In the Middle Ages, Roman bullion money ended up hoarded inside churches and monasteries, leading to a shortage of money in circulation. This led to the creation of new, improvised forms of paper money, issued by the people rather than their rulers. Esoteric types of credit money, such as ‘tea checks, noodle checks, bamboo tallies, wine tallies’ emerged China . In England, money was issued by ‘shopkeepers, tradesmen and even widows who did odd jobs.’  All over the world, money took on unprecedented forms as credit tokens issued by peers in relationships of trust, or ‘self-issued credit.’ In Europe, such forms of money were often denominated in Carolingian money, but did not rely on it as a basis for issuance.
Self-issued credit may have been widespread in the Middle Ages, but the history of money seems to be denominated by bullion. This is partly because objects like paper notes and tally sticks don’t survive as well as coins do, even though they may have been used a lot more at a given time in history. Traditionally, money is conceived of as something created by monarchs, or their central banks, and not by people. However, today we face cash problems which are similar to those at the onset of the Middle Ages in Europe: money is becoming scarce again, as banks are contracting, leaving people who are able and willing to earn a living without the means to pay for it. Perhaps we can learn some lessons from the abundant self-issued credit of the medieval era.
What is self-issued credit?
First of all, what is self-issued credit precisely? It could be defined as a recorded promise to deliver an equivalent amount of goods or services to the bearer of the note. Such a promise would usually come with an expiry date, which limits the issuer liability in case of non-redemption over an extended period. Here’s an example: a “labour note” issued in the 19th Century: 
Notes would typically be denominated in a unit of account: in this example, three hours’ labour “in Carpenter’s Work” from Joseph Peters. This particular note is non-transferable, however most notes would be. Usually, the community of people who are willing to trust the issuer to make good on their promise defines the boundaries of circulation. A typical medieval market would involve trading with notes issued by bakers, butchers and farmers. Promises issued from one source could circulate through many pairs of hands before returning to their issuer for redemption, providing a supply of money even for people who didn’t intend to redeem them. As confidence begets confidence, self-issued credit becomes money.
From this description, it’s obvious that money like this is heavily dependent on trust between individuals. The credibility of a given producer literally determines their access to money. This creates a virtuous feedback loop in the system: people who don’t redeem their promises loose credibility, and their money starts to trade at a discount, or not at all, as other people factor in the risk of accepting it. On the other hand, issuers who are honourable benefit from the fact that people who don’t necessarily want to buy their produce will accept their cash, because it is highly trusted. It’s these dynamics which regulate the supply of self-issued credit – the amount of money a person can create depends on people’s faith in their promises, and vice versa. 
From the above description, self-issued credit might sound like a risky idea. This is true, insofar as relying on promises – even State-backed ones – always involves an element of risk. What is interesting about this particular type of money is that the risks are transparent and distributed: people issue their own money, which they’re responsible for redeeming. The bearer would probably not have legal recourse if something went wrong. In fact, in the medieval Islamic trade routes, disputes over self-issued credit notes could only be referred to voluntary courts mediated by merchant guilds or civic associations. The courts’ ability to impact a merchant’s credibility, and hence their access to credit, was their main source of power. 
The greater risk transparency means that there is less moral hazard in the monetary system: people who accept self-issued credit are aware of the risks that they are taking in doing so, and bear the consequences if something goes wrong. In the case of a national money supply, bad debts lead to monetary crises which affect everybody who uses the currency. Similarly, in a mutual credit system, money issued by people who don’t keep their promises creates problems for everybody else using the system, as it exists as a collective liability, rather than a personal one. Self-issued credit systems, by contrast, create resilience through diversity.
Another benefit of accepting greater risk is liquidity. Unlike forms of money which originate from hierarchical institutions like commercial banks, or government mints, self-issued credit is never in short supply relative to need. As long as people are able to produce things, and convince other people to accept their promises to deliver them as payment, money can be created. The ability to produce, and trust within a community, are the determinants of the money supply, rather than the other way around. Douglas Rushkoff recently coined the phrase “radical abundance” to describe this tendency in medieval monetary systems. 
As well as risk transparency, and abundant liquidity, we could also add to the list that self-issued credit is not debt-based, like other proposals to replace the financial system are. Specifically, transactions do not necessarily create debts, they create potential liabilities. The difference might appear semantic, but isn’t. Debts are exchanges which aren’t yet brought to completion, and which linger on when not completed. We are naturally averse to going into debt to people we have close relationships to for good reasons: they change the balance of power within relationships, and potentially undermine them. In a centralised financial system, the banks act as mediators between borrowers and lenders, absorbing the bad Karma of debt-ridden relationships. In mutual credit, debt can also be a problem if it is left hanging, without possibility of escape, because nobody wants to buy anything from the debtor.
A self-issued credit note creates a different type of relationship. A note issued is a potential liability, because a promise to deliver something only has to be redeemed if the bearer wants it to be. If they don’t, there is no feeling of an incomplete transaction hanging over the relationship, as there would be in an accounting system. Expiry dates also allow issuers to limit the extent of their exposure, creating a safety against accumulating potential debts. Another significant factor is the narrative associated with self-issued credit. Issuers feel like they are creating a unit of money, rather than accumulating debts. This, in turn, encourages participation among producers.
What is to be done?
Recent research has led me to the conclusion that self-issued credit is a really powerful invention, which seems particularly well suited to a networked era. It’s money that arises from relationships between peers, and which depends on trust, rather than state coercion of fear of destitution. It transcends the corrosive logic of debt, and it also works particularly well for communities. Another appealing aspect is the simplicity of such systems: ancient technologies like paper, seals and ink were sufficient to create credit notes, and should be again today. What has worked well in the past might prove very useful now, particularly with the help of modern technology.  Something to explore in more depth in a future post.
 David Graeber, Debt, p. 270. During the Song Dynasty (960-1279 AD,) in periods of financial collapse, people resorted to ‘tea checks, noodle checks, bamboo tallies, wine tallies, etc.’ Graeber also notes these forms of popular money resembled the ‘token’ money seen in Europe in the Middle Ages.
 David Graeber, Note worthy: what is the meaning of money?, Guardian
 The example labour note is from Wikedia’s article on barter. Self-issued credit as well as mutual credit can sometimes be referred to as barter, in the sense that the goods promised are being bartered in the future for goods received now. This is also called ‘virtual barter.’
 Paul Grignon’s animated video The Essence of Money: A Medieval Tale gives a good account of the mechanics of self-issued credit in medieval European market fairs.
 David Graeber, Debt, p. 276.
 This phrase comes from a talk called Radical Abundance given by Douglas Rushkoff in 2009, in which he describes the abundance-based grain-backed currencies of the European Middle Ages.
 Mark Frazier has written several interesting proposals for how personal currencies might be implemented using modern technology.