In fact, even though the law says that money is “debt”, a correct application of the general principles of accounting does raise deep doubts about such a conception of money. Debt typically involves an obligation between lender and borrower as contracting parties. We wonder which obligation may fall upon the state from the rights entertained by the holders of coins, or which obligation may fall upon the central bank from the rights entertained by the holders of banknotes or by the banks holding reserves.
We specifically refer to these three “species” of money because they are all “legal tender”, that is, in force of a legal power, they absolve their issuers of any responsibility to convert them into other forms of value.
And from the conclusion:
The foregoing discussion offers a broad outline of a new approach that we refer to as the “Accounting View” of legal tender money. The proposed new approach calls for understanding money by correctly applying to it the principles of general accounting. We think it will be important to further deepen the study of the implications of the new approach.
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