|Old Lodge Skins|
To recapitulate in short the positions: the currency position is inherited from the general equilibrium theory which starts from initial endowments where agents are disposing according to their preferences. (BTW: Friedman did not talk about 'helicopter money' as form of integration of money in the economic process, he used it as a methodological trick to circumvent the question how money gets into the economy by stipulating, that 'money is just there'. Actually he was talking BS.) The banking position takes the view, that the money used is just an IOU from a bank without making a difference if this IOU belongs to a commercial bank or a central bank. Sometimes money is seen as a IOU from the state with the argument, only the power of the state to levy taxes is a reason for money to have 'value'. This is more the MMT belief.
There is the classical joke about economists who are touching different parts of an elephant with the consequence, that everyone is interpreting different the same animal. This is a good illustration of this controversy over distingushable features of money which can be traced back to a semantic core of the legal codification how contracts are conceptualized. To make a long story short, the difference between englisch and german codification of contracts is the so called 'abstraction principle'. A short overview can be found in wikipedia:
In german law a loan is just the obligation to hand over the object of desire which is on the on hand the media of paying down a debt. (To hand over the purchased good is the opposite part of a deal, because the seller has the obligation to hand out the sold object.) This media a known as central bank money with the two versions a) paper money and b) claims against the central bank (the money which the central bank has a right to emit in unlimited magnitude). So if you have a claim on something you have a right to get it into your property where the debtor is obliged to make this property right for you available. This process is to distinguish from the mere right to get something into the own property sphere. This principle applies for each item so that the bank has an obligation to hand over paper money or has the obligation to transfer money to an account which the borrower can appoint for transfer. (Of course this is only an indirect right to dispose over central bank money, but it works well as long as there is the belief, that 'there is money in the current account'.)
What is important to note is, that the item which has to be transferred is not only a debt from one bank to another. (If money would be actually an IOU then this transfer should be able to pay down a debt.) The question is, under what condition another bank accepts an additional debt against its customer and what must be the compensation for this? The answer is simple: the sending bank must handover the amount of central bank money what the receiving bank gets as additional obligation. So a money transfer is not only a transfer of customer claims but also a transfer of the amount of central bank money in question. The simple bookkeeping logic is: if there is a transfer of liabilities (Passiva) there must be a correspondent transfer of assets (Aktiva)!
To interpret a loan 'a priori' as fulfilled relies on the perspective of households, because there exists the widespread laymen believe 'that there is money on the bank account' where in fact a positive bank account is only a claim on paper money or a right of disposition over central bank money. (Therefore banks are known as payment service provider!) Economists have been a long way on the search of the holy grail which is the 'stable money demand function' where it is quite appropriate to interpret the claims of households as 'money'. But this analytical convenience should not lead to misinterpret the debt settlement item as a claim against a bank. It is sufficient to remind the positive chance of bank runs to convince everybody, that a claim is a claim which is usually honoured by banks but sometimes...(see above)!
The difference to a central bank in a paper money system is this: if a bank has a claim against the central bank the central bank only can get rid of its debt with a physical delivery of bank notes to a bank. There the abstraction principle applies as well: a claim against a central bank is settled only if the object of obligation is handed over. This is the only! way how paper money arrives in the economy. A speciality with central bank payment is this: a payment of a central bank is a change in the liability side of their balance sheet, because the central bank now has less obligations (because of the hand over of paper money) and an increase of the reminder position 'emitted bank notes'. This contradicts directly the widespread misbelief, that central bank notes are obligations of the central bank (which was true in times of the gold standard long ago). The opposite is nowadays fact: with a delivery of central bank notes the central bank is less indebted than before. This liability turnover (Passivtausch) has nothing comparable at commercial banks, because they have to pay in a (asset-) standard, which they cannot create by themselves therefore a payment there is a reduction of their balance sheet - less obligations and less assets. (If the receiving bank credits the due amount of money the volume of the balance sheet do not change, nevertheless the seller got his additional right of disposition over his money and the not transferring bank is indebted as before.)
What can be learned from that? At most, that the claim on money and central bank money (proper?) are not controversial sides, but only the opposite sides of the 'same coin' of a legal currency system. The different viewpoints are due to different theoretical approaches (which address only one side of the phenomenon 'money') and not inherent in the subject of money itself. Therefore a structured thinking about contract obligation on the one hand and contract fulfillment on the other side especially in the case of money unveils this controversy as a classical 'glass bead game' (Glasperlenspiel) where the opponents look just only through their own hourglass of theory. In short: the banking position talks about claims (Verpflichtungsgeschäft) while the currency position insists that money has to be an asset, which comes due, when a claim is to be fulfilled (Verfügungsgeschäft). The abstraction principle makes clear, that every business transaction consists of both dimensions - if not, no transaction could ever be settled!
In effect, the currency/ banking controversy is a result of filthy reasoning. Structured thinking makes clear, that there is a reasonable way of thinking where the contradictions between both positions can safely be ignored.