Commodity Money and the Gold Standard in Star Wars

I am a big fan of Star Wars myself and I could not help but notice that George Lucas, Lucasfilm, and Disney share some fetishism for commodity money as in the old days of the gold standard. Upon closer analysis, the Star Wars movies and series all rely on commodity money akin to gold and silver. Despite the massive advances in technology and weaponry, the far far away galaxy could not invent a superior financial technology to replace physical currency. No digital money, no crypto, and no fiat money either. Transactions in Star Wars are carried out in commodity money such as gold and silver coins.

I wonder how such an advanced civilization in terms of technology could remain stuck with an outdated monetary system based on metal coins and physical currency. Maybe it is because the credit system collapsed at the end of the Old Republic. David Graeber claims in his book “Debt: The First 5,000 Years” that a monetary system which once relied on trust to issue immaterial IOUs might be compelled to resort to commodity money to settle transactions after undergoing a major systemic crisis. In times of crises, trust is lost and people would resort back to commodity money that is not fiat because its value would be quite independent of institutions. There is, however, no indication of that in Star Wars. Commodity money was used even during the 1,000 years of the Galactic Republic. “Republic credits” were commodity money akin to metal coins and ingots all along, way before the collapse of the Old Republic. To add to the conceptual confusion, “credit” and physical currency are used interchangeably in Star Wars and regardless of the period in question, whether before or after the Old Republic, whether before or after the Galactic Empire.

In this post I discuss the concepts of money and credit in more detail. I show how money and credit are always conceptualized as physical entities in Star Wars irrespective of the reference period, irrespective of the form that the state takes, and irrespective of the underlying mode of production. During the Old Republic, during the Clone Wars, during the Galactic Empire, and during the New Republic, money and credit are always conceptualized as physical entities. As I demonstrate in this post, Star Wars reproduces incorrect ideas such as the “money multiplier” and that bank loans are reallocations of existing deposits, as if banks were mere intermediaries that reallocate money from savers to investors. The “money multiplier” and the requirement of prior saving for banks to issue new loans are two common conceptual mistakes often made when money and credit are incorrectly conceptualized as physical entities.

I also analyze the challenges of conceptualizing value equivalence in a galactic market that spans different modes of production, both within and across planets. Star Wars avoids the complications of what the nature of value would be in a galactic socio-economic formation by portraying money as a physical commodity. But this comes at the price of creating a mismatched narrative of advanced technology co-existing with an outdated financial system. At the galactic level, general relativity and time dilation pose additional challenges to the pricing of securities and to a value theory based on production time.

How econ101 and economics textbooks made their way into the Star Wars universe

In this post I will argue that Star Wars employs:

(i) incorrect concepts of money, credit, and finance;

(ii) a mistaken notion that money and credit are physical entities;

(iii) a mistaken notion that investment is financed by prior savings;

(iv) a mistaken notion according to which the “money multiplier” supposedly explains how banks issue new loans from previously saved deposits and, in this way, “multiply up” the monetary base into the money supply, therefore relegating banks to the role of mere intermediaries between savers and investors;

(v) an ahistorical concept of money and finance that decouples money and finance from the state and from the type of economic system;

(vi) unclear concepts of price and value, with no defined equivalence system that spans the production and exchange of goods and services across different modes of production on different planets.

What prompts me to write this post is the fact that I am a big fan of George Lucas but, nonetheless, also the fact that Star Wars employs incorrect concepts of money and finance, akin to what is unfortunately taught in many introductory Economics classes and textbooks. Star Wars has a wide reach across ages, countries, and religions. Its content reaches peoples all around the world. It is unfortunate, however, that Star Wars reproduces mistaken notions of money and finance. Hopefully this post will clarify what money and credit really are and how Star Wars could better conceptualize them in the forthcoming movies and series.

The naïve textbook approach to money and finance portrays money and credit as entities analogous to physical commodities that have to be saved in order to be borrowed. Even in sophisticated economic models to this day, money is still theorized as a physical entity, and finance is still theorized as an intermediary that reallocates existing money from net savers to net investors. This naïve approach is known in the history of economic thought as the “loanable funds theory”. It treats money and credit similarly to any other tangible commodity, and it treats finance as a reallocator of money from savers to investors. My main concern is that Star Wars remains attached to this mistaken approach to money and finance.

Star Wars additionally portrays money in an ahistorical way that detaches money from the state and from the type of economic system. In the terminology of Political Economy, Star Wars detaches the concept of money from the underlying mode of production. Regardless of the historical moment in the Star Wars timeline, money is always and everywhere presented as a physical entity, similarly to commodity money and the gold standard. Before and after the Old Republic, before and after the Galactic Empire, before and after the New Republic, money is always and everywhere presented as akin to gold bars and other precious metals. The images and dialogues that I gather in this post will attest to that.

In Star Wars we see a complex and evolving socio-economic formation comprising a combination of vastly different modes of production. Within and across planets, we see modes of production based on hunters and gatherers (as in a subsistence economy), slavery, serfdom, feudal relations, capitalist relations and, not surprisingly, socialist relations. But in all of these vastly different modes of production, money is always portrayed as a physical entity like gold bars. The unit of account may change, as it did from “Republic credits” to “Imperial credits” and then to “New Republic credits”. But the underlying concept of money and finance is always the same in Star Wars, namely that of commodity money akin to gold and silver.

Even though the production and exchange of goods and services occur both within and across planets, Star Wars does not make clear how the value equivalence of those goods and services is established. How are goods and services valued across different types of economic system on different planets? How is wealth measured in a universal way such that different people on different planets agree on a common measure of value? How is wealth valued in such a way that it can be recognized and traded across vastly different types of economic systems from one planet to another? Even though the Galactic Republic or the Galactic Empire could establish a common unit of account, how does that unit of account represent labor hours and the value of goods and services? How does the galactic market determine how much something is worth?

From my analysis of all Star Wars movies and series, the conclusion is that Star Wars simplifies these complicated economic issues by resorting to the gold standard and to the concept of commodity money, often employing analogies with gold and silver. However, by portraying money as physical money and precious metals, Star Wars creates a mismatched narrative in which advanced technology co-exists with inadequate concepts of money and finance. Were the two Death Stars and the armada of Star Destroyers paid for in gold coins and precious metals?

What is the solution?

Star Wars needs to ditch naïve notions of money and finance such as the “money multiplier”, the “loanable funds theory”, and the conceptualization of money as a physical entity. In its place, Star Wars should present money and finance as they really are:

(i) banks create money endogenously (ex nihilo) based on their own profit expectations, where banks’ expected profits are jointly determined by the demand for credit and the risks associated with the banks’ leverage levels;

(ii) the money multiplier does not exist;

(iii) the “loanable funds theory” is unrealistic;

(iv) money and credit are socially accepted representations of labor time and are, as such, social constructs not bound to physical entities;

(v) banks are not mere intermediaries reallocating saving, but de facto creators of money ex nihilo, where banks create new deposits when they issue new loans;

(vi) saving does not determine investment but the other way round: investment creates saving;

(vii) investment does not require saving, even though credit issuance often requires some form of asset as collateral;

(viii) the creation of money out of nowhere (ex nihilo) inflates the asset and the liability sides of the banks’ balance sheets, with no need to resort to gold bars accumulated in an underground vault;

(ix) money and finance are intrinsically related to the type of economic system, such that there is no universal, ahistorical concept of money that is independent of the mode of production.

Evidence from the Star Wars canon

In the paragraphs that follow I analyze how money and credit are conceptualized in many of the Star Wars movies and series. I do not own any copyrights over the images displayed here. I use them only with the sole purpose of explaining how money is incorrectly portrayed in Star Wars and, hopefully, offering a way to improve the Economics of Star Wars.

If you are new to the Star Wars universe, these timelines summarize the sequence of events: timeline 1 by Bossk’s Bounty; timeline 2 by In a Far Away Galaxy; and timeline 3 by an anonymous author.

This is a screenshot of Star Wars: A New Hope released in 1977. Notice how the Rebel Alliance paid Han Solo in physical currency for rescuing princess Leia and for transporting Luke, Obi-Wan Kenobi, C-3PO, and R2-D2. Right before the battle of Yavin we see Han Solo loading some boxes of money onto the Millenium Falcon:

Now take a look at this scene from Star Wars: The Book of Boba Fett released in 2022, the events of which take place after The Return of the Jedi. The Pyke Syndicate uses metal coins to trade raw spice on Tatooine:

One more from The Book of Boba Fett now. Garsa Fwip offers tribute to Boba Fett by filling his helmet with New Republic “credits”. So there is no doubt that Star Wars remains attached to the gold standard:

At the end of episode 4 of season 1 of The Book of Boba Fett, Fennec Shand asks Boba Fett “how much treasure do we have in reserve?”. To which Boba replies: “I have plenty of credits”. The dialogue explicitly indicates that money is conceptualized as “credit”, which is then equated to “treasure in reserve“. This clearly equates money to a tangible commodity that can be physically hoarded as treasure:

In episode 5 of season 1 of The Book of Boba Fett, Din Djarin (the “Mandalorian”) comes after Kaba Baiz to bring him in. Kaba Baiz’s table is covered with physical currency. After killing him, the Mandalorian tells the employees that “there’s a pile of New Republic credits in there” that he has no right to. New Republic “credits” are indeed commodity money just like in the gold standard:

The Mandalorian series, released between 2019 and 2023, narrates events five years after the fall of the Galactic Empire at the end of Return of the Jedi. In the opening scene of episode 1 of season 1, Mythrol offers his “credits” to Din Djarin at a bar located on the icy planet Pagodon. The “credits” are the physical representation of money:

In the same episode 1 of season 1, the Mandalorian meets with Greef Karga, an agent for the Bounty Hunters’ Guild, inside a cantina on planet Nevarro. Karga pays the bounty in Imperial credits but Mando refuses to accept payment, arguing that the Empire does not exist anymore. Karga offers to pay him in Calamari Flan instead but only at half the rate, an offer that Mando reluctantly accepts. The Imperial credits and the Calamari Flan are both depicted as physical currency, much similar to commodity money:

In episode 4 of season 1 of the Mandalorian we see that commodity money in the form of metallic coins is used as currency among krill farmers on planet Sorgan:

Episode 5 of season 1 of the Mandalorian takes place on Tatooine. Mando lands his Razor Crest on Mos Eisley for repairs and offers 500 Imperial credits to Peli Motto to fix his ship. The “credits” are commodity money in the shape of metallic bars, and even sound like metallic coins. A few minutes later, Mando enters Chalmun’s Spaceport Cantina where Toro Calican is playing with a golden coin that has the Rebel Alliance insignia. Take a look:

In season 3 of the Mandalorian, commodity money makes an entrance again in episode 2. At her garage in Mos Eisley, Peli Motto charges an unknown Rodian some money to fix his damaged speeder. The upfront payment comes in the form of metallic coins inside a tiny leather bag. Peli Motto then gives some of the coins to the Jawas for the parts that they themselves had stolen from the poor Rodian:

In episode 6 of season 3 of The Mandalorian, Axe Woves and Koska Reeves are now working as mercenaries using ships they had taken from the Empire. They intercept a Quarren freight ship and retrieve Mon Calamari Viceroy’s son from her lover, Quarren captain Shuggoth. Koska Reeves boards the Quarren ship and informs that her group of Mandalorians, which has broken up with Bo-Katan Kryze, is now up for hire and that “all it takes is a few credits”. The scene shows that “credit” is the universal unit of account:

In episode 7 of season 3 of The Mandalorian, Grogu drives his new IG-12 droid around Nevarro and creates some mess with one of the food stalls. Din Djarin then pays for Grogu’s mess twice using the local currency, which happens to be metal coins:

Despite the advanced technology, why does the commodity money fetishism persist? The term “credits” appears often in Star Wars but, to no surprise, it refers to physical currency that can be stored in a vault. “Credit” in Star Wars is not an immaterial IOU but is rather commodity money that can be physically hoarded in safe boxes and vaults. Why does Star Wars combine advanced technology and weaponry with outdated conceptions of money and credit? My guess is that George Lucas and the producers at Lucasfilm are simply reproducing incorrect conceptions of money and finance from naïve Economics textbooks.

In the 1999 movie Star Wars: The Phantom Menace, Jedi Master Qui-Gon Jinn offers 20,000 Republic credits to Watto in exchange for replacement parts (a hyperdrive generator) for his damaged Nubian ship on Tatooine. Watto does not accept the offer and replies instead that “Republic credit are no good” on Tatooine and that he needs “something more real”, so “no money, no parts, no deal”. In this particular dialogue, Watto equates “money” with “something more real” than Republic credits. This gives the impression that Republic credits are not commodity money. Take a look:

But once you search for “Republic credits” on Wookieepedia you will see the big confusion between credit (an immaterial IOU which in no way needs to be tangible), money (which is the autonomized representation of abstract wealth that has universal acceptance; and which in the capitalist mode of production becomes a means that is also an end in itself), and physical currency: “credit also came in the form of small metallic ingots” and that “credits existed in coins and chips of varying denominations”. Try another search for “credit” on Wookieepedia and you will find that: “Credits could be carried on a person via credit chips. Credits also came in the form of credit ingots, which were often kept in vaults and transported under heavy guard.”

A quick search on Google Images for “star wars republic credits” shows you how the physicalist interpretation of what money is in fact dominates the Star Wars universe:

Little Anakin wins the Boonta Eve pod race on Tatooine in Star Wars: The Phantom Menace. After winning the race he sells his pod and collects the money in physical form. Anakin then comes home and brings to his mother the commodity money he gained from selling the pod:

Debates on the nature of money and value are inevitable in any type economic system. How much is a commodity worth? In what (universal) units do you measure the value of commodities? How does money represent the value of commodities? What is “value” to begin with? What is the connection between the value of commodities and the value that money represents? How is that connection established? How is the monetary unit of account connected to the value of the goods and services? How does money relate to the underlying mode of production? This set of questions is what value theory addresses in Economics and in Political Economy.

In A New Hope (released in 1977) and in The Return of the Jedi (released in 1983), both of which take place during the rule of the Empire, we see two dialogues in which prices are negotiated but the monetary unit (the unit of account) is not made explicit. I assume the implicit unit of account to be in terms of “Imperial credits”. The first dialogue is from A New Hope when Han Solo and Kenobi reach an agreement on the passage to Alderaan. Han Solo asks for 10,000 in advance and Kenobi offers him 2,000 on the spot plus 15,000 upon reaching Alderaan:

In Return of the Jedi we see the second dialogue in which Leia (disguised as bounty hunter Boushh) negotiates with Jabba the Hutt the reward for capturing Chewbacca. Jabba offers 25,000 for bringing Chewbacca in. Leia asks for 50,000 and then turns on a thermal detonator. Jabba appreciates Leia’s boldness and they finally settle for a bounty of 35,000. The reward is negotiated but the unit of account is not made explicit. I again assume that the implicit unit of account is denominated in “Imperial credits”:

In Star Wars: The Force Awakens, released in 2015 and whose story is set 35 years after The Return of the Jedi, we see a dialogue between Rey and Unkar Plutt on planet Jakku. A barter trade takes place between them. Unkar tells Rey that the parts she brought him are worth one quarter portion of food. In the second dialogue, Unkar tries to acquire BB-8 from Rey by offering her 60 portions of food in exchange. In this barter economy, goods are exchanged directly one for another and money has no place. But some form of value equivalence must be stablished in trade. How much is a spare part worth? How do you measure value? Is value purely subjective? Is value somehow connected to the objective labor effort directly and indirectly spent on acquiring or producing the goods? If yes, then how?

Star Wars: The Last Jedi, released in 2017, continues the story from The Force Awakens. The underworld codebreaker DJ steals a ship on Canto Bight and then ransacks the money hidden aboard the ship. The money DJ ransacks is, of course, commodity money:

Aboard the First Order starship, DJ buys his freedom by informing general Hux about the rebels’ escape plan to planet Crait. He cuts a deal and the First Order rewards DJ in physical currency:

In Solo: A Star Wars Story, the movie released in 2018 and which narrates events 10 years prior to A New Hope, we see that “credits” is the unit of account on the shipbuilding planet of Corellia. Han Solo and Qi’ra bribe an imperial officer by offering her refined hyperfuel, also known as coaxium, which is “worth at least 800 credits, maybe more”. At the end of the movie, Han Solo estimates that the refined hyperfuel he gifted to the rebels are worth “about 60 million credits”:

Star Wars: Rogue One, released in 2016, narrates the events that lead right into the 1977 movie A New Hope. On the desert moon Jedha, Jyn Erso and Cassian Andor search for Saw Gerrera just before Jedha city is blown up by the Death Star. While walking through the city, Jyn and Cassian pass by an Imperial hologram offering a 600-credit reward for information on Bodhi Rook, the Imperial pilot that deserted to bring the recording from Galen Erso to Saw Gerrera. As we can see, “credits” are also the unit of account and the form of currency on Jedha:

Star Wars: Andor, released in 2022, narrates the events 5 years prior to Rogue One and the Battle of Yavin in A New Hope. At the start of episode 1 in season 1, two Pre-Mor Authority security officers harass Cassian Andor on planet Morlana One. Andor tells the officers that he has “300 credits in [his] coat pocket”. The scene shows that money is measured in units of “credits” and that it is something physical that can be placed in your pocket:

In episode 3 of season 1 of Andor, we more directly see how money is represented as commodity money akin to the gold standard. Take a look at this dialogue between Cassian Andor and Luthen Rael on planet Ferrix. Andor asks for the money (40,000 credits) and Luthen Rael replies by opening a hand fan of gold bars:

In episode 4 of season 1 of Andor, the rebels plan to raid the Imperial garrison on planet Aldhani. Look at the details of the plan highlighted in the figure below. The dialogue shows that money is conceptualized as something physical that is stored in crates inside the vault of the Imperial garrison: “the Aldhani Garrison is a depot for … the payroll for the entire Imperial sector. […] This room behind the flight deck, that’s a vault. We’re taking crates of payroll from that room”. Crates of payroll? The salaries of the Imperial officers are stored in crates inside a depot?

Not even the almighty Empire can use electronic money to pay the wages of their own employees. With such advanced technology, why is the payroll of an entire sector stored physically inside a vault? In episode 5 we then get a glimpse of the vault filled with the crates of gold bars. Take a look:

In episode 6 of Andor it becomes clear that Star Wars indeed conceptualizes money as commodity money in the form of gold bars. Even the payroll of the Empire is stored in crates of gold bars, secured inside a vault. The rebels steal an estimated sum of 80 million credits from the vault to finance the Rebel Alliance. The issue here is that even a powerful centralized Galactic Empire is portrayed, counter-intuitively, dealing with money in physical form. The Empire has no electronic or digital money despite all the advanced technology, weaponry, and the powers of an authoritarian, centralized state.

In episode 7 of Andor, Cassian pretends to be showering on Niamos while he is in fact getting some commodity money from a hidden box on top of the shower. The commodity money is certainly Imperial credit, judging by the raised logo on the credit chip:

In episode 11 of Andor, Cassian escapes from the Narkina 5 prison and makes his way back to Niamos to rescue his safe box from the hotel room, where he had hidden his money payment from the job in Aldhani. The box is still filled with imperial credits and a handgun. The imperial credits are, once more, depicted as commodity money in the form of metal bars. In the same episode, Syril steals some money from his own mother’s safe at home. The currency is also depicted as commodity money in the form of a metal bar. Take a look:

The animated series

Let us now analyze the animated series. In Star Wars: The Clone Wars, produced between 2008 and 2020, the events of which take place between Episode II (Attack of the Clones) and Episode III (Revenge of the Sith), we find much better evidence that the Star Wars canon remains stuck with the idea that money and credit are physical entities.

In episode 6 of season 1, Anakin and Ahsoka negotiate with a Trandoshan scavenger in an attempt to retrieve R2-D2. Anakin offers the scavenger money in return for the missing droid. The money is shown in physical form:

In episode 11 of season 1, Hondo Ohnaka and his pirates capture Count Dooku and demand a ransom of “a million credits” from the Republic, to be paid in spice. I believe that “spice” is a tribute to Frank Herbert’s Dune novel, published in 1965 and which was a major source of inspiration for George Lucas.

In episode 17 of season 2, Obi-Wan, Anakin and Ahsoka crash land on Felucia and join a group of bounty hunters in defending a village from Hondo Ohnaka’s pirates. In an attempt to prevent a conflict between pirates and local farmers, Obi-Wan offers Hondo money via a “funds transfer”. Hondo turns the offer down and promptly responds: “Republic credit? My associates don’t accept that currency”. Interestingly enough, this dialogue is very similar to the negotiation between Watto and Qui-Gon Jinn on Tatooine in Episode I: The Phantom Menace. Like Watto, Hondo and his pirates do not identify republic credits as money but only as currency. Take a look:

In episode 22 of season 2, Plo Koon and Ahsoka Tano search for clues on where to find Aurra Sing and Boba Fett, who hold troopers as hostages at an unknown location. The two Jedi enter a bar in Coruscant’s underworld and find a lead to Florum. On their way to the exit, Ahsoka throws a few gold bars to distract the men at the bar:

In episode 4 of season 3, Jabba the Hutt scolds his son, little Rotta, inside his palace on Tatooine. The scene has nothing to do with money at all, but I think it is worth mentioning that the little huttlet is my namesake in Star Wars!

In episode 5 of season 3, corruption is on the loose on Mandalore and an inspection officer is taking bribes from smugglers at the shipping docks. The criminals bribe the inspection officer in commodity money, which seems to be “Republic credit”:

In episode 8 of season 3, Jabba the Hutt pays Cad Bane for his services in physical money, which looks like mini gold bars to me:

In episode 20 of season 4 of Star Wars: The Clone Wars, Asajj Ventress also gets paid in what looks like mini gold bars, but those are referred to as “unmarked credits”:

In episode 1 of season 5 of Star Wars: The Clone Wars, Savage Opress and Darth Maul find a vault filled with gold bars but they refer to them as “credit chips”. Why would they refer to physical money in a vault as “credit” chips?

In season 6 of Star Wars: The Clone Wars we then see that the Intergalactic Banking Clan has a massive vault on planet Scipio, which gives further emphasis to the mistaken notion that money and credit are physical entities that can even be stored in an underground vault. Once more, the producers at Lucasfilm were not able to break free from the incorrect conception that money and credit are tangible objects, and thus missed the opportunity to show to the audience how a real financial system operates.

At first sight, it is not clear if the vault that the Banking Clan keeps on Scipio stores physical money or just the data on financial transactions. But then in episode 5 of season 6, Clovis tells Padmé that “the vaults are empty“, giving further emphasis to the mistaken notion that money and credit are physical entities that can be stored in vaults:

Now look at this scene between Clovis and Padmé in episode 6 of season 6. Clovis tells Padmé that “the Banking Clan is promising to lend credits to the Republic, credits they simply don’t have“. Padmé then asks back to Clovis: “But where have all the savings gone?“. This particular dialogue is strong evidence that the concept of money in Star Wars is, unfortunately, that of commodity money. Clovis’ line explicitly implies that banks can only lend money that they already posses in their vaults. You can only lend what you already have, right? Well, not when it comes to money creation actually.

Padmé and Clovis reinforce this mistaken notion of money and credit by thinking that savings are the source of bank lending, as if banks were lending the money that was first saved by the depositors. This is the well-known “money multiplier” story, which mistakenly posits the causality backwards when it comes to money creation. Moreover, the dialogue between Padmé and Clovis suggests that the Death Star was paid for with stolen physical savings, which the Banking Clan redirected to hidden accounts. Take a look:

The “money multiplier” story claims that, first, savers deposit their money in the banks. Because of the fractional reserve system, in which only a small fraction of the bank loans needs to be covered by reserves, banks are then allowed to issue loans in excess of their reserves, thus “multiplying up” the deposits from savers into the actual money supply. But in reality banks do the exact opposite of what the “money multiplier” story claims. Banks issue loans based on expected profits and then buy reserves to keep their minimum level of reserves requirements. Those reserves can be purchased from other banks or from a central bank that issues the universal means of payment. If there is no central bank, then the biggest private bank operates as the de facto central bank, as JP Morgan did for several decades in the USA before the creation of the Federal Reserve (the “Fed”) in 1913. The fundamental role of a central bank, whether public or private, is that it operates counter-cyclically: it curtails credit when the economy is booming and it creates liquidity in times of crises. Private banks do the opposite of what a central bank does: they extend credit when the economy is booming and curtail credit when the economy is tanking.

In episode 5 of season 7 of Star Wars: The Clone Wars, we once again see that money is confusingly called “credit” and is conceptualized as a physical entity even at the heart of the Old Republic on planet Coruscant:

In the ensuing series Star Wars: The Bad Batch released between 2021 and 2022, which takes place right after the Clones Wars and the end of the Old Republic, metal bars are still used as currency. Look at this scene from episode 2 of season 1. The former clone trooper is holding physical “credits” in his hands while trying to book a trip off-planet. We then see a hologram announcing that “every citizen can exchange their invalid currency for Imperial credits at no cost, thanks to the generosity of the new Galactic Empire”. This is clear evidence that money is conceptualized as a physical entity regardless of the political form of the state and the type of economic system. The Galactic Empire replaced the Old Republic, and hence the unit of account changed from Republic credits to Imperial credits, but the essence of money was the same: that of commodity money akin to gold.

The “chain code” mentioned in that episode is just a form of personal identification, similar to an ID card, for the government to surveil people trying to move around. With the change in government, Republic credits became invalid currency and had to be replaced by Imperial credits. Whether before or after the rise of the Empire, the essence of those “credits” was that of commodity money. Observe:

In episode 4 of season 1 of The Bad Batch we see that commodity money is the official currency on planet Pantora. The units of the physical currency are called “credits” and they look like silver bars:

In episode 5 of season 1 of The Bad Batch, silver bars are used as means of payment, giving further emphasis to the mistaken notion that money is a tangible entity. In this scene featuring Cid and Bib Fortuna, the commodity money is carried in a briefcase:

In episode 7 of season 1 of The Bad Batch, we again see that the official currency in Star Wars is indeed called “credits”. “Credits” are the means of payment in all trades, local and between planets. We see once more that these “credits” are physical money similar to silver bars. Look at the “credits” stored inside Cid’s briefcase:

The payment for the rescue on Ryloth in episode 12 of season 1 of The Bad Batch comes inside a briefcase too. No wire transfers or digital money this time? Nope. It is commodity money again:

In episode 1 of season 2 of The Bad Batch, we learn that Count Dooku kept his personal fortune in precious metals. The bad batch opens Dooku’s war chest and finds his fortune stored in the form of what looks like gold bars, silver bars, and diamonds:

In episode 13 of season 2 of The Bad Batch, Phee and Omega meet Crowder and his gang of thugs inside a cantina. Crowder has an artifact for sale that Phee wants. Omega then delivers a briefcase full of commodity money to Crowder in exchange for the artifact. Look at those shiny gold bars inside Omega’s briefcase:

In episode 16, the final episode of season 2 of The Bad Batch, Cid betrays batch 99 and turn them in to the Empire. Doctor Hemlock rewards Cid with a suitcase (possibly filled with commodity money, but not shown explicitly) for her assistance in revealing the location of batch 99 and Omega. No wire transfer for Cid? Nope, the empire prefers to deal with money in physical form:

In the series Star Wars: Rebels produced between 2014 and 2017, the events of which occur after the events described in The Bad Batch, we see once more that metal bars are still used as currency. Not even the all powerful, centralized state of the Galactic Empire could get rid of physical currency. No surprise here once again, given the attachment to the mistaken notion that money needs to be something physical. In episode 3 of season 1, senator Bail Organa pays Kanan Jarrus in what looks like gold bars:

In episode 11 of season 1 of Star Wars: Rebels we see again some “credit” chips on the table. Or should I say gold bars on the table?

In episodes 6 and 14 of season 2 of Star Wars: Rebels, pirate Hondo Ohnaka carries a box of “credits” in physical form, which look like gold bars to me:

Commodity money is also used in local trade on planet Lothal, homeland of Ezra Bridger. Observe these two scenes from episode 3 of Star Wars: Rebels – Shorts. A shiny gold bar is used as local currency:

Star Wars: Resistance, the animated series released between 2018 and 2020, narrates the events after the fall of the Empire in Return of the Jedi. The series take place during the times of the New Republic and the rise of the First Order, shortly before and during the events of the sequel trilogy. Once more, money is portrayed as commodity money and the gold standard rules in the galaxy. Take a look at this scene from episode 2 of season 1 of Resistance in which money is still referred to as “credits”:

In episode 3 of season 1 of Resistance, in the following sequence of scenes we clearly see that money (“credits”) is conceptualized as gold bars. No doubt that money is a physical object even during the times of the New Republic. And these folks are surely not bounty hunters:

In episode 6 of season 1 of Resistance, we see that “credit” is the official unit of account and that physical currency is used in local trade on the ocean planet Castilon:

Episode 9 of season 1 of Resistance tells the story of the conflictive relation between Jarek Yeager and his estranged younger brother Marcus Speedstar, who will race each other in the Platform Classic around the Colossus. Aunt Z and her customers place bets on Yeager and Speedstar using physical money ahead of the race. Yeager lets Speedstar win so he can collect the race prize (in physical money). Marcus then uses the race prize to pay off his debt with the Guavian Death Gang and release his friend Oplock from the gang’s custody. All transactions employ commodity money:

In episode 9 of season 2 of Resistance, Captain Doza and Vranki the Hutt strike a deal in the Voxx Cluster. The bet between them is denominated in units of “credit”. In episode 10 of season 2, bets aboard the Colossus ship are made using shiny currency in physical form, just like gold bars. In episode 12 of season 2, vendor Lechee refers to money as “credits” while holding gold bars on planet Varkana. In episode 14 of season 2, Warbirds pirate leader Kragan Gorr purchases battle droids from Sidon Ithano, the Crimson Corsair. The physical payment for the droids is delivered in a big metal box.

The scenes happen on different planets and within different modes of production. But in all of them the common denominator to represent value is commodity money. These episodes take place during the New Republic and during the rise of the First Order. I wonder who issues these “credits” and under what conditions. Is there a central galactic bank that the New Republic controls to issue commodity money? Or is the commodity money produced in a decentralized way like gold mining? Or is there a private consortium of banks, like the erstwhile Intergalactic Banking Clan, that controls the issuance of these physical “credit chips”? I know that Star Wars is a fantasy universe, but I wonder how money would be issued and how value equivalence would be determined once intelligent life spreads across galaxies.

How does finance really work?

A real financial system operates mainly through the endogenous (on-demand) creation of liquidity, in which the banks’ assets and liabilities are jointly expanded ex nihilo. Each bank creates new money by inflating the liability side of its balance sheet, which simultaneously becomes the asset side for the account holders. The newly created deposits are a liability to the commercial bank and an asset to the borrower. Little relation exists to anything tangible besides the electrical energy powering up the computers that run the software for the banks.

The commercial banks’ expected profit is the main driver of endogenous liquidity creation, not a precious metal stored in the banks’ vaults. Once banks calculate their expected revenues and expected costs (which include the expected risks associated with non-performing loans, defaults, as well as regulations imposed by the central bank), they can make a final decision on whether to issue new credit based on the expected profit of the credit issuance. The creation of credit happens when the loan is approved and is done digitally by typing the numbers on the computer. Nothing physical is issued when banks extend credit.

More importantly, the credit that banks extend is not a reallocation of already existing savings in the economy. Saving is not required for the issuance of new credit, even though assets might be pledged as collateral. The new purchasing power that the new loan creates is based on expected profits that might be realized or not in the future. The new loan has no equivalent in prior savings or in current saving. In fact, it is not the case that saving creates credit, but rather that it is credit that creates saving through investment.

Note that I use the word “saving” both as a noun and as a verb to refer to a flow of income, while I use the word “savings” always as a noun to refer to a stock of wealth.

See this note and this paper from the Central Bank of the UK (known as the Bank of England) on how commercial banks create money endogenously on demand.

This short article on the credit-growth nexus offers important insights on how people mistakenly conceive of money and credit not in monetary terms but actually in physical terms. People also mistakenly think that the “money multiplier” exists, but the “money multiplier” is an incorrect approach that assumes that credit derives from reserves that are “multiplied up” to become the money supply.

Investment (a flow of expenditure) and credit (a stock of debt) do not come from prior saving (a flow of income) or from prior savings (a stock of wealth), even though some assets are often pledged as collateral when someone receives a loan. Saving comes from investment and credit creation, not the other way around. Credit is created on demand when banks expect to profit from it, and the credit that banks create represent new purchasing power that did not exist beforehand in the economy.

In this sense, banks are not intermediaries that reallocate money from savers to investors, as is usually assumed. Banks do not merely reallocate savings. Banks create new credit to finance new investment expenditures. Credit creation generates new deposits, finances new investment, and then creates new flows of saving that increase the existing stock of savings.

It is amusing to see how Star Wars combines very advanced technology and weaponry with mistaken conceptions of money and credit.

If you want my perspective on money as the autonomized representation of abstract wealth that has universal acceptance and which simultaneously becomes a medium of exchange as well as an end in itself, then see my 2016 paper with Rodrigo Teixeira in the Cambridge Journal of Economics, titled “The Autonomization of Abstract Wealth: New Insights on the Labor Theory of Value“.

If you want a more in-depth explanation of how endogenous credit creation and Keynes’ principle of effective demand determine relative prices and the growth path of an economy, then see my 2021 paper “Effective Demand and Prices of Production: An Evolutionary Approach” published in Structural Change and Economic Dynamics.

If you want to know my opinion on Bitcoin, cryptos, and other digital assets then see my 2022 paper with Edemilson Paraná titled “Bitcoin as a Digital Commodity“, published in the New Political Economy journal. This paper is open access to everyone.

Fantasy or science fiction?

Star Wars is often but mistakenly categorized as sci-fi when in fact it is a fantasy universe that stretches our imagination. As George Lucas himself describes it, Star Wars is a space opera that narrates a family drama. But I often wonder how a galactic civilization as portrayed in Star Wars would organize the production and distribution of wealth. At the galactic level, different planets would feature different socio-economic formations comprising different modes of production. I assume, as in Star Wars, that trade would take place both within and across planets. I call this the galactic market. I wonder how the galactic market would determine the exchange rate between goods and services across different modes of production on different planets. How would value equivalence be stablished? How would the galactic market determine how much a good or service is worth? How would people agree on how much something is worth? Even more challenging is to imagine in what units of value would the equivalence of goods be stablished, either objectively or subjectively. Here I do not mean the currency units, but in fact the underlying units of value that the currency units represent.

Let us assume for a moment that, as in Classical Political Economy, the unit of value that the unit of currency represents can be measured in hours of abstract labor time. The real challenge is that an hour is a measure of time, but we know from General Relativity that time is relative to speed and that time can be both curved and slowed down by massive objects in space. And the faster you move in the space dimension, the slower you move in the time dimension. People travelling at near the speed of light would age much slower than people resting on a planet similar to Earth. Furthermore, because of the huge distances at the galactic level, there is no universal agreement on what “now” means. The meaning of “now” depends on the location and speed of the observers. Hence, different observers on different planets would not agree on what “now” means and on how much time has passed between two events. Communication between distant observers is also not instantaneous since the speed of communication is bounded by the speed of light.

In that case, how would value be measured in units of time? How would compound interest be charged by banks? How would the rate of return be computed per period? What would be the reference time period to compute rates of return? How would spot and futures markets operate if there is no universal agreement on what the “spot” moment is? If there is no agreement on time at the non-local level, say across distant planets with different masses, there cannot be an agreement on matters of value and finance at the non-local level either. At the local level, say on the same planet, people agree on matters related to time because at the local level the effects of general relativity are much smaller. In local finance the effects of general relativity can be ignored. But the effects of general relativity such as time dilation are too great to be ignored at the galactic level. Because of time dilation and the non-Euclidean properties of the fabric of spacetime, it would be very difficult to create a galactic market with a universal measure of value based on non-local time. A measure of value based on time would thus work within but not across distant planets.

A galactic market requires a non-Euclidean concept of value that is not susceptible to time dilation. One solution would be to ditch measures of value based on time and implement measures of value based on energy consumption. Relative prices, compound interest, and value equivalence would all be determined in units of energy expenditure. Using energy consumption rather than reproduction time as the measure of value would probably reduce, even though it would not eliminate, the effects of general relativity on value equivalence in the galactic market. A crucial problem would still remain because energy consumption is a per-period flow that requires a reference time frame to stablish what a time period is and how to measure its length.

What do you think? Let me know.

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Post last updated on: May 8, 2023.

I will continue to update the post as long as Disney and Lucasfilm release new Star Wars movies and series.

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