Money Doesn’t Make the World Go Round

Why Credit, Not Money, Runs the World

Tamika Tyson, Founder & Managing Partner, SCALE
April 2026 | Part 3 of 7 in the Through the Cycle series

I have a sign in my office that says, "Cash is king." And I believe that. Cash keeps you alive.

But if cash is king, credit is the queen.

And in chess, you learn something important: the king keeps you alive. The queen is how you win.

You can survive with just a king, but it is a lot harder to win without a queen.

Same thing in life and business. Cash keeps you in the game, but credit gives you the ability to actually win.

Most people do not think about it this way. Ask anyone around you what makes the economy work, and they will tell you the same thing I have heard my entire career: money. Money makes the world go round. That understanding is not just incomplete. It is fundamentally wrong in a way that matters enormously for how we think about risk. If you believe money is what drives the economy, you will miss where the next crisis begins. And I can tell you exactly where to look.

The Scale Problem That Nobody Notices

Let me start with a number that should shake anyone's confidence in our conventional wisdom. The total physical currency in circulation in the United States is roughly $2.4 trillion. That includes every dollar bill in your wallet, every coin in your kid's piggy bank, every twenty in a cash register from Miami to Seattle.

Now, the total US nonfinancial debt is $80.7 trillion.

That means physical currency represents approximately 3 percent of the debt outstanding in this country. Three percent. We have built an economy that runs on 97 percent credit and 3 percent physical currency. If money made the world go round, we would have solved this problem decades ago. We have not, because we are asking the wrong question.

The disparity is even starker when you zoom out. Global credit markets are approximately $143 trillion. That is nearly 60 times the total amount of physical currency circulating in the United States. Nearly sixty times. We are running a global economy of historic scale on a foundation of credit that dwarfs the actual money supply by more than an order of magnitude.

This is not a minor accounting detail. This is the fundamental architecture of modern financial systems.

Where Money Actually Comes From

In 2014, the Bank of England published research that should have been a watershed moment in economics education. They found something that contradicted decades of textbook explanations. Banks do not lend out money that already exists. Banks create deposits simultaneously with loans. When a bank approves your mortgage, they do not hand you cash from a vault. They create a liability on their balance sheet, credit your account, and that newly created liability is the money you use to buy the house.

Credit creates money. Money does not create credit.

This is not theoretical. This is how the system actually functions. The money supply expands and contracts based on credit conditions. When banks are willing to lend, money supply grows. When banks pull back, money supply shrinks. The textbook money multiplier model, taught in every introductory economics course, is wrong. It has been wrong for decades. We have known it is wrong since 2014 when the Bank of England told us. And yet the implications have barely penetrated policy circles or investment strategy.

Why does this matter. Because if credit creates money, then understanding credit is understanding the circulation system of the entire economy. And right now, I need you to think about your plumbing.

The Credit Supply Chain as Infrastructure

Think about what happens when your home plumbing system works correctly. You do not think about it. You turn on the faucet, water flows, you brush your teeth, you shower, water drains away. The system is invisible because it works. But the moment the pipes freeze, or a main line breaks, or the pressure drops, suddenly everyone notices. Suddenly the pipes are all anyone can talk about.

Credit is the plumbing of the economy.

There are distinct components in the credit supply chain, and understanding each one matters because each one represents a point of failure.

The source is the central bank. Before 2008, the Fed's balance sheet hovered under $1 trillion. By 2010, it had expanded to approximately $2.4 trillion. By 2020, it reached $7 trillion. The Fed essentially says, "We will be the ultimate source of liquidity," and this sends a signal through the entire credit system about how much credit can be created. When the Fed shrinks its balance sheet, that signal changes.

The distribution happens through financial institutions. Here is where the structure has transformed in ways that few investors fully appreciate. Nonbank institutions now represent 51 percent of global financial assets, totaling $256.8 trillion as of 2024 according to the Financial Stability Board. That means more than half of all financial intermediation is happening outside the banking system as it is traditionally understood. These are mortgage companies, asset managers, insurance firms, investment funds, and countless other entities that gather capital and deploy it into credit markets. They are not subject to the same reserve requirements or regulatory scrutiny as commercial banks. They are the shadow system. And the narrow measure, the subset the FSB considers most likely to pose bank-like risks, has grown to $76.3 trillion.

The pipes are the specific credit markets through which capital flows. Mortgages totaling $12.95 trillion. Corporate bonds at $11.5 trillion. Commercial paper markets channeling $1.89 trillion. Consumer credit of $4.65 trillion. Trade finance, which flows about 80 to 90 percent of global trade. Each of these markets has its own characteristics, its own participants, its own dynamics. But they all serve the same function. They move credit from source to borrower. When any one of them seizes up, the whole system feels it.

What Happens When the Plumbing Breaks

I want to walk you through four moments when the credit pipes cracked. These are not abstract scenarios. They are specific, documented episodes where the credit system stopped functioning properly. Understanding what happened in each case is how you prepare for the next one.

September 2008. The Reserve Primary Fund, a money market fund that was considered as safe as holding cash, broke the buck. It had invested heavily in Lehman Brothers commercial paper, and when Lehman collapsed, the fund's value dropped below a dollar per share. Investors panicked. Money market funds, which are supposed to be the ultra-safe extension of the banking system, suddenly looked risky. Within days of the Reserve Primary Fund breaking the buck, hundreds of billions of dollars were withdrawn from prime money market funds. The commercial paper market, which is supposed to be the lubricant that allows companies to manage their short-term financing needs, essentially froze. Companies that had always been able to roll over their commercial paper suddenly could not. The pipe broke. The credit supply chain fractured at one of its most critical junctures.

2008 to 2009. The damage cascaded into international trade. When credit markets seized globally, companies could not get trade finance. They could not finance the movement of goods across borders. Global trade fell approximately 12 percent in volume terms. Global gross domestic product fell approximately 2.3 percent. The contraction in trade was considerably steeper than the contraction in GDP. This tells you something crucial about how dependent our production systems are on credit. When the pipes that finance cross-border movement of goods break, the damage to the real economy is disproportionately severe.

March 2020. The Treasury market, the most liquid, most trusted financial market in the entire world, seized. Bid-ask spreads widened by a factor of six. If you wanted to sell a Treasury bond quickly, you had to accept prices significantly lower than fair value. The market that is supposed to be the foundation of confidence in the entire credit system was not functioning. Everyone who had assumed they could exit any position quickly found that assumption to be wrong. It took extraordinary intervention from the Federal Reserve to restore function. Think about what that moment signaled. The safest market in the world was not safe.

March 2023. I mentioned Silicon Valley Bank last week as a grey swan, a risk that was visible but that the market chose to deny. But the grey swan framing tells you what the market missed. The plumbing framing tells you what actually broke. SVB had approximately $166 billion in deposits. In one day, depositors withdrew $42 billion, roughly 25 percent of the total. The bank could not convert its assets to cash fast enough. The bank failed. This happened not because of fraud or incompetence, but because the interest rate environment changed and the bank held too many long-duration bonds at prices that were underwater. The moment depositors realized the bank's asset quality was poor, they ran. The bank that had been fine in the morning was insolvent by the evening.

Each of these episodes revealed the same thing. The credit system is not invisible when it works. It is not reliable when it stops working. And the stops are sudden. There is usually no warning. The system goes from functional to broken with remarkable speed.

Who Controls the Plumbing

If credit is the plumbing of the economy, then the question becomes, who controls the pipes.

The answer is smaller than most people realize.

Three firms control 95 percent of global credit ratings. Three firms. Moody's, S&P, and Fitch rate the creditworthiness of borrowers globally. Every major credit decision, every bond issuance, every securitization flows through these three entities. Their rating changes can freeze markets. Their rating agencies have made mistakes so consequential that they nearly destroyed the financial system. In 2008, they rated mortgage-backed securities composed of subprime loans as investment grade. The fees they earned created perverse incentives. Nothing has fundamentally changed in the structure. The same three firms still control the gates.

The shadow financial system I mentioned earlier, nonbank institutions managing $76.3 trillion in narrow shadow banking, operates with minimal regulatory oversight compared to commercial banks. They face different reserve requirements. They face different liquidity standards. They operate under different stress test regimes. But they are now moving nearly half of all global capital. The regulation has not kept pace with the structure.

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, processes over 68 million messages daily at peak and facilitates trillions in daily flows across borders. SWIFT is the plumbing that connects national plumbing systems. It is operated by a consortium, but it is effectively a single point of potential failure for global trade. A significant disruption to SWIFT does not just affect the financial system. It affects the entire global supply chain.

Then there is digital asset infrastructure. Whether you are a believer or a skeptic, the reality is that cryptocurrency exchanges and stablecoin issuers now sit at the intersection of the traditional credit system and an alternative payment layer. Stablecoins alone represent over $300 billion in assets that are supposed to be backed one-to-one by reserves, much of it held in Treasury bills and commercial paper. That means a run on a major stablecoin issuer is not just a crypto problem. It is a commercial paper problem. It is a money market problem. It connects back to the same pipes that broke in 2008. You do not have to have an opinion about the future of digital assets to recognize that they have become a node in the credit infrastructure, and nodes are where breaks happen.

Washington has begun to acknowledge this reality. In April 2026, the GENIUS Act established the first federal oversight framework for stablecoin issuers, including anti-money laundering standards, reserve requirements, and sanctions compliance programs. Regulatory recognition of the risk does not eliminate it. What it does do is confirm that policymakers now see the connection to the broader credit system that I am describing here. A node that regulators are stress-testing is still a node.

These are concentration points. Rating agencies, shadow banks, payment infrastructure, and now digital asset intermediaries. When you think about where a crisis can originate, you are thinking about control points in the credit system.

The Stress Fractures We See Today

This is where I want to focus your attention because I think the early warning signs are visible if you know where to look.

Investment grade credit spreads are currently running near the tightest levels seen since the late 1990s. That was a period of relative stability and optimism. But today, defaults are rising. The credit fundamentals do not match the pricing. This is a disconnect that does not persist. Either spreads will widen to reflect the credit risk, or risk will decline. Spreads widening means prices falling, losses accumulating, and the repricing happening abruptly.

That repricing pressure is now building from two directions. The first is the fundamental mismatch between pricing and default risk I described above. The second is the current tariff environment, which is creating direct stress on the trade finance pipes. Corporations derive roughly 30 percent of revenues from outside the United States. As tariff costs compress margins and complicate cross-border financing, the credit fundamentals underpinning today’s spread levels are eroding from below. The same trade finance pipes that seized in 2008 and helped push global trade volumes down 12 percent are under active pressure today from a different direction but through the same mechanism.

There is a refinancing wall in 2028 and 2029 of approximately $2.8 trillion in debt that will need to be rolled over or paid back. In an environment of rising rates and tighter credit conditions, refinancing becomes harder and more expensive. Companies that could easily refinance in 2024 and 2025 may find refinancing difficult in 2028. The maturity schedule creates a moment of vulnerability.

Private credit has grown to $3.5 trillion in assets under management and operates with minimal oversight. These are loans made outside the traditional banking system, often in structures that are illiquid and unregistered. The size and the opacity represent a concentration of credit risk that is not fully visible to regulators. If a significant participant in private credit markets encounters stress, the shock will not be contained within that market. It will reverberate through the entire credit system.

Regulators are beginning to notice. In April 2026, the Bank of England announced formal stress tests targeting private credit crunch risk specifically. The stress is becoming visible in ways it was not twelve months ago. When the central bank of a major economy decides it needs to stress-test a specific market, that is the system acknowledging a pressure point.

And if you want a single indicator of how much confidence the market has in the credit infrastructure itself, watch gold. Gold is not a player on the board. It generates no yield. It creates no money. It participates in none of the credit mechanisms I have described in this post. Gold is what people reach for when they think the board is about to flip. When gold demand accelerates while credit spreads are still compressed, it tells you that some participants are quietly positioning for a break in the plumbing even while the market price says everything is fine. Gold is not a thesis. It is a pressure gauge. As of this writing in April 2026, that gauge has moved. Gold is trading near $4,750 per ounce, roughly two and a half times where it stood five years ago, while investment grade credit spreads remain near historic tights. The divergence between what gold is saying and what credit spreads are saying is one of the more striking features of the current moment. These two markets cannot both be right about the state of the credit infrastructure at the same time.

Watch the Plumbing

The economy is not made of money. It is made of credit. The plumbing that distributes credit from source to borrower is the actual engine of growth, the actual constraint on activity, the actual point of failure when things go wrong.

For over twenty five years, I have watched the financial system navigate one crisis after another. I have seen the central banks expand their balance sheets, seen credit conditions ease and tighten, seen new regulations implemented and old ones circumvented. What I have learned is that crises do not start in equities or in consumer behavior or in corporate earnings. Crises start in the plumbing. They start when the infrastructure that distributes credit stops functioning the way participants expect.

It starts when a major bank fails suddenly because deposit runs accelerate beyond the bank's ability to meet them. It starts when a major financial market like Treasuries or commercial paper seizes because confidence in counterparty creditworthiness evaporates. It starts when nonbank financial institutions that hold trillions in assets face redemption pressure they cannot meet. It starts in the pipes.

If you want to anticipate the next serious market disruption, do not spend your time watching earnings forecasts or unemployment data or Fed rhetoric. Watch the plumbing. Watch credit spreads. Watch nonbank financial institutions. Watch funding conditions. Watch the systems that distribute credit and the control points that regulate access to credit. Watch the rating agencies, the shadow banking system, the payment infrastructure.

That is where the next crisis will start.

But knowing where to watch is not enough if you do not understand who turns the valves. The plumbing does not break on its own. Someone opens a valve too wide, or closes one too fast, or changes the pressure in the system through a decision made in a committee room or a legislative chamber. In the next post, I am going to show you the variable that most risk models leave out entirely: politics. And I am going to trace a direct line from a political decision made in 2018 to a financial crisis in 2023.

I am currently in conversations with CEOs, CFOs, and risk chairs about what today's credit infrastructure signals for their portfolios and governance mandates. Reach me directly at tamika@tamikatyson.com.

Sources

US currency in circulation (~$2.4 trillion, January 2026): Federal Reserve, Monetary Base: Currency in Circulation (MBCURRCIR), FRED, Federal Reserve Bank of St. Louis; U.S. Currency Education Program, "Currency in Circulation."

US nonfinancial debt ($80.7 trillion, Q4 2025): Federal Reserve, Financial Accounts of the United States (Z.1 Release), March 19, 2026.

Global bond market ($143 trillion): Securities Industry and Financial Markets Association (SIFMA), 2026.

Corporate bonds ($11.5 trillion, Q4 2025): Securities Industry and Financial Markets Association (SIFMA), "US Fixed Income Market Size," Q4 2025.

Bank of England money creation research: McLeay, Radia, and Thomas, "Money creation in the modern economy," Bank of England Quarterly Bulletin, Q1 2014.

Federal Reserve balance sheet history (approximately $2.4 trillion at year-end 2010): Federal Reserve, "Recent Balance Sheet Trends," Board of Governors of the Federal Reserve System; Federal Reserve Material Loss Review for SVB.

Nonbank financial institutions (51% of global financial assets, $256.8 trillion total, $76.3 trillion narrow measure): Financial Stability Board, "Global Monitoring Report on Nonbank Financial Intermediation 2025," December 2025.

SWIFT daily message volume (68 million peak): SWIFT, "A year of shared progress: 5 highlights from 2025."

Reserve Primary Fund and money market fund withdrawals (September 2008): SEC, "Money Market Fund Reform," 2010; Investment Company Institute historical data; Federal Reserve Board analysis of prime money market fund redemptions.

Treasury market seizure (March 2020): Federal Reserve Bank of New York, "Treasury Market Liquidity During the COVID-19 Crisis," 2020.

SVB deposits (~$166 billion total, $42 billion withdrawn in one day, March 2023): Federal Reserve, "Review of the Federal Reserve's Supervision and Regulation of Silicon Valley Bank," April 2023; Federal Reserve Material Loss Review.

Global trade decline (~12% in volume terms, 2008-2009): World Trade Organization, World Trade Statistical Review, 2010.

Global gross domestic product decline (~2.3%, 2008-2009): World Bank and International Monetary Fund, Global Economic Prospects and World Economic Outlook, 2010.

Trade finance scope (80-90% of global trade): World Trade Organization, United Nations Conference on Trade and Development (UNCTAD), and International Chamber of Commerce (ICC), "Trade Finance Handbook," 2020.