Yes, credit can be a medium of exchange, and that is really good

Introduction

Hayek wrote, in what we interpret as a prefiguring of crypto currencies, that he found "more helpful for the explanation of monetary phenomena if 'money' were an adjective describing a property that different things could possess to varying degrees...Machlup for this reason speaks occasionally….of 'moneyness' and 'near-moneyness.'"*

Moneyness Example 

Therefore, we must ask: if the nature of mediums of exchage is about degrees of moneyness, what kind of economic goods have the property of moneyness at a very high degree? Let's use the following example to answer that question. 

Say I lend you 100 silver coins because your promises are solid.

1. You spend the coins on production/capital goods.

2. At the same time, I can go and spend your promise in consumer goods at a grocery store. I transfer your promise to the grocery store owner and I can take consumer goods as I see appropriate. Now you owe the 100 coins to the grocery store, not to me. No one should have a problem with that. I hope.

1.1 The capital goods seller spends the coins on new inventory.

2.1 The grocery store spends your promise on new inventory, by transferring the promise to a consumer goods producer.

1.2 The producer of capital goods spends the 100 coins on buying parts.

2.2 The consumer goods producer spends your promise on machinery/capital goods to produce more consumer goods....

See where it's going?

This is about trust. Your promises are as good as money. That's why I lend you the coins to begin with in our example.

The moneyness of credit is backed by present goods

We all use your promise above as money because you are producing goods and services that we need. Therefore, you are helping all that process. Your promise is as good as money, or near money.

If you were slacking off, no one would accept your promises to begin with. So the above process would not even get off the ground. The goods and services you continually produce back the moneyness of your promises. The moneyness of credit is backed by present and continually produced goods, not just by base money.

In a free-market situation, commercial banks that make productive loans do exactly this. However, commercial banks that make mortgage loans to unemployed borrowers, for example, cannot do that.

Conclusion

We should see by now that credit is transferable; therefore spendable and very high on moneyness. The reason why this is not a problem is because, absent an imposition by the bureacratic-state, the promises and credit that contain high degrees of moneyness are the promises from productive economic agents; not from random weak and new banks.

References

*Denationalization of Money

https://fee.org/resources/denationalization-of-money/

Why is fractional reserve banking moral and a net economic positive for society?

Fractional reserve banking has been wrongly labeled as fraud because it has been thought as if commercial banks create multiple titles to a small pool of money. However, our checking accounts are not property titles but credit, a promise to make our payments. We lend the commercial banks our money today and we get goods & services as we use our checking account balance. In fact, fractional reserve banking (FRB) is beneficial for society because it coordinates over time our purchases with the investment companies make to have inventories ready for us.

Commercial banks coordinate our purchases

The main way the commercial banks cover their promises is by the goods & services depositors get every week. Please follow the time-structure example:

1. Monday we deposit 100 coins, we get 100 debit balance.

2. Tuesday the bank lends those 100 coins to the grocery store.

3. Wednesday the grocery store uses the 100 coins to buy more inventory.

4. Saturday we transfer our 100 balance to the grocery store. We are made good on our loan to the commercial bank with goods, not with money.

5. The grocery store uses the transferred balance to pay the loan.

6. Both debts are erased. The loan you made to the bank is paid with goods & services, and the loan the bank made to the grocery store is canceled by the balance transferred.

This is an exogenous example. On another occasion we can develop endogenous examples. But it must be clear now. The commercial banking process gets resources to companies before we buy goods & services, so they have our preferred economic goods in their inventory. Commercial banks coordinate our commercial time-preferences with the time-structure of investment in the commercial sector.  We lend, then the commercial bank lends, and later we get paid by the goods & services we get weekly; many times daily.

The commercial bank owes you the amount deposited, the contract clearly says that.

Furthermore, we have to keep in mind that the checking account contract is very clear. The contract states: "Unless otherwise expressly agreed in writing, our relationship with you will be that of debtor and creditor. That is, we owe you the amount of your deposit."* There is no deceit that our money is stored waiting to be picked up.Checking accounts are not property titles, checking accounts are credit we give to the bank and we are paid by the goods & services we get from companies that do business with our banks. Then again, we lend, then the commercial bank lends, and later we get paid by the goods & services we get weekly; many times daily.

Conclusion 

In closing, fractional reserve banking has been wrongly labeled as fraud, but it cannot be fraud. Our checking accounts are not property titles, they are credit we give to the commercial bank. Also, fractional reserve banking coordinates our commercial time-preferences with the time-structure of investment in the commercial sector. One last time, we lend, then the commercial bank lends, and later we get paid by the goods & services we get weekly; many times daily. We cannot avoid its effectiveness in coordinating our actions over time with the companies we do business with.

*Consumer Deposit Account Agreements, Banking Relationship Fact Sheets, and Notices

https://online.citi.com/JRS/popups/ao/Consumer_Client_Manual.pdf?JFP_TOKEN=POJGUX3S