Mutual-credit theory has its origins in the social turmoils of the mid and late 19th century, in which the industrial relations that would come to shape the following decades, started to assume their modern forms. Comparable to the contemporary atmosphere, those times of rapid technological innovation were characterized by radical social shifts and resulting tensions which lead to a plethora of groundbreaking new ideas and reformist movements.
Among them were a group of forward-looking theorists which may have had little influence on the politics of their day, but who came to shape the groundwork of both progressive and conservative lines of thought for centuries to come.
Thinkers such as Pierre-Joseph Proudhon, William Batchelder Greene, Benjamin Tucker, and others proposed a series of non-violent and mostly voluntary reforms which aimed to cure the social ills of their time by relying on free-associations and markets, based on mutually-benefiting relationships, rather than on state-sanctioned institutions and the industrial relations they seemed to impose. This movement became known as the Mutualist movement and one of its most cherished ideas was what is known today as Mutual Banking.
While having been proposed in various forms, the role Mutualists assigned to their banking proposition was to restore what they perceived to be the original function of markets as an arena for the equal, voluntary, and free exchange of goods and services. To rid markets from their feudal and colonial heritage, Mutualists argued, money had to be reinvented as an instrument that favors mutual-trade over the preservation of the power-dynamics created by artificially scarce mediums of exchange, such as gold and fiat currency.
Although rejected by the authorities of the time and rebuked by both - the political left and right, Mutualist Banking initiatives were partly adopted by the American Labour movement, and later inspired the credit unions and banking cooperatives, prevalent on both sides of the Atlantic today.