Almost everyone’s convinced we must find a way to get credit flowing freely again. Without it, it seems, we’re lost.

Taken to an extreme, this isn’t mere hyperbole. In its complete absence, trade wouldn’t be financed, crops might not be sown or harvested, few factories would be built or expanded nor payrolls met, and purchasing a home would be damnably difficult. It’s also vital to managing and smoothing intergenerational cycles. Credit has, in one form or another, helped the world go around for a very long time.

Still, it has its dark side, as has recently become only too apparent.

So what separates good credit, the sort that helps us to do all those constructive things, from its less helpful variants? Are they different in kind, or only in degree?

Faced with this question, economists tend to descend into their version of a pub brawl. There’s no obvious, accepted, definitive answer and the stakes really couldn’t be higher.

To make a decent attempt at answering it, we have little choice but to go back to basics. Our financial system has become so absurdly complex that even the meanings of terms in everyday use (such as savings, credit, and money) are disconcertingly slippery. Recent evolutionary developments, such as CDOs and credit default swaps, were merely a sort of final extravagant flourish.

Things have in fact been spinning out of control for quite some time.