A Simple Guide: Learning Structuralism and Realism in Modern Philosophy Through Money

A Simple Guide: Learning Structuralism and Realism in Modern Philosophy Through Money

1. Learning Structuralism with Money: Anything Can Be Expressed Structurally

Anything that can be described through realism can also be expressed using structuralism. The best way to show this is to demonstrate it in practice. This can serve as both a case study and an exercise.

Money is an excellent teaching tool for learning philosophy. Specifically, I will show how commodity money is philosophically realist, while credit money is structuralist, using the “structuralization” of currency as an example. Furthermore, a deeper understanding of money enhances financial literacy, making it practical and useful in many ways. It’s always better to have concrete examples when studying anything.

Money is a great case study for learning philosophical realism and structuralism because it contains elements of both. While anything can be viewed through the lens of either realism or structuralism alone, having both perspectives is better, if not best. There are various types of money; some are more practical to view from a realist perspective, others are clearer from a structuralist one, and some are even more convenient to understand with both views simultaneously.

Simply put, when money is treated as a tangible object, a realist view is useful. When it’s more convenient to see it in terms of finance, investment, or double-entry bookkeeping, a structuralist view is clearer.

To be specific, commodity money, like gold and silver coins which have intrinsic value, is best understood through realism. Credit money, which is born from the ledgers of a central bank’s double-entry bookkeeping and expanded through credit creation by banks, is best understood through structuralism. Representative money is a transitional form between the two, and recently, a new form of currency called crypto-assets has emerged. In this way, currency has a layered, sedimentary quality, where several types coexist.

The difference lies in whether you view things from their form (as a tangible object, which is a realist perspective) or from their function (in terms of their roles, relationships, and interactions, which is a structuralist perspective). Even if it’s philosophy, if you can apply it practically in your daily life, work, and leisure and feel its convenience, it will improve your quality of life and efficiency. I will explain how philosophy can be rooted in everyday life and how structuralism can be applied to anything.

2. The History of Money

Let me give a brief overview of the history of money. In ancient times, things that were useful and had intrinsic value were used as currency, which can be considered the beginning of money. This could be gold, silver, or copper, and in some places like the South Sea Islands, shells or even large rocks were apparently used as money. Since the money itself has practical value as a commodity, it is called commodity money. This form of money is an extension of barter, as it is an exchange of commodities. It is also a form of cash, as payments for goods and services are made directly with the physical money.

It’s unclear what practical use shells had, but perhaps they were like accessories? They are beautiful, have unique shapes, and some are even called “treasure shells.” The practicality of giant rocks is also hard to grasp, but considering the island context, perhaps rocks with certain components were rare, or they were useful for building houses, infrastructure, or tools. On coral reef islands, volcanic rock might have been scarce, and transporting it by ship or land could have been difficult, making the act of transport itself valuable.

Gold, silver, and copper are precious metals that are resistant to corrosion, or rust. They are relatively soft, making them easy to adjust in quantity for coinage. In fantasy and medieval worlds, gold, silver, and copper coins are the quintessential image of currency. This type of money is also cash. It’s important to note that cash is not synonymous with money. Our relationship with money often begins in childhood with the use of cash, so we tend to think cash equals money, but money takes many forms besides cash.

Unlike the giant rock currency, as the term “curren-cy” implies, money is something that is carried or circulated. The labor, cost, and time of transportation itself may have been one of the sources of money’s value. However, even gold coins are too heavy and bulky for large purchases. This inconvenience in transactions led to the creation of credit instruments like checks and bills of exchange. Instead of transporting and exchanging physical gold, certificates served as a substitute for money. These certificates promised that they could be exchanged for gold or silver at any time, making transactions much more convenient. This is how paper money was born.

In Europe, for example, goldsmiths needed gold as a material and had safes to protect it from theft. Let’s say there are gold coins in the world. People who owned gold coins but didn’t have a safe would ask the goldsmith to store their coins. A contract was made, and a certificate was issued. With this certificate, one could get their gold back from the goldsmith. If it was certain that the certificate could be redeemed for gold coins, the certificate itself was as good as gold. Therefore, when a person holding a certificate wanted to buy something, the seller might accept the certificate instead of physical money. In this way, the certificate acquired the same value as money. This certificate is the origin of the banknote.

With the creation of paper money, let’s consider another aspect. The goldsmith could not only store gold coins but also lend money. When lending, they would issue banknotes instead of physical gold coins. If transactions could be made with banknotes, they were often more convenient than heavy and cumbersome gold coins. The role of storing and lending money didn’t have to be limited to goldsmiths; they were the precursors to modern banks.

3. Money and Double-Entry Bookkeeping

When we think of money, we often picture cash, but cash makes up only a small fraction of the total money supply in the world. Today, deposit money is far more prevalent. The money that exists only as entries in a bank’s balance sheet is overwhelmingly greater than physical cash. To convert all of this into cash would be a waste of resources and bad for the environment. It would also defeat the purpose of having banks, credit card companies, and the entire financial system. In the age of cashless payments, many people rarely use cash. In countries with high crime rates, carrying cash can be dangerous.

Deposit money is deeply intertwined with double-entry bookkeeping. In practical, operational terms, things like deposit money could not exist without it. A deposit is inseparable from a bank’s balance sheet. (Though one might argue that cash is also inseparable from its material, like metal or paper.) For example, a deposit is recorded and managed on a bank’s books as follows:

Assets (Debit)	Liabilities (Credit)
Loan +100 million	Deposit +100 million

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The “Loan (asset)” and “Deposit (liability)” are recorded as equal amounts on the books and are created simultaneously. When they change, they increase or decrease by the same amount. This is a matter of bookkeeping entries and differs from cash, which has a physical substance. It is functional and formalistic. When you borrow money from a bank, you rarely receive 100 million in cash. If you want to use the borrowed deposit, it is handled through the manipulation of bookkeeping numbers. When repaying, you can use cash, but it is often done through a transfer from another bank.

The fact that it functions without a physical substance, that it can be treated as if it were a physical substance due to various established rules, is what makes deposit money structuralist.

Furthermore, credit money as a whole, including cash and deposits, is structuralist. In Japan, banknotes are printed by the Bank of Japan, but coins are minted by the Japanese government. I don’t know the cost of making a 10,000-yen bill, but it’s certainly not 10,000 yen. The same goes for coins; the cost to make a 1-yen coin is not 1 yen. According to my research, the costs are as follows:

Coin Denomination	Estimated Production Cost (per coin)	Profit/Loss
1 Yen	~3 Yen	~2 Yen Loss
5 Yen	~10 Yen	~5 Yen Loss
10 Yen	~13 Yen	~3 Yen Loss
50 Yen	~12 Yen	~38 Yen Profit
100 Yen	~15 Yen	~85 Yen Profit
500 Yen	~20 Yen	~480 Yen Profit

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So, the Japanese government makes a profit of 480 yen for every 500-yen coin it mints. But it loses money making 1-yen coins. The important point is that whether making credit money is profitable or not, the value of the currency is completely unrelated to its production cost. Since it’s often profitable to create currency, this profit is called seigniorage. The entity that issues currency profits just by doing so. However, if what is issued is not recognized as currency by others, it won’t become currency, and the issuer will only incur a loss equal to the production cost. What is necessary for currency to be recognized as such is credit (trust).

4. Credit Creation

There can be many different monetary systems. Japan has its own system, which is different from its pre-war system or the system of the Edo period. It’s also different from the monetary systems of communist countries. The post-war monetary system was established at the Bretton Woods conference, where there was a conflict between the UK’s John Maynard Keynes and America’s Harry Dexter White over two completely different proposed systems. In the end, Keynes’s plan was defeated, and White’s American plan was adopted. Keynes had also opposed the Treaty of Versailles after World War I, famously predicting it would lead to another world war and leaving the conference. He was a man whose fame as an economist did not translate to success in such international conferences.

At Bretton Woods, the liberal bloc established a system where the US dollar was convertible to gold, and other countries pegged their currencies to the dollar. I don’t know what the Soviet Union’s system was like, but the currency issuer was a single entity, and its use was likely determined by the state—or the Communist Party and its bureaucrats—under a planned economy. The US spent too much money on things like the Vietnam War, leading to the Nixon Shock when it suspended the dollar’s convertibility to gold. The world gradually shifted to a floating exchange rate system. Later, during the Fourth Middle East War, the US established the Petrodollar system, where oil transactions were settled in dollars. It also created systems like SWIFT, famous for its use in sanctions against Russia, and the dollar remains the world’s reserve currency.

However, this system is gradually beginning to crumble, and it is expected that the world is moving from a unipolar US-centric system to a multipolar currency system. Hegemonic powers have benefited from having the reserve currency, but neoliberalism and globalization have hollowed out the middle class. The negative aspects have grown to an extreme, and the developed world is now struggling. It seems to be a pattern in world history that nations rise with their middle class and decline when they stop distributing wealth or providing infrastructure to them.

Regardless, lending money can be seen as an act based on pre-existing trust, but it can also be seen as the moment trust is generated in the concrete form of a loan or debt. Either way, lending money equals the creation of credit. Of course, loans are made with the expectation of repayment, and a credit check is performed before credit is finally extended.

The issuance of banknotes can be handled by entities other than goldsmiths; today, the central bank system is mainstream. It could be a private bank, and indeed, there were times in many regions when this was the case. Multiple banks issuing their own currencies was the norm in the US, for example, before the creation of the Federal Reserve (FRB). Remnants of this system still exist today; the president of the Federal Reserve Bank of New York serves as a governor of the Fed. The FOMC meets about eight times a year, where governors discuss policy rates and, if necessary, quantitative easing to control interest rates and the money supply. The decisions made in these meetings are implemented not by the committee itself, but by banks like the New York Fed.

Central banks do not lend directly to us but to private and government banks, from which we and corporations borrow. There was a time when there were no central banks and various banks issued their own currencies, but various problems arose, leading to the development of the central bank system. The central bank is called the “lender of last resort,” but today it often acts more like a dealer. The lender-of-last-sort function is activated only during major economic crises. Normally, it adjusts the initial creation of money and interest rates to maintain the economy, prices, employment, and the system.

Conversely, the government could become the issuer of money, eliminating the banking system. In Japan, the government mints coins, but the quantity is likely adjusted in coordination with the Bank of Japan and commercial banks. If all money is returned to the central bank—that is, settled—theoretically, all money in the world would become zero.

5. Monetary Base, Money Supply, and the Multiplier Effect

As I wrote earlier, the central bank originally has zero money. The moment it lends, money is created on its books as a deposit and a loan on the debit and credit sides. The same is true for the borrowing bank. Money is created on the books in an amount that balances the debit and credit sides.

Goldsmiths and banks never issued banknotes (certificates) only up to the amount of gold they held. They operated on the assumption, “Everyone won’t come to withdraw their money at the same time, so it’s fine,” and lent out more money than they actually held. A regular bank doesn’t just lend money; it also takes deposits. It borrows money. Banks lend and borrow. If the amount they lend is less than the amount they’ve borrowed, there’s no problem, but they lend out more than they’ve taken in.

Fundamentally, we don’t carry much cash. This is true even in Japan. In a credit card society like the US, it’s even more so. Cash is only suitable for small purchases. For high-value goods, using cash is often practically impossible. It simply doesn’t fit in a wallet. ATMs have withdrawal limits. It’s not normal to carry hundreds of thousands of yen in a wallet. The wallet would be bulging or the money wouldn’t fit. Rent, loans, tuition for higher education, cars, houses—for buying or renting these, cash is virtually useless. Counting a million yen is difficult. So, we keep it as a deposit and pay with cards or electronic money. We hold money in the bank in the form of deposits.

Banks can lend out a portion of these deposits, but they keep some reserves in case everyone suddenly comes to withdraw their money. Still, to make a profit from interest, they must lend out a part of the deposited money. The borrower might use that money for a payment or keep it as a deposit for a while. If they use it for a payment, the recipient will deposit it in a bank. In reality, most transactions are not in cash but between banks, so it becomes a deposit in someone’s bank account somewhere. The bank then lends out a portion of that again.

By repeating this process, the amount of book-entry deposits—deposit money, inside money—becomes larger than the original money issued by the central bank. The money that the central bank lends to other banks is called the base money or monetary base. After it is lent to banks, money moves between banks, individuals, and corporations. Whether through transactions or lending, the important thing is that most money exists in the form of bank deposits. The money existing in this form becomes greater than the money created by the central bank. This is called the multiplier effect. The money multiplier or credit multiplier refers to this phenomenon, and the total amount of money, which is greater than the base money, is called the money supply.

As money circulates through the banking system, the total amount of money, including deposit money, increases. Lending money always means trusting someone. When you lend money, you assess the borrower’s credit, and the act of lending means you trust they will pay it back. If something happens, like a bank run, it can be disastrous. The central bank’s role as the lender of last resort is to lend to banks when they cannot secure funds elsewhere in such a crisis.

The act of lending borrowed money is re-lending, which might raise ethical or moral issues in some cultures. Furthermore, the idea of “lending out extra because nobody will ask for it all back at once” might feel like a scam or deception to some. However, it is a known statistical principle—the law of large numbers—that it is unlikely for many people to demand a refund all at once under normal circumstances. The fact that this system is in place and described in economics textbooks also means it has its merits. In Japan, some may still remember the collapse of the bubble economy, the Asian financial crisis, or the Lehman shock.

With the development of AI, the role of commercial banks in this process may diminish. However, this phenomenon could occur in various forms; even if the official system is abolished, it might just go underground in the form of a shadow banking system.

This series of money created by banks is called credit money. Before banks, there was commodity money, which was precious metals, rare items, or things like round rocks that were difficult but possible to transport. Credit money itself has no substance that can be used as a commodity. There is cash, but most of it is deposit money that exists only on the double-entry books of banks. It’s paperwork, so mistakes are not allowed. Commodity money, in a way, was easier to manage, as you just had to keep it in a safe. Credit money requires diligent, detail-oriented bankers who are good at practical work, make few mistakes, and can check and correct them if they do.

The act of treating something without substance as if it were real through a system and clerical work is, in this sense, structuralist. I have seen the assertion that “money is an illusion,” but it is not an illusion. In Buddhist terms, it is śūnyatā (void); in modern philosophy, it is a simulacrum or simulation. “Simulacrum” can also mean counterfeit or fake. Some may know “simulation” from the gesture in soccer to deceive the referee into thinking a foul was committed. However, it’s not meant in such a malicious sense but has a rather interesting property.

Theoretically, if you reverse the flow of money—you could use the word “settle”—you eventually return to the beginning. That is, you return to a state of zero on the central bank’s books, with debit and credit balanced. In reality, there is no reversal, and unexpected things happen, like banknotes burning in a fire. But without such events, it can literally come from nothing and return to nothing. Yet, it works hard and functions in the world. In that sense, it might be helpful to think of it in the image of “śūnyatā.”

6. Post-structuralism and Money

One could draw a contrast: “Commodity money has substance, so it’s realist.” “Credit money has no substance, so it’s structuralist.”

This is possible, but in fact, even commodity money can be treated with structuralism. And there is no problem in treating credit money as if it has substance and exists in reality. It’s a matter of perspective; you can see it one way, or from the opposite, countervailing viewpoint. In other words, commodity money can be understood through both realism and structuralism. Credit money can also be understood through both structuralism and realism. Furthermore, it’s possible to hold both realist and structuralist views of commodity money at the same time. For example, a gold coin, just because it is made of gold, does not necessarily have the value of the same amount of gold as money. In this respect, even a gold coin has non-material, structuralist circumstances.

We often treat credit money in a material way in our daily lives. Many cultures and families introduce children to money through cash, so many people retain an image of all money as being like cash. I have heard there is a trend to teach children about money in school from an early age to improve financial literacy, so perhaps today’s children have a different sense.

7. Money is Like Geological Strata

The modern philosopher Foucault proposed a kind of “archaeology of knowledge,” and money and economics also have an archaeological, geological quality. Commodity money existed before goldsmiths and banks came into being, and it hasn’t disappeared. New things don’t eliminate the old; they coexist. However, since credit money is overwhelmingly larger in scale, commodity money is less visible, much like an older geological layer that is hard to find unless you excavate.

Even today, the Ministry of Finance sometimes issues commemorative gold coins. They might be kept as souvenirs or traded by collectors at a premium, but they can be used as regular currency. Though it’s not common, and a shop might be troubled if you paid with a commemorative coin.

No particular system is universal or inherently good. Neoliberalism seemed good to some, but combined with globalization, it was taken too far, and now the West, and perhaps Japan too, is in trouble. As the economist Joseph Stiglitz says, perhaps we should patiently rebuild our institutions. He wrote that a long time ago, so it might already be too late. Japan, having been left behind by the world during its 30 lost years, may have been spared the excesses of neoliberalism. Or perhaps it wasn’t spared and it’s already too late.

Commodity money is not the end of the story; today, we have crypto-assets. While they may have seemed suspicious at their inception, I believe there is now a consensus that they can be considered a respectable form of currency. If so, then “Satoshi Nakamoto,” the creator of Bitcoin, may have been a genius.

In terms of geological strata, perhaps there is a layer of commodity money, on top of that a layer of credit money, and on top of that a layer of Bitcoin. If there is an épistémè—a fault, an active fault—that creates a cliff where the strata are visible, perhaps we could see this three-layered structure.

Not just money, but monetary systems have been the subject of long and varied trial and error by different peoples in different regions over many years. We don’t know what the future holds. Perhaps we will shift from a unipolar, dollar-hegemonic system to a multipolar one. Perhaps a major economic shock will lead to the realization of Keynes’s proposal for an International Clearing Union, with a world central bank and a reserve currency called the “bancor.” Or perhaps unbelievable advances in AI or unimaginable changes in international affairs will shape a different system altogether.

8. Conclusion

To understand structuralism, I have used credit money as an example. This is similar to how Hilbert reconstructed geometry using undefined terms, axioms, and formalism. It is not necessary to assume that points, lines, and planes exist in reality, as in Euclidean geometry. Conversely, it is fine to assume they do. Whether they exist or not, Hilbert’s reconstruction of geometry can be accepted. However, depending on how it’s used, Hilbert’s structuralist method deconstructs Euclidean geometry.

In fact, it is the proper method to teach modern disciplines with structuralism. It is advisable to teach the historical process and the realist era, but like physics, theories need to be structuralized. I sincerely hope that modern philosophy, especially structuralism and post-structuralism, along with financial, ICT, and English literacy, will become widespread in the world, as I believe they will be necessary and useful for some time to come.