Money as a claim on something real, not a claim on someone’s future promise to pay.
Modern money is mostly created as debt: a bank issues a loan and the deposit it credits is new money, backed by nothing but the borrower’s obligation to repay. For most of monetary history this wasn’t how money worked. Asset-backed money is the general term for currency whose value is tied to, or represents a direct claim on, a tangible asset or good: precious metals like gold and silver, but also commodities such as grain, salt, or cattle in earlier agricultural economies. Economic historian Glyn Davies traces this arc across millennia in A History of Money from Ancient Times to the Present Day, from commodity money, where the medium of exchange has intrinsic use value on its own, to representative money, where a note or token circulates as a receipt for a stored quantity of a real asset held elsewhere.
The common feature across both forms is that the supply of money is constrained by the supply of the underlying asset. New money can’t simply be issued by decree or created as a bookkeeping entry against a loan; more of it requires more of the real thing it represents or is redeemable for. That constraint is what distinguishes asset-backed money from a pure credit or fiat system, where money is a liability of a bank or government rather than a claim on a physical good.
This is a broader and much older concept than any single monetary policy built on it. A gold peg, for instance, is one specific 20th-century arrangement, a government formally fixing its currency’s exchange value to a set weight of gold, that lasted only as long as Bretton Woods and ended in 1971. Asset-backed money predates that policy by thousands of years and doesn’t depend on it: cattle, grain, and unminted silver functioned as asset-backed money long before any government pegged a currency to anything, and the concept covers any money tied to a real asset, not only currencies formally pegged to gold under a specific 20th-century regime.
Source: Davies, G., A History of Money from Ancient Times to the Present Day, University of Wales Press, 1994.