P10　The center of gravity of what underpins value shifts

Metal/Sovereignty/Law/Insignia/Weights and measures → Paper/Data/The state/Taxes/Central bank/Banks/Payment networks

What gives today's money its value?

Four Steps

Similarities

There have always been multiple underpinnings for value, and their center of gravity has shifted (they have not been simply replaced).

Differences

Commodity money is backed by its material; fiat money is backed by taxes, law, and trust. However, sovereignty and law were also necessary in the age of gold coins.

Applications

Answering "What gives today's money its value?" from a historical perspective.

Limitations

⚠ When making the dichotomy of "metal in the past, credit today."

These are the four steps for going beyond "it's similar." The "limitations" step defines the point beyond which historical analogies should not be drawn.

Read at the Modern Money Stations

Stations from the textbook "Modern Money: Whose Debt Is It?" where this structure appears. The four steps for each station are not displayed on the screen in the textbook. Here, you can read them side by side.

Is 10,000 yen in a wallet the same money as 10,000 yen in an account?

1-01 / Modern Money　Present. Tokyo and London.

Similarities: Whatever the recipient can accept without doubt circulates as money. The marks on silver coins and the face value of bank deposits both serve this function.
Differences: Silver coins carried value in the material itself. A deposit is a liability of the bank, backed by the bank's assets, regulations, and central bank settlement.
Applications: When you see a balance, make it a habit to ask whose liability it is. Do not treat the banknotes in your wallet and the numbers in your account with the single word "money."
Limitations: The figure of three percent is the value for the United Kingdom in 2019 and varies by country and year. The proportion for Japan cannot be stated at this station.

Why can the receipt of banknotes not be refused?

1-02 / Modern Money　Present. Tokyo. Bank of Japan Act, Article 46.

Similarities: The state's mark serves to reduce the recipient's doubt. Both the Lydian stamp and Article 46 perform the same function.
Differences: The stamp guaranteed the content of the material. The legal article does not guarantee the material, but guarantees its circulation and price stability.
Applications: If you wonder, "Is this money?", check the legal text to see who mandates its acceptance and what the limits of that obligation are.
Limitations: Legal tender concerns the extent to which yen-denominated debts can be settled with legal currency. This authority does not cover a shop's freedom to determine payment methods in advance, nor the freedom of pricing or using foreign currency. The twenty-coin limit is a value from Japanese law; it differs in other countries.

Reading the Bank of Japan's balance sheet.

1-04 / Modern Money　August 31, 2026. Tokyo. Ten-Day Report on the Principal Accounts.

Similarities: A goldsmith's ledger, matching the gold in the vault with the issued deposit receipts. The idea of tabulating the backing is the same.
Differences: The goldsmith's backing was gold. The majority of the Bank of Japan's assets are government bonds, which are the government's liabilities.
Applications: When you hear "Bank of Japan's assets" or "holdings of government bonds," rephrase it using the account titles from the Ten-Day Report.
Limitations: The figures are as of August 31, 2026, and will change in the next ten-day period. The details in the appendix (such as the Loan Support Program) have not been analyzed.

Why did banks hold government bonds, and why did they stop?

4-06 / Government Bonds　2011–2026 Tokyo, London

Similarities: The idea of backing liabilities by keeping "something that can be exchanged at any time" on hand is the same as that of a goldsmith's vault.
Differences: What it can be exchanged for is not gold but central bank money, and government bonds are the asset one step before that.
Applications: When reading a bank's financial statements, distinguish their roles: current account deposits at the Bank of Japan are settlement assets, while government bonds are "assets convertible into settlement assets in a short time."
Limitations: The reasons for holding by each bank and their regulatory treatment (liquidity regulations) are not covered. Ratios are based on market value.

The books of QE — comparing the tables of two central banks

7-06 / 2008 and QE　August 2026, Washington/Tokyo

Similarities: The double-entry bookkeeping format, which lists backing assets and issued liabilities on a single table, has been the same since the time of the goldsmiths.
Differences: The backing is not gold but government bonds and mortgage-backed securities, and the majority of liabilities are not banknotes but reserves.
Applications: When looking at a central bank's balance sheet, distinguish between the types of securities on the asset side and the three liabilities: banknotes, reserves, and reverse repos.
Limitations: H.4.1 is a weekly average; daily values differ. The definitions of accounting items in Japan and the U.S. are not the same.

Was it "printed"? — Concluding with three questions

7-08 / 2008 and QE　Present, London/Tokyo

Similarities: The perspective of tracking the increase or decrease of money by "whose liability it is" is the very history of money, starting from debt records on clay tablets.
Differences: In modern times, liabilities are divided into three layers (state, central bank, banks), and quantitative easing is an exchange between two of these layers.
Applications: When you read "printing money" in the news, apply the three questions in order before making a judgment.
Limitations: Three, eighteen, and seventy-nine are the UK's percentages for 2019. Japan's percentages are not shown for this item.

P10 The center of gravity of what underpins value shifts