Re Paul C's comment on money that:
In a purely private banking system, where anybody can set up
as a banker, the bankers individually need some guarantee of
their ability to make payments, which can only be provided by
gold or silver held as reserves. One needs a social guarantee
of the restricted supply of money, with gold, geology ensures
<snip>
One point well made at a recent circulationist conference was
that what makes someone a (potential) banker is not a hoard of
money, but collateral with which to back the issuing of notes.
If a landlord with huge holdings issues redeemable notes, what
he/she is backing them with is not the presence of money in
vaults somewhere on that estate, but that estate itself.
The "there must be money to back money" argument also falls into
the trap of infinite regress, as Riccardo will no doubt explain.
Cheers,
Steve Keen