Money is, first and foremost, a medium of exchange, something we use to pay for the things we buy.
Money has evolved over time, from:
1. commodities that are valuable in themselves, to
2. symbolic “warehouse receipts” or claim checks for commodities in storage somewhere (including deposits of gold or silver in banks), to
3. credit created on the basis of some assets pledged as collateral, such as a house when you get a mortgage from a bank.
Today, virtually all money is credit money.
The process of money creation takes place in banks when banks make “loans.”
But ultimately goods and services pay for other goods and services; money is just an interediary device that facilitates the process. Money has become simply an information system that offsets your debits from purchases with credits from your earnings.
Mutual credit clearing is the process that is making conventional money obsolete.
For complete background on this subject, see www.reinventingmonry.com
Beyond Money 