Inside money, instead, is named this way because it is backed by private credit: it would cancel out if all the claims held by banks on private creditors were to be settled. So, it is one form of currency that is created – and can be destroyed – within the private economy.
As a consequence, reputation and trust in the ability of individual banks and the banking system as a whole to redeem the bills, the IOUs or the deposits is essential in order for the new fractional reserve system to function. Trust is the critical word. It becomes an intimate attribute of money.