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I am very interested in learning about debt and credit - not personal debt and credit - but debt and credit of countries and the like. I have searched everywhere but it's difficult to find books that are related to these topics. One such book that I found was Alexander Graeber's "Debt: The First 5000 Years".

I was wondering if someone has a recommendations for books that would allow someone to get a much better idea of what exactly debt and credit are and how they affect the world around us.

Thanks!

P.S. I apologize in advance if this question is off topic but this was my last resort. :)

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  • $\begingroup$ That's covered under the general topic of "economics" -- which is offtopic for this discussion of personal finances. I think there is now a Stack Exchange community for economics; i's suggest redirecting this question there. $\endgroup$ – keshlam Jan 31 '15 at 19:57
  • $\begingroup$ I found Graeber's book quite interesting but his findings are in dispute. See for example Noah Smith's review: noahpinionblog.blogspot.com/2014/11/… $\endgroup$ – BKay Feb 2 '15 at 14:52
  • $\begingroup$ @BKay Yes, that's why I was looking for some alternate viewpoints. $\endgroup$ – Jeel Shah Feb 2 '15 at 21:09
  • $\begingroup$ So you want alternative perspectives to Graeber's on debt or you want to learn more about national debts? $\endgroup$ – BKay Feb 3 '15 at 13:27
  • $\begingroup$ @BKay I would prefer both. Since, Graeber's viewpoint is contemporary, I would like to know what is the accepted understanding. Furthermore, I would like a book that also talks about credit and its influence on the economy etc. $\endgroup$ – Jeel Shah Feb 3 '15 at 14:08
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You might call Graeber's theory of money as something emerging from a system of compensation from the harm of others.

The Chartalist's say the state is what makes money, they demand taxes be paid in money, this gives money value, and then the state makes money which it spends on what it wants.

The Chartalist contribution turns on the recognition that money cannot be appropriately studied in isolation from the powers of the state – be it modern nation-states or ancient governing bodies. It thus offers a view diametrically opposed to that of orthodox theory, where money spontaneously emerges as a medium of exchange from the attempts of enterprising individuals to minimize the transaction costs of barter. The standard story deems money to be neutral – a veil, a simple medium of exchange, which lubricates markets and derives its value from its metallic content. Chartalism, on the other hand, posits that money (broadly speaking) is a unit of account, designated by a public authority for the codification of social debt obligations. More specifically, in the modern world, this debt relation is between the population and the nation-state in the form of a tax liability. Thus money is a creature of the state and a tax credit for extinguishing this debt. If money is to be considered a veil at all, it is a veil of the historically specific nature of these debt relationships. Therefore, Chartalism insists on a historically grounded and socially embedded analysis of money.

This chapter distinguishes between several broad Chartalist propositions about the origin, nature and role of money, and several specific propositions about money in the modern context. It offers only a cursory examination of the historical record to illumin- ate the essential characteristics of money emphasized in the Chartalist tradition. Chartalist ideas are not new, although they are most closely associated with the writings of Georg Friedrich Knapp of the German Historical School. Thus the chapter briefly surveys instances in the history of thought which have emphasized the chartal nature of money. The paper then expounds on Chartalism, clarifying aspects of the concepts and drawing out the implications for modern currencies. It concludes with a discussion of the various applications of this approach to policy.

Chartalism and the tax-driven approach to money

Economics (as a profession) generally focuses on another motive for money, solving the problem of the double coincidence of wants. That is, in barter we generally need to both want what the other has or we can't make a deal (unless we have credit, but consider barter among strangers). Money presents an alternative, a good that we don't want per se, but we can use for transactions because everyone else wants it and we can rely upon to want it later as well. Such a thing should be portable, hard to counterfeit, and easily identified. Then when Art wants to buy a Ball and Charlie has a Ball but wants to a Dog, Art can use his money to buy the Ball from Charlie so that later he can use money to buy a Dog from Eric who will then use it to buy Florence's Goat, and so on...

There is an accessible and justifiably famous paper on this sort of money, The Economic Organisation of a P.O.W. Camp, about how cigarettes emerged as this sort of money in WW II POW camps. Graeber singles this paper out for scorn, saying these people already knew about money and so this is not a good example of a origin story for money, but it is a nice example of money as an emergent phenomenon to solve the double coincidence of wants problem.

I haven't read Ascent of Money, I recall it getting mixed reviews, but I really enjoyed a Ferguson's somewhat related The Cash Nexus, which might help you understand the national aspect of your question. I also enjoyed The Origins of Value: The Financial Innovations that Created Modern Capital Markets, but that book covers much more than just money. Famous Myths of Fiat Money has some nice examples of commodity money emerging to solve transactional issues. On Money as a Medium of Exchange is a famous (relatively modern) theory paper that covers the benefits of fiat over commodity money. The book What is Money? in many ways is a long answer to your question, with chapter 7 in particular covering a lot of these issues.

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  • $\begingroup$ Are there any books that you would recommend related your last paragraph? Another book that comes to mind is "Ascent of Money". $\endgroup$ – Jeel Shah Feb 3 '15 at 19:39
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While its difficult to pinpoint an answer to the question, here are some ideas/sources id consider helpful/interesting.

Video: How The Economic Machine Works by Ray Dalio (30 minute presentation) https://www.youtube.com/watch?v=PHe0bXAIuk0

Book Titles:

  1. Capital in the Twenty-First Century
  2. Fault Lines: How Hidden Fractures Still Threaten the World Economy
  3. This Time Is Different: Eight Centuries of Financial Folly
  4. Manias, Panics and Crashes: A History of Financial Crises
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