell the story about the evolution of money. The
point is not that the story is historically accurate. Presumably it is not, but it illustrates
the logical relations. In the beginning, there is only commodity money such as gold and
silver, but it is inconvenient to carry gold and silver around, so one leaves it with a man
who sits on a bench called a bank. The man is called a banker. In return for the gold and
silver, the man gives you a set of documents that constitute promises to pay the bearer
in the gold and silver in the bank. This is much more convenient and safe than carrying
actual pieces of metal. But as long as the banker honors the contracts, the contracts are
as good as gold. The contracts now replace the commodity as money. Another form of
flexibility, and a form of deception that is easy and really inevitable, is to issue more
contracts than the actual amount of gold and silver in the bank. As long as everybody
does not run to the bank all at once, the contracts function just fine. However, for any
number of reasons it becomes historically tempting to forget about the gold and silver
and just have the ‘contracts’. The story goes that this money then becomes fiat money
because it is only really money because some authority says it is money. Typically, the
old promises are verbally repeated on the fiat money: ‘The Bank of England promises
to pay the bearer on demand ten pounds’, but the promises are meaningless because
the only thing they can pay you with is what you already have. In the USA, this step
is known as ‘going off the gold standard’ and it occurred in two stages: first, in 1933
when the government announced that they would not redeem paper currency in gold
to individual citizens, and second, in 1971 when the government announced that they
would not provide other governments with gold in return for US dollars. The move
from contract money to fiat money is supposed to illustrate how the same functions can
be performed even though the underlying ontology is quite different.
The notion of a ‘fiat’ seems to imply an explicit act of performing a fiat. This is not
necessarily the case. The point is that something might gradually evolve as money
through general acceptance. The point, however, is that it will turn out that some assign-
ment of status function is essential to performing the functions of money. This always
requires a Declaration whereby some representation makes it the case that it is money.
This is normally called a ‘fiat’, and it will turn out that all money, in this sense, is fiat
money. The interesting distinction is not between commodity money, contract money,
and fiat money but between commodity money, contract money, and what I will call
baseless money, money which is not backed by anything.
But, if it remains money all along, then we have to ask, what exactly are the func-
tions of money which will serve to define it? What are the functions that money serves?
Here is a list:

1. The possessor can buy goods and services with money. For this reason, money is
power. The person who has money has more power than the person who does not.
The power in question is deontic, having to do with rights, obligations, etc. When
I have a twenty-dollar bill, I have a right to buy things with that money and I have
the power to pay my debts up to twenty dollars’ worth. This will turn out to be the
essential feature of money.

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1456  J. R. Searle
2. You can make payments, such as debts, even those that have nothing to do with
buying anything. Taxes are an obvious example, but all sorts of transfer payments
would be included: payment from parents to children, blackmail, extortion, cash
gifts and countless others.
3. Money is a store of value. Because of 1 and 2, you store something of value when
you save your money, either in cash or in a bank account.
4. Money is a measure of value. The question ‘How much is it worth?’ is typically
answered by stating a money value.

What else is there? Here, more or less at random and pre-theoretically, are some fur-
ther features of money that I hope to explain:

5. Money is essentially social. There are lots of valuable artifacts that can be used
either privately or socially, works of art for example. But money can only function
between people or institutions. Robinson Crusoe, alone on his island, has no use
for money. Money requires society and collective intentionality between members
of the society. As far as I know, money is unique in that it is believed to be valuable
by each individual only on the assumption that everybody else believes it to be valu-
able, and believes that everybody else believes it to be valuable, and so on up in a
potentially infinite, but non-vicious, hierarchy.
6. Money is essentially digital. You cannot have an analog form of money because, in
order to perform its functions, money has to be countable. You have to be able to
give a numerical value to answer such questions as how much the object costs, how
much the object is worth, and how much you have saved. Whether squirrel pelts,
gold ounces, or dollars, there has to be a numerical answer to the question, how
much?
7. Money, when functioning as money, is not valued for its own sake. People may use
gold as jewelry or tooth fillings, but when used as money its only function is to buy,
sell, pay, store and measure. Its possession is always a means to an end, not an end
in itself.
8. Money has to be exchangeable or transferable. It is essential to the functioning of
money that quantities of money must be transferable from one agent to another. It
is easy to see that this is essential for money to perform its functions as an object of
exchange. It is said that at some points in ancient Sparta money consisted of huge
iron bars because the authorities did not want money to be taken out of town. So
the transfer need not involve a movable physical movement, but it must involve
a recognizable transfer of rights. If a community uses mountains as money, then
paying with a mountain must involve a transfer of the right to use the mountain as
money from the payer to the payee.
9. One helpful, anonymous commentator pointed out that money needs to be easily
movable and transferable and that it has to be nonperishable. With the qualifications
like the Sparta example, I agree with these points, so let us add them collectively as
another condition.
0. Only animals with human or humanlike cognitive capacities can have money. Dogs, for
1
example, are very intelligent social animals, but if I leave a pile of dollar bills next to
my dog’s bed and train him to bring me a dollar bill every time he wants to be fed,
even if I feed him only on receipt of the dollar bill, all the same, he is not buying
anything with the money and it is not even money to him. Why not?

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 Money: Ontology and Deception   1457
2.  Social ontology
I think one of the reasons that the accounts of money I have seen are so inadequate is
that they do not rest on an adequate account of social ontology in general. So, before
I  get into the special problems about money, I  want to say something about social
ontology.
We need a distinction between the epistemic sense of the objective-subjective distinc-
tion and an ontological sense of the distinction. So, for example, in the epistemic sense
I can say that Obama was president in 2015—that is epistemically objective because
it can be established as a matter of fact—but I can also say that Obama was a better
president than Bush—that is a matter of subjective opinion. Epistemic objectivity and
subjectivity are always features of claims, statements, assertions, etc. Underlying that
epistemic distinction is a distinction in modes of existence. Pains, tickles and itches,
as well as beliefs, hopes and desires, have a mode of existence that depends on being
experienced by a subject. They are ontologically subjective, whereas mountains and
tectonic plates, electric charges and avalanches exist no matter what anyone thinks.
They are ontologically objective.
Related to that is another crucial distinction between those features of reality which
are observer relative, which depend for their very existence on being observed, thought
about, attended to or regarded in a certain way, and those that are independent of
anybody’s attitude or observation. Money, government, property and marriage are all
observer-relative phenomena, whereas such brute physical entities, such as mountains
and planets, are observer independent. Part of the interest of this distinction is that
many phenomena, and it will turn out that money is one of them, which have a mode
of existence that is observer relative and therefore ontologically subjective, nonethe-
less admit of characterizations that are epistemically objective. It is, for example, an
epistemically objective fact that I  have a twenty-dollar bill in my hand even though
the existence of twenty-dollar bills is observer relative and thus contains elements of
ontological subjectivity. It is an important point that the ontological subjectivity of a
domain does not by itself imply that characterizations of phenomena in the domain
must be epistemically subjective. All of this is going to be important when we get
to money.
All functions are observer relative. In general, we can say that function is a cause
that serves a purpose and the purpose has to come from some intentionality, human or
animal. Many species of animals can assign functions to objects. Think of birds’ nests
or the use of a stick by a chimpanzee to dig out ants for food. Human beings have a
special capacity which, as far as I know, is unknown in other animal species, which is
that they can impose functions on objects and other people where the function is not
performed in virtue of the physical features of the person or object, or at least not the
physical features alone, but it is performed in virtue of the fact that a certain status
has been assigned to the person or object, and with that status there is a function that
can be performed only in virtue of the collective acceptance or recognition of that status
in the community in question. So the fact that Donald Trump is president gives him a
status, and with that status a certain set of powers, but these status functions, as I call
them, can be performed only in virtue of their collective acceptance in the community
in question.
Status functions are the key to understanding human civilization because they pro-
vide reasons for action that are independent of inclinations and desires. They provide

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1458  J. R. Searle
deontic powers, which are rights, duties, obligations, permissions and authorizations,
etc., and those provide reasons for action which are independent of the other inclina-
tions and desires of the agent in question. We live in a sea of status functions: marriage,
universities, private property, nation states, summer vacations, restaurants, organized
religions and cocktail parties are all status functions.
Among the status functions assigned by Status Function Declarations are certifica-
tions. I am physically able to drive a car no matter what anybody thinks, but to drive a
car legally I have to be certified as a licensed driver. Such certifications are very com-
mon. For example, in the building where I have my office, the elevators are periodi-
cally inspected and certified as safe. Certification will be important when we consider
certain kinds of money. Often, status functions are accompanied by status indicators,
epistemic devices that enable anyone to perceive that the person or object has the
status function. Driver’s licenses, wedding rings and police officers’ uniforms are all
examples.
With the exception of the values attaching intrinsically to certain mental phenom-
ena, all values are observer relative. Therefore, gold is valuable only relative to our atti-
tudes. Value is not intrinsic to gold, nor to any other external object. The exceptional
cases are those human mental states that have values intrinsically built into them. So,
for example, a true belief is better than a false belief because it is part of the definition,
part of what it is to be a belief that the belief succeeds if it is true and fails if it is false.
Leaving out the intrinsic values of certain human mental phenomena, we can say that
all values are observer relative because value has to be assigned by some conscious
agent, human or animal. And because values are assigned, they are observer relative.

3.  Status functions are created by declaration

If, as I  have said, status functions are the key to understanding human civilization,
then how exactly are they created? It turns out they are all created by a certain type of
speech act that I call a Declaration, where you make something the case by declaring
it to be the case. J. L. Austin’s performatives are good examples. When the chairman
says, ‘The meeting is adjourned’, he makes it the case that the meeting is adjourned
by Declaration. The Status Function Declaration creates a status function by declar-
ing it to exist. When it says on American currency, ‘This note is legal tender for all
debts public and private’, that utterance makes it the case by Declaration that the
note is legal tender. The fact is not discovered by empirical investigation; it is cre-
ated by Declaration. The bill is declared to be legal tender. Often the Status Function
Declaration can be inexplicit. For example, two people can become involved in a love
affair without anybody declaring, ‘This is a love affair’.
It turns out that there is a class of status function that differs strikingly from other
status functions, and those are linguistic acts that create deontic powers. But we can-
not say that the speech act status functions are created, like other status functions, by
speech acts, or we would get an infinite regress. The infinite regress results from the
following: If it turns out that all status functions are created by speech acts, then the
status function which is the speech act must in turn be created by some further speech
act, and so on infinitely.
To summarize, there are non-linguistic status functions which include private
property, government, marriage, universities, cocktail parties and summer vacations.
All of those are created by a certain type of speech act, sometimes inexplicit, the Status

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 Money: Ontology and Deception   1459
Function Declaration. There are linguistic status functions which are speech acts, such
as promises or statements. Speech act status functions are not typically created by
external Declarations. If I say, ‘I promise to come and see you on Wednesday’, that
utterance creates a linguistic status function, a promise. But the speech act itself is
not created by a further speech act, and the powers of the speech act do not exceed
the semantic powers of the sentence. However, if the chairman says, ‘The meeting is
adjourned’, he creates a non-linguistic status function, the adjournment of the meet-
ing. Here, the powers are created by the semantics, but the powers go beyond semantic
powers.

4.  Money is always a status function

What fact about this twenty-dollar bill makes it money? Well, this is not just money, but
it is a paradigm case of a status function. The status function is a function that is per-
formed not in virtue of the physical features of the object or person in question that has
the status function, but in virtue of the fact that there is a collective acceptance that the
object or person has a certain status and a function that can be performed only in vir-
tue of the collective acceptance of that status. The twenty-dollar bill fits this definition
perfectly because it does have a definite status of being a twenty-dollar bill in the USA.
It performs the function in virtue of the collective recognition of that status. But the
function is not performed in virtue of the physical structure. The physical structure is
rather trivial. I emphasize these points because some people whose opinions I respect
have said that the twenty-dollar bill is not money. According to Tony Lawson (2016A),
it is in fact an IOU, a promise to pay. But the problem with that is, if it is an IOU, I will
presumably want to cash it and get paid in real money. But if I take it to the Treasury
and ask that they redeem it, what they would in fact give me is another twenty-dollar
bill (that is, if they did not think I was totally crazy).
In the first drafts of this article, I thought certain kinds of commodity money were
not status functions. For example, at a time when gold and silver were commonly used
as money, the value of the coin was supposedly exactly equal to the value of the gold
or silver in the coin. This seems to be a case where the object performs its function
solely in virtue of its physical structure. Of course the attachment of value is observer
relative and thus contains an element of ontological subjectivity—it is only because of
our attitudes that gold and silver are valuable. They have no ‘intrinsic’ value. But as
long as the gold or silver is assigned a status solely in virtue of its physical structure, its
structure as gold or as silver, then it seems it is not yet a status function.
This view now seems to me a mistake. What is the difference between exchanging
lumps of gold for goods and services and having gold coins as money? There are several
differences, at least these: the coinage typically involves a certification that there is so
much gold in the coin. So the coin has a certification status function, because the govern-
ment stamp guaranteed that it contained such and such amount of gold. Notice that
the gold is measured in money, not the money in gold. We say, ‘This is a twenty-dollar
gold piece’, not ‘This amount of money is half an ounce’. Furthermore, the use as
money gives it a status function as ‘legal tender’. If you owed somebody twenty dollars,
a twenty-dollar gold piece constitutes payment, whereas an equivalent-sized lump of
gold may not be accepted as such. Therefore, commodity money, if it is really money,
is always a matter of status functions because deontic powers accrue to the money in
virtue of the collective acceptance of their status as money. All money, to function as

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1460  J. R. Searle
money, requires collective acceptance or recognition of its status as money, and for that
reason, all money is a status function.
I said earlier that we need a distinction between commodity money, where commodi-
ties such as gold and silver are used as money; contract money, where a contract to pay
the bearer is used as money; and fiat money. I abandon the terminology of fiat and
replace it with baseless money, for two reasons. First, all money is fiat money because it
is created by a Status Function Declaration. Second, because the distinguishing feature
of this third type is that it is not backed by anything. It is baseless. We can consider two
such cases: the twenty-dollar bill is a case of baseless money, and the gold coin is a case
of commodity money. What about the intermediate case, the case of contract money?
Well, in the imagined evolution of money that I described above, it was impractical for
people to carry gold and silver around with them, so they left it with the bank, and the
banker issued certificates that were redeemable in gold and silver. The certificates were
a promise to pay, hence a contract, and the contract money said that the bank would
pay the bearer on demand so much in gold or silver. Contracts are status functions,
but they are purely linguistic; they are promises. They are standing speech acts, and
the standing speech act, the promise to pay in gold or silver, can function as money
because the contract actually is exchangeable for the commodity. Contract money is
valuable because, in theory at least, you can exchange the contract for some valuable
commodity. Some genius discovered that they could issue more contracts than they
actually have in gold or silver in the bank. If everybody rushes to the bank at once, the
bank will fail, and such cases have happened many times throughout history. The fact
that more contracts are issued than can possibly be fulfilled all at once, and that there is
nothing in the contract to block simultaneous demands for fulfillment of all of them, is
a second example of the systematic deception involved in money. The bearer of the contract
thinks that his contract is fulfillable if the conditions stated in the contract are satisfied.
But that is not really true, because if everybody wants their contract fulfilled at once,
the bank or other agency will go bankrupt. How can money-issuing institutions get
away with this? It is as if the city sold the right to sit in a seat on park benches and then
sold more rights than there are seats on the benches. It is a systematic deception that
more contracts are issued than can be redeemed. This is the second of several types of
deception we will find in money.
To summarize our results so far, we found that there are three kinds of money.
The first kind, commodity money, is a status function precisely to the extent that it
is collectively recognized as money and not just as a commodity. Second, the case
of contract money is a case where the semantics of the speech act are sufficient to
guarantee the deontic powers. When money was freely exchangeable for gold, it said
on the bill that the US Treasury agrees to pay the bearer twenty dollars in gold on
demand, and that is an actual promise. Because the speech act is an official speech act
of the government, it is a status function in virtue of its semantics. Third, the purest
case of the status functions of money is baseless money, where something becomes
money in virtue of the imposition of a status function. The point is this: all money is
the result of the imposition of status functions by ‘fiat’, and sometimes that imposition is in
virtue of some other feature that the money-stuff has. These are the cases of commodity and
contract money. But even in these cases a lot of the money in the system will be baseless
money because there will be more contracts issued than there is gold to back them
and there will be more money in the economy than there is gold in the central bank
and in circulation.

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 Money: Ontology and Deception   1461
So far we have found two types of systematic deception involved in money. The first
is where baseless money is disguised as contract money. It typically says on the bill that
the Treasury will pay the bearer on demand so much money. It used to say this on US
Federal Reserve notes, and as far as I know, it still says it on British currency. This is a
deception because it implies that there is something distinct from the bill in virtue of
which it has its value, and that the bill is redeemable in this further valuable entity. But
there is no such entity. The most you could get would be another such bill. I assume
this has to be a survivor of the actual practice in contract money of stating that the bill
was a contract redeemable for gold or some other such commodity. But in the case of
baseless money, there is no such ‘backing’. There is just the bill itself. The second is the
case of contract money, where more contracts are issued than there are quantities held
by the contract issuer sufficient to redeem all of the contracts simultaneously.
The upshot of this discussion is that money is like various other types of status func-
tion in that something is money only if everybody believes that it is money and that
everybody believes that everybody else believes that it is money and everybody believes
that everybody else believes that everybody else believes that it is money and so on.
Some money is believed to be money in virtue of some other feature. It is a valuable
commodity or a contract to exchange the money for a valuable commodity, but these
are in no way essential to its being money, and indeed, we will see that even these cases
are misleading and involve certain kinds of deception.

5.  Further forms of deception and money

It is of the essence of money, as I have described it, that it involves forms of deception.
I do not say ‘lying’ because that implies a conscious intentional liar. Also, the deception
is not that of supposing it has intrinsic value. Outside of certain conscious states, noth-
ing has intrinsic value. As far as intrinsic value is concerned, the special thing about
money is that the value is at one remove. It has observer-relative value because it can
be used to get many other things that have observer-relative value.
The first form of deception occurs where fiat money is disguised as contract money.
It says on the ten-pound note that the bearer will be paid ten pounds, thus giving the
impression that the note derives its value like other forms of contract money from the
things it can be redeemed for, which are quite distinct from the contract itself. However,
to repeat, there is no such other thing. The ‘contract’ is all there is to the money.
The second form of deception occurs when in the case of contract money more
contract promises are made than can be simultaneously fulfilled.
A third form of deception occurs when banks create money by loaning more money
than they have. When the bank loans you a thousand dollars, it need not have the thou-
sand. It creates money, literally, by setting up accounts for more money than it has.
The only constraint on this deception is that the government sets reserve ratios where
a certain percentage of the loan must be possessed by the bank. If the reserve ratio is
20%, then when the bank loans you the thousand, they have to actually have $200 in
the bank. The other $800 is pure creation because money, in the form of spendable
bank deposits, now exists which did not previously exist.
The fourth, and most interesting, form of deception has to do with ontology. To
understand this, go back to the Confederate $100 bill. Unlike the American $20 bill,
it does not say that it is worth the value on its face. Rather, it says that two years after
the cessation of hostilities between the Confederate states of America and the United

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1462  J. R. Searle
States of America, the Confederate states will pay the bearer $100. But what exactly
is a dollar such that the Confederacy will give the bearer 100 of them? Of course the
Confederacy lost, but suppose they had won. What would they have given? What did
they promise to give?
Basic to our conception of how we relate to reality is that most of reality consists of
objects (things, entities, etc.). Look around and you will find yourself surrounded by
objects—people, furniture, cars, houses, trees, not to mention planets, galaxies, blades
of grass and oceans. Objects have remarkable features. You can distinguish one from
another, even those of the same type. This is one car, these are two cars. This is what
enables us to count objects. Perhaps above all, objects are countable. Furthermore,
you can re-identify the same object on different occasions, even though there have
been changes in the object. This is still my car, the same one I had last year. These
two features, countability and re-identifiability, have traditional names; they are called
individuation and identity. Identity presupposes individuation. In order to say that it is
the same car (identity), you have to be able to say that it is a car (individuation).
The ontological deception in money can be stated quite simply. The vocabulary
contains the implication of individuation and identity, but money does not satisfy these
conditions. We can say, ‘I borrowed twenty dollars from you and I am paying back the
twenty dollars’, and that looks a lot like saying, ‘I borrowed your car and I am giving
back the car’. But though these sentences look alike, their logical structure is, in fact,
quite different. In order to give back your car, I have to give back the same material
object that I borrowed. But in order to return your $20, any number of physical objects
will suffice. Indeed, no physical object at all is necessary. This is because, in order to
function as money, money does not require any physical existence at all, but only rep-
resentations that record the amount of money that agents have and the amount that
they are transferring in economic transactions.
To get at these issues, we have to ask, what is it that I  have exactly when I  have
money in my bank account, granted that I need not have any physical object whatever?
There are representations of the amount of money I have, and what exactly do those
representations represent? They do not represent any physical object whatsoever. They
represent power, the specific power to buy. In addition to such powers, there is no such
thing as money. We can embody those powers in coins and bills. The coins and bills
are literally money and not representations of anything, but in order for there to be the
function of money, there need not be coins, bills or any physical realization whatsoever.
All there needs to be are well-defined representations of amounts of money such that
you can buy something by transferring the amount in your representation to somebody
else’s representation.
What do you have 100 of when you have one hundred dollars? Strictly speaking,
you do not have 100 of anything. What you have is a certain power, and that power is
measured roughly by assigning a numerical value. This is why no physical object is nec-
essary to have money. All you need is some way of representing how much money you
have. And this is why we get the illusion that money has absolute digital value, because
it can always be measured on a digital scale. Leaving out taxes and other debts, if all
the prices double tonight, you have lost half your money because you have lost half of
your power even though the digital sum you have remained exactly the same.
The deception inherent in money comes out in the following. The requirement that
money be digital implies that any storage of money we have is numerically specifiable.
However, because the essence of money is deontic power, that specification does not

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 Money: Ontology and Deception   1463
specify the specific amount of power that the possessor of the money has. The power
is only relative to the prices of the goods and services that the possessor might want to
buy, and debts, such as taxes for example, can be imposed on the possessor. The power
in money is never absolute but only relative to the price, including tax, structures. This
is disguised from us by the fact that we think we have such and such amount of money.
This deception can manifest in countless ways. For example, public authorities rec-
ognize that people would much rather have the price of goods and services rise than a
reduction in their salaries. The effects are exactly the same. Businesspeople are shrewd
enough to see that a tax break is just as good as a rise in income because it is, in effect, a
rise in income. In the salary case, people think they are actually getting a fixed amount
of money in their salary. But the essence of money is power, and the power is not fixed
by the numerical value but only the numerical value relative to prices and debts.
Governments, encouraged by their economists, tend to like a small, continuous rate
of inflation. This is because the public has the illusion that they have more money when
their salaries are increased to match the inflation, whereas in fact they may be suffering
a decline in their standard of living, and they almost certainly are in the USA because
tax rates are increasing as they move into higher tax brackets.
In my lifetime, the Carter administration was one of the worst offenders regarding infla-
tion. In some years, there was a 15% rate of inflation when I was receiving a 5% annual
increase in my salary. Carter and his economists did not think this was a problem. Many
people, including me, did, and this was one of the reasons he was defeated after one term.
Money consists entirely in power, specifically deontic power to buy, pay and close
debts. Ontologically speaking, there is nothing else.
The system only works on two conditions. First, it must be countable: you must be
able to count how much money you have, how much money you have paid, how much
money you owe, etc. And second, there must be a system of representation, so at any
given moment there is an accurate representation of these values. These two features,
countability and representation, inevitably give rise to the deception. We think there
must be some entities (things, objects) which we are counting and representing.

6.  Money and deception, a summary

To summarize, there are several forms of systematic deception that are endemic
to money.
First, a deception occurs when baseless money is disguised as contract money in
the way that I described. It says on the baseless money that it is contract to ‘pay the
bearer on demand’ in money. But there is no such thing as money other than the sort
of money it is.
Second, a deception occurs when government, bank or other agents issue more
contracts to pay than they can simultaneously satisfy. If I hold in my hand a contract
to pay me, the bearer, on demand three ounces of gold, I reasonably assume that the
satisfaction of my demand is not dependent on the behavior of other contract holders.
Unless the contract states otherwise, I assume it can be satisfied anytime. But that is
a deception. The contract can be fulfilled only on the condition that other contract
holders do not insist their contracts be satisfied. If a sufficient number simultaneously
insist on satisfaction, the bank will run out of resources and will be forced to default.
That is, it will be unable to meet its contractual obligations and, in many cases, will be
forced to close, to declare bankruptcy.

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1464  J. R. Searle
Third, when the bank loans you money, you think this is just like borrowing money
on interest from a friend or relative. But friends and relatives cannot loan you money
they do not have. The bank precisely loans you money it does not have, and thus it
literally creates money.
Fourth, another deception occurs when I am the possessor of, let us say, one hun-
dred dollars (or pounds, euros etc.). I naturally assume there is a class of such entities
and that I possess one hundred of them. But there are no such entities. Even if I have
one hundred one-dollar bills, the actual bills function only as forms of power and the
amount of power is not fixed by the numerical values. It is fixed by the relation of
the number I have to the prices of goods, services and debts. If the prices double, my
power is cut in half even though my number of one hundred remains constant.
It is a mistake to think that the one hundred one-dollar bills are representations,
because they do not represent anything. If I  have one hundred dollars in my bank
account, there is indeed in the bank a representation of how much money I have in the
account. But the actual bills in my hand do not in that way represent anything. They
actually are powers and nothing more because, as their possessor, I have the power to
buy things and pay debts with them.
Fifth, the final deception I have not so far discussed, but I think is implicit in pretty
much everything I have said, is that we have the illusion, and this illusion is fostered
in all sorts of different ways, that the money in our hand is only money because it is
backed by something. It may be backed by gold, promises, debts or by the US govern-
ment, but it has to be backed by something. This is a falsehood, and I hope that it is
obvious. Even in the cases where there is the appearance of being backed by some-
thing, commodity money and contract money, much of the stuff that passes for money
has no backing. Even under the gold standard, the amount of gold in circulation or in
the bank is unlikely to be as great as all the money in the economy.

7. What is money?
I began this article by saying that I had in my hand a US $20 bill. I believe we now
have enough tools to be able to analyze that statement. What facts make it the case that
the USA has the institution of money, and what fact about me makes it the case that
I have such and such an amount of money? Any such analysis will give us an analysis
of money. Because we are not concerned with the money of a specific country, and
because, as we have seen, money need not take the form of currency, the statement we
need to analyze is much more general. We assume that there is a community C, and
that it contains agents A1, A2, A3, etc. We assume that this community has certain
general practices, recognized by and engaged in by the agents of C. We assume that
they assign numerical values of (what we will call) Units of something to the mem-
bers. Intuitively, we think these units are dollars, pounds, etc., but we do not use these
concepts and just say that, at any point in time, any A of C will have a certain number
of N Units, where N may be equal to zero if A is broke. In earlier drafts, I counted
people who are in debt as having negative Units. But that does not really seem to work
very well1, so I am now counting zero Units as the limiting case. What we are trying

1
  Why not? Major debts such as mortgages are typically incurred to buy valuable property which increases
in value. Holders of such debts have an increased net worth in dollars as a result of the debt. To explain this
requires an analysis of liquidity, and that is beyond the scope of this article.

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 Money: Ontology and Deception   1465
to analyze is, what fact about those Units makes them money. There are two aspects
to the analysis: First, what is it for a community C to have the institution of money?
Second, what is it for an individual A with that community to have a specific amount
of money? No individual can have money unless there is a collective practice of money
within his community.
But our analysis must make no reference explicitly or implicitly to money. Therefore,
we cannot mention buying, selling, etc. The analysis must be given entirely in nonmon-
etary concepts. Since we are trying to analyze money in terms of its deontology, we can
use the deontic concepts because they are quite general and have no special reference
to money. The analysis makes explicit what is meant by saying money is essentially
social. We assume that the society has recognized Units, which we intuitively think of
as dollars, pounds, euros, etc., but we cannot use such concepts. Our task is to explain
what facts about dollars, etc., makes them money. Here are the statements we need to
analyze.
A community C has money measured in Units. A person or subject S in a commu-
nity C has money to the amount of N Units.
I will give the analysis as a set of numbered propositions, followed by an attempt to
explain it in parentheses. The parentheses are not part of the analysis.
Here is the analysis:
1. The community C has the practice of assigning numerical values N of Units to agents
A1, A2, A3, etc., in C. Each A in C is the owner of N Units, where the limiting case
is N = 0. To put this in a way that makes the quantifier scope explicit, we can say:
At any time T, and for any A in C, there is some N such that A has N Units at T.
(This just says that, at any time, everybody has a certain amount of money [includ-
ing no money at all as a limiting case]).
The assignments of Units may be for all sorts of reasons: e.g. payments, inherit-
ance, theft, pensions, finding money in the streets, winning bets, etc. The agents
may be people, families, corporations, gangs, etc. The point is, at any given moment
each agent has a certain amount of money, including zero amount for people who
are broke. However, the Units, so far, are not necessarily money. So far, they could
be cans of beer or pairs of pants. What do they have to have to be money?)
2. The Units are believed to be valuable by all the members of C, but they are believed
to be valuable only because each member believes that all the others believe that
they are valuable. Each member believes that all the other members believe that
each member believes that all the other members believe that the Units are valu-
able, and so on up in a potentially infinite fashion.
(These potentially infinite but benign regresses in collective intentionality are famil-
iar in analyses of collective intentionality. I have tried to frame it in ways that avoid
traditional controversies about whether collective intentionality of the form ‘we
intend’, ‘we believe’, etc., can be analyzed as individual intentionality, ‘I intend’, ‘I
believe’, etc.)
3. The Units are believed to be valuable, not for their own sake, but because each
Agent possessing Units has certain powers as a result of that possession.
(The analysis of these powers explains what makes the Units money.)
4. C has the practice whereby Units can be transferred from one Agent to another.
(This may be by buying and selling, but also by taxation, extortion, gifts, etc. The
point is, if you cannot transfer it from one agent to another, it is not money. Money
is not just social, but it is socially transferable.)

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1466  J. R. Searle
5. The possessor A  of N Units can exchange those units either all or in part for
goods and services possessed by other Agents. Typically, both parties will make the
exchange voluntarily, but it can also be forced, as when the government forces peo-
ple to buy health insurance. The exchange results in the new possessor (‘the buyer’)
acquiring deontic powers over the goods and services, the objects of the exchange,
and the agent surrendering the goods and services (‘the seller’) acquiring deontic
powers over the N Units exchanged.
(This is the ability to buy and sell.)
6. To the extent that any Agent is under obligations specified in Units, the obligations
may be removed by giving to the holder of the obligation the number of Units in
question.
(This is the ability to pay debts.)
This, then, is the analysis of money. Can it really be this simple? Perhaps it is. Money,
so analyzed, is essentially collective, and the collective practice assigns deontic powers
to the individual agent, where the agents need not be human individuals but corpora-
tions, etc. Essentially, the two abilities are the ability to buy and sell and the ability to
incur and pay debts. What about our features, such as money as a store of value and
measure of value? I think they follow from the analysis as stated. If you have Units that
function the way I have described, you can always state, ‘I have so many Units in my
bank account, under the mattress, etc.’ I can also ask of any exchangeable object, ‘How
many Units is it worth?’
I believe that this explains all of the conditions that we stated for something to be
money, with the exception of why animals cannot do it. The reason why my dog, Tarski,
cannot operate with money, cannot possess money, spend money, etc., is that in order
to do that, you have to be able to operate with a lot of rather complex deontic con-
cepts. In particular, you have to be able to operate with the deontic concepts of rights,
duties and obligations.You have to see that possessing money gives you deontic powers
and that those who owe you money have deontic obligations. In order to have those
thoughts, you have to have a language. Thus, the short answer to why animals cannot
do it is, in order to do it, you have to have something like a human language. A bee
language or animal signaling system is not enough. You have to be able to think with
a much richer set of categories, and that requires something like a human language.

Bibliography
Lawson, T. 2016A. Social positioning and the nature of money, Cambridge Journal of Economics,
vol. 40, no. 4, 961–96
Lawson, T. 2016B. Some critical issues in social ontology: reply to John Searle, Journal for the
Theory of Social Behaviour, vol. 46, no. 4, 426–37
Searle, J. R. 2007. The Construction of Social Reality, New York, Free Press
Searle, J. R. 2011. Making the Social World: The Structure of Human Civilization, Oxford, Oxford
University Press

Appendix: Lawson on Money

The foregoing paper has been written for a Cambridge Journal of Economics special
issue on social ontology marking Tony Lawson’s (2016A) contribution to the subject.
Let me in this appendix indicate explicitly where Lawson and I part company regard-
ing the ontology of money. I did not find his views easy to understand, and it is quite

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 Money: Ontology and Deception   1467
possible I  may have misunderstood him. On its face, the theory he advances seems
false and I cannot find any sustaining argument to support it. I will try to make this
explicit in what follows.
Central to Lawson’s analysis of money is the notion of a position. At first sight, his
notion of a social position looks a lot like my notion of a status function. Status func-
tions, as you will recall, are produced by the collective assignment of a status to a certain
person or object. Then, with the assignment of that status, there is the assignment of a
function that can be performed only in virtue of the collective acceptance of the status.
Money, government, property and marriage are all obvious examples, but so are uni-
versities, cocktail parties and summer vacations. These are all cases where deontology—
rights, duties, obligations, etc.—is assigned by collective intentionality. Lawson does
not say much about collective intentionality, but I think that it is implicit in his account.
Here is his definition of items that are socially positioned: ‘In all cases, social positioning
involves the generalized acceptance of the following three elements regarding any item
that is thereby positioned: (i) the allocation of an agreed status; (ii) its practical place-
ment as a component of a totality; and (iii) the harnessing of certain of its capacities
already possessed to serve as one or more system functions of the totality’ (ibid., p. 963;
italics in original). The difficulty I have with this account is the notion that the capacities
must already be possessed. There are many forms of status functions where the entity
that has the status function does not have the capacity to perform the function prior
to the assignment of the status. The most obvious case is language itself. Language is
the most fundamental social institution because other institutions, such as money, gov-
ernment and property, presuppose language, but language does not presuppose them.
Words and sentences are not positioned as language in virtues of the meanings they
already possess. He tells us that the capacities must already be possessed, but in the
case of language, the meanings are the capacities, and without language, there can be no
such capacities. Words and sentences have meaning only as part of a language. You can
always cheat and say that what gets positioned is words with their meanings, but that
makes it impossible to answer, or even pose, the crucial questions: What are meanings
and how do they relate to words and other syntactical entities? Other entities that are
capable of performing functions once a status has been assigned to them, but not capa-
ble prior to the assignment, are ‘limited liability corporations’ and so called ‘fiat’ money,
what I have been calling ‘baseless’ money. In the case of the limited liability corporation,
there is no previously existing entity which was the corporation. Rather, the corporation
is created in order that there be an entity capable of engaging in economic transactions,
but where the officers, employees and stockholders of the corporations are not person-
ally liable for the debts of the corporation. That is why they are called ‘limited liability
corporations’. And, of course, there is baseless money. The piece of paper that is the
twenty-dollar bill I mentioned earlier in this article has no capacity already possessed
to be worth twenty dollars. Rather, the assignment of value is made to that twenty-
dollar bill by the US Treasury acting through the Bureau of Engraving and Printing. In
response to the point about corporations, Lawson points out correctly that, in order for
the corporation to function, there have to be activities by specific agents. That is true,
but the essential point which I need to keep repeating is that the agents are not identi-
cal with the corporation. The corporation is not identical with any collection of people,
including the officers of the corporation. Indeed, it is essential to the functioning of the
corporation that it should not be identical with people because, if it were, those people
would inherit the liabilities of the corporations, which they do not.

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1468  J. R. Searle
Given this conception, Lawson says some things about money which seem to me
false. He says, for example, that the twenty-dollar bill I possess is not a form of money.
He says specifically, ‘My contention is simply that these notes and coins are not only
of minimal value, but never do serve as a means of payment anyway, whether as a
medium of exchange or otherwise, and so on my conception are not after all a form of
money’ (ibid., p. 976). He goes on to compare them with passports, identity cards and
wedding rings. They are, in my terminology, status indicators.
Given this conception of position, the closest that I can find in Lawson to a defini-
tion of money is the following: ‘Money is constituted where it is accepted throughout a
specific community that a thing or stuff of value is positioned as a generalized form of
value, to function as a general means of payment, in conditions of an equally accepted
and appropriately positioned common or shared system of value measurement. Money
just is that positioned form of value’ (ibid., p.  972). This seems consistent with the
account that I gave of the assignment of status functions with the one basic difference
I have mentioned. That is, the entity that is positioned to become money has to already
be valuable before becoming money in order that it can become money. That seems
to be obviously false in the case of baseless money. In the case of commodity money,
if we take gold as our example, the gold can become commodity money because it is
already valuable. In the case of contract money, the contract is valuable because it is
exchangeable for something valuable. It is, for example, exchangeable for gold. But
once the country goes off the gold standard, as the USA did partly in 1933 and then
completely in 1971, then there is no longer something that is already valuable that can
be positioned as value. Rather, a status function is assigned to actual money, but that
status function is not in virtue of any preexisting value. What is the preexisting value
according to Lawson, according to which this twenty-dollar bill can be used as if it
were money? Well, he says it is a set of debit/credit relations. The picture that he has,
although it is hard to get a clear conception of it, is that when I own a twenty-dollar bill,
what I have is an IOU issued by the government. But this seems to be, to put it mildly,
most implausible. So let us go through the possible history of this twenty-dollar bill,
at least as far as its situation in the current economic system of the USA is concerned.
If we consider a typical real-life case, we can see the relations of debt and obligation
quite clearly. In the imagined example, I borrowed a thousand dollars from the bank.
As the reserve ratio is 20%, the bank literally created 800 dollars that did not exist
before. There is now, in my account, a thousand dollars, 800 of which was simply not
part of the economy up to that point. Now, according to Lawson, when the banks cre-
ate $800 which did not previously exist, they ‘position’ some previously existing value
of $800 as money. That is a literally incredible view: in order to create $800, the $800
had to exist already. But what is this value of $800 that had to exist prior to the crea-
tion of the money? Well, he tells us it is a set of debt relations. In order that the bank
can create $800 belonging to me, there already has to be a debt relation whereby the
government owes $800 to me. Frankly, this seems worse than implausible; it seems out
of the question. How is this $800 debt supposed to have been incurred? What did I, or
the government, do whereby the government owes me $800? What actually happened
was the routine textbook case whereby banks create money by loaning money that they
do not have.
The question is, how does the money that I just created satisfy his condition that
there had to be a preexisting value? Here is what he says: ‘In the end, given the nature
of the conception I  am setting out, it does not really matter for my purposes how,

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 Money: Ontology and Deception   1469
precisely, a form of debt is rendered appropriate and recognized as satisfying the cri-
teria (a trusted transferable source of value); the point is that it is. The debt (social rela-
tion) satisfying these criteria is constituted as money on being appropriately positioned’ (ibid.,
p. 977; italics mine). His general claim is that in order for anything to be ‘positioned’ as
money, it has to have a preexisting value. The problem is that the creation of money out
of nothing, when the bank loans me a thousand dollars, may well be a case of position-
ing, but there is no preexisting value which becomes the new $800.
What are the actual credit and debt relations? The bank is under an obligation to let
me withdraw from my account in the amount I want, up to a thousand dollars. I am
under an obligation, as a debtor, to pay back the thousand dollars; and if it is a typical
arrangement, I will pay it back on a monthly basis using money in the account together
with other such moneys as I might put into that account as a result of my salary. So
the obligations are quite clear. Now let us suppose that I withdraw from an Automatic
Teller Machine twenty dollars. And let us suppose that this is the source of the twenty-
dollar bill I am now holding in my hand. Now, that twenty dollars reduces the amount
of money that I have in my account to $980 and gives me a twenty-dollar bill. I can
get the $20 because the loan created money which I  now have in my account, and
I redeem twenty dollars’ worth by taking the bill. In addition to all of these obligations
that I have described, Lawson thinks there is an additional obligation that the govern-
ment owes me something as a result of my possession of the twenty-dollar bill. But
what exactly do they owe me, how was the debt incurred, and how exactly could they
ever pay it? Because, as we will see, he has no satisfactory answer to these questions,
I cannot make any sense out of his theory.
It is interesting that he mentions bitcoin because it is hard to see how his theory
of money can accommodate the actual fact of bitcoin, which appears to be a form of
money that does not conform to his theory. He tells us he thinks that bitcoin will cease
to exist, and perhaps he is right about that, but the important thing is, on his theory,
it seems it could never have existed at all. This must be a failure of his theory, because
it does exist. Bitcoin is the perfect test case for anybody’s theory of money. It fits my
theory, as far as I can tell, exactly, since bitcoin consists of a series of artificially created
status functions, the bitcoins. On his account, there could not be any such a form of
money because there is no ‘harnessing of certain of its capacities already possessed to
serve as one or more system functions of the totality’ (ibid., p. 963). In a word, bitcoin
refutes Lawson’s theory.
On his view, the twenty-dollar bill that I began discussing at the beginning of this
article is not real money, it is an IOU issued by the government. But if it is an IOU,
then I should be able to take it to the government and have it redeemed. This is an
obvious objection. It is reductio ad absurdum of his position to say the twenty-dollar bill
is not real money. His response to this objection is very revealing. He says, ‘If Searle
wants the issuer of the debt to redeem it, this may be possible but this actually involves
Searle giving up, rather than acquiring, real money. In this Searle will typically have to
choose amongst the sorts of things that lie within the jurisdiction of the bank or state
to provide. He can certainly use some of his bank credit to discharge his own debt to
the state, the later perhaps taking the form of taxes due, fines to be paid, purchases of
alternative more “risky” (less liquid) non-monetized forms of government debt and
so on’ (Lawson, 2016B). I am not sure he fully realizes how inadequate this answer
is, because it is a refutation of his position. His position is that the twenty-dollar bill
is not money. But money is defined in terms of the sorts of functions that he just

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1470  J. R. Searle
described. I can pay for and buy all of this stuff with it, and for that reason, it is money.
Furthermore, it is legally money because it says on it that it is ‘legal tender for all debts
public and private’, and that is a legally enforceable status function. The piece of paper
that is the twenty-dollar bill already exists as money prior to any of these putative debt
relations that he claims to be describing.
Suppose that he is wrong that some further fact about the piece of paper is needed,
that there is a debt relation between me and the federal government. What difference
does it make? None whatsoever. It still functions as money, it officially and legally has
the status function of money and can in fact function as money and, therefore, it is
money. That is, nothing is added to its powers by his description of the debt relation.
All of the things that he says the bank or state can provide, such as I can pay my debts,
etc., are already available to me, just by possession of the piece of paper. And indeed,
suppose I do not have any taxes to be paid, bank credit to discharge, etc. Suppose I just
want money. Of course, it is open to him to use words in any way he likes, and if he
wants to say it, he can say that the twenty-dollar bill is not money. That is fine, granted
that he is prepared to tell us what money really is. His answer in this and in other such
cases is that there is a creditor/debtor relation between me and the federal government.
But the answer to that is that there is no such relation. The piece of paper in my hand
is not a status indicator for real money; it is real money.
The problem I have with his account is that it seems counterintuitive on the face,
and I cannot see that he gives any reason for supposing it to be true. I cannot see that
he gives any reason for supposing that, in order for something to be ‘positioned’ as
money, it has to be independently valuable. Why can a community not accept collec-
tively that such and such otherwise worthless bits of paper are going to be money? That
seems to be exactly the situation we are now in, and he gives no reason to suppose that
we are not in this situation except that he holds a general theory to the effect that we
could not be in that situation, but he gives no reason for supposing that the general
theory is true.
This looks like an instance of the fifth deception involved in money. That is the idea
that, somehow or other, real money must ‘backed by’ something or other, and if it is
not ‘backed by’ gold, etc., then, on Lawson’s account, it must be backed by debtor
relations. But this is, I think, false.
The important thing for this discussion is that almost all money today is baseless
money, money without backing. A standard form of deception is to give you the illusion
that there is some kind of backing because the bank will pay you something on demand.
But there is no backing whatsoever. What is the backing that makes the twenty-dollar
bill into money? The answer, of course, is simply the fact that people accept it. There
is massive collective intentionality that supports it. This is legally enforceable. Once
that collective intentionality disappears, it is worthless. In fact, such things happen
in periods in massive inflation, where ordinary amounts of money become effectively
valueless.

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