The Economist Revisits Perry Mehrling's Hierarchy of Money

The Economist on October 20, 2026, published an explainer headlined "The course for par," crediting the late economist Perry Mehrling with a framework that ranks every form of money by how reliably it can be redeemed for the tier above it, according to the outlet.

What Is the "Hierarchy of Money"?

The term describes a ranking of financial instruments by how closely each one functions as money. At the top sits central bank money — reserves and currency issued directly by a monetary authority, carrying essentially no credit risk. Below that sit commercial bank deposits, which function as money only because banks promise to convert them into central bank money on demand, one for one. Further down the ladder sit instruments such as money-market fund shares and repurchase agreements, private IOUs that behave like money in ordinary times but depend on confidence rather than a government guarantee. The Economist's account credits Mehrling with mapping this ladder and tracing what happens when a rung breaks.

What Does "Par" Mean in This Context?

Par value, in the framework the Economist describes, is the promise sitting under every rung: that a dollar of bank money, a share of a money-market fund, or a unit of any private monetary instrument can always be exchanged one-for-one for the tier above it. The outlet titled its piece "the course for par" to capture a central theme of Mehrling's work — that holding the system at par is not automatic. It requires institutions, chiefly central banks, willing to lend against collateral or backstop markets when private promises to pay at par come under strain, according to the Economist's account.

"The course for par" — the Economist's framing of Mehrling's central argument.

How Does the Hierarchy Break Down, Tier by Tier?

Economists describing this structure typically lay it out in four broad layers, each one less liquid and more dependent on confidence than the one above it:

• Central bank money — reserves and currency, the top of the ladder, with no counterparty risk.
• Commercial bank deposits — insured and backed by a central bank acting as lender of last resort.
• Shadow-banking instruments — repo and money-market fund shares, promising par without a direct public backstop.
• Private credit and newer monetary forms — the furthest from guaranteed par, and typically the first to break it under stress.

Why Is the Economist Revisiting the Idea Now?

The outlet's headline identifies Mehrling as deceased, framing the piece as an account of intellectual legacy rather than a live policy dispute. The material available does not include a date or cause of death, nor biographical detail beyond the hierarchy framework itself. That narrower scope reflects what the Economist has published so far; it has not, per the available text, attached the explainer to a specific current market event.

Where Can Readers Find the Full Account?

The Economist's complete explainer, "The course for par," runs in the outlet's finance and economics section, dated October 20, 2026, and includes the fuller treatment of Mehrling's career and argument.

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