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Final Conclusions

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Part of the Economic and Financial Law & Policy – Shifting Insights & Values book series (EFLP,volume 7)


Chapter 11, entitled “Final conclusions” of the book entitled “Covid-19 and Capitalism - Success and Failure of the Legal Methods for Dealing with a Pandemic”, aims to attach some general conclusions to the previous Chaps. 1–10 of the same book. This leads to a renewed call to work on a new model of socioeconomic order, in which the dictates of liberal and neo-liberal thought, including its motives of greed, egoism and selfishness, would be abandoned, and a connection to an altruistic design of the socioeconomic order would be rekindled. Specifically, this chapter explains how the establishment of a new monetary order, as advocated by the author in certain of his earlier works, could allow countries to be financed through periodic allocations—rather than through taxation and the incurring of public debt—which would allow them to return to prioritizing the pursuit of the common good, rather than merely striving to create an optimal economic playing field for the wealthy (i.e., the so-called free market).

11.1 Impact of Two Crises on the Monetary and Fiscal Policy Levels

11.1.1 General

After the two severe crises of the past decade and a half—particularly (1) the severe financial crisis of 2008, and its aftermath, and (2) the Covid-19 crisis of 2020–2021—the monetary and fiscal policy systems of many Western countries may very well have been stretched beyond their limits.

11.1.2 Quantitative Easing, and Some of Its Consequences

During said two crises, the ECB reacted by means of a policy that was framed in a variety of special, monetary support mechanisms. In the United States, the Federal Reserve (also “FED”) responded to both crises through similar monetary mechanisms (as explained extensively in Chap. 3).

Especially during and in the aftermath of the financial crisis of 2008, a notable—and still ongoing—trend in this regard has been captured under the term “quantitative easing” (QE), essentially indicating a willingness of the ECB—besides foreign central banks, such as the US Federal Reserve—to buy up (already existing) debt instruments issued by a wide range of issuers, with an emphasis on states, (other) public authorities and companies/corporations. Basically, such QE policy shows a willingness of refinancing debt states, besides debt-burdened private firms, by central banks.Footnote 1

In a traditional approach, it is perceived that to execute quantitative easing, central banks, at least potentially, increase the supply of money in order to buy, e.g., government bonds and other securities. Increasing the supply of money happens with the intent to lowers interest rates (as money supply increases), or with the intent to help keeping interests rates that are already low, to remain low (i.e., helps making, or keeping, money cheap(er)). Private banks themselves can then lend under easier terms, which helps the economy to survive (in) times of trouble. Moreover, to the extent that private banks are the ones selling debt instruments to the central bank, they also enlarge their own cash reserves, which again allows them to lend out more.Footnote 2 As new lending by private banks may, in turn, again lead to new purchase operations by the central bank, a relaxation of the conditions under which such operations can take place, obviously, has as effect making it easier for new money to be created as a function of debt instruments previously issued. Hence, what quantitative easing basically does is simply multiplying—or, even better, allowing to multiply—debt …

In a further past—notably under the gold standard (i.e., during the nineteenth century and until WWI) and the gold exchange standard (i.e., as of 1944 until 1971)—such a system of “new money/debt”, based on “old money/debt” would have been unthinkable.

But even within the framework of the prevailing, neoliberal monetary order, characterized by a huge love for debt (cf. Sect. 3.2), such a QE policy may give rise to certain concerns. According to some, the system entails the danger that the money base will keep expanding, whereby the link with the underlying economy could become increasingly tenuous.Footnote 3 For a variety of economic players, a situation may, moreover, arise of (too) easily obtained credit. However, like all credit, it will still, ultimately, must be paid back at some point in time. Furthermore, such a QE purchase operation by a central bank does not alter the conditions which apply to the underlying debt instruments.

However, according to Krugman, while, based upon such QE, in the United States the FED has indeed bought a lot of government debt, this does not imply that the FED started financing the budget deficit in a direct manner. According to this author, at a fundamental level, households are the ones who finance the deficit in an indirect manner. According to Krugman, this is based upon the huge savings undertaken by families who started saving much of their income in an environment where their usual consumption no longer felt safe. However, under QE, such household financing of the government deficit happens not in a direct manner. Instead, it has taken the form of a sort of what Krugman refers to as a “financial daisy chain”. Families are stashing their savings in banks. Banks, in turn, have been accumulating reserves—that is, based upon deposit facilities, lending to the FED which these days pays interest on bank reserves. And, with this money, the FED has been buying government (and other) bonds. Krugman gives the following rough picture (with regard to situation in the USA by May 2021): More or less, US households held on to USD 2 trillion in deposits; banks acquired USD 2 trillion in reserves; and the FED has acquired USD 2.5 trillion in government securities (implying that USD 0.5 trillion in this “daisy chain” may come from abroad).

Exactly why the process has been so indirect (and why US households are unwilling to invest directly in government or corporate bonds themselves) is to Krugman an interesting question. A guess is that private players are worried about liquidity, or, phrased differently, about having quick access to their funds if necessary. So, both families and banks want deposits they can draw down in a pinch, not Treasury (or other) securities that might be slightly harder to liquidate.Footnote 4

As a result, it is the central bank who is turned into an investor, based upon liquidity initially provided by savers and with banks acting as a further intermediary. This is, obviously, not in line with the basic premises of capitalism on the role of government institutions, such as central banks, and on the intent of “capital” investments that are usually explained as the emanation of private, entrepreneurial initiative.

This immediately also implies that low interest rates are not the result of artificial manipulation, but simply of demand and supply: there simply are a lot of household savings with nowhere to go, which—in an indirect manner—are cheaply being made available to the government through two intermediary levels, namely that of private banks and that of the central bank. Second, because the “daisy chain of lending” runs through bank deposits, it shows up in the measured money supply (M2). But it is not really a monetary expansion of M1. The FED is, hence, not printing new dollars all the time; it is basically acting as a financial intermediary for investors who want to park their money somewhere safe. And, for Krugman, while there are plenty of reasons to worry about what was/is going on in the US economy, FED purchases of bonds and rising M2 are not on the list.Footnote 5

So, what Krugman is implying is that quantitative easing (and similar programs) is not financed out of new (chartal) money creation (hence: out of increasing M1), but out of bank reserves parked with the central banks by private banks who themselves have these reserves because of huge savings by private householdings.

This however raises two sets of questions, namely: (1) Why—based upon their huge reserves –private banks do not hold on to the (government or other) bonds themselves, or, phrased differently, why the central bank has to get involved as a further intermediary. And (2) what else get the private banks in return for transferring their government (or other) bonds to the central bank than (an) (additional) claim(s) on the latter (which may, potentially, called for in cash). Unless if what Krugman implies is that, with regard to the latter question, the cash reserves that private banks hold onto because of the general public’s deposits and which they then park with the central bank on the basis of the latter’s deposit facilities, are more than sufficient to meet possible future claims of the private banks (because of QE) when the latter would have a need for cash (in which case there will be no need to print new money). Even then, the question remains what is to happen when the deposit holders would start to withdraw their deposits in exchange for cash at the same time.

This seems to imply that QE speculates on the continuance of huge savings by private householding through means of bank deposits without these been drawing back. Phrased differently: QA is basically possible because central banks are sitting on huge reserves (of money created in the past) due to huge savings from the part of the general public (or, otherwise put, because deposit holders stop(ped) consuming and/or are not interested in taking up investments themselves, and neither in cash withdrawals of their deposits).

Be this at is may, under the logic of the prevailing monetary and financial system, it cannot be the intent that a state would be financed indefinitely—even if only indirectly—through emergency plans of the monetary authorities. On the contrary, a state is expected to pay off its debts, or refinance them on the private financial markets, whereby in all cases, an increase in the debt burden of a state is never good news for the citizens of such a state, nor for their economy. This is because, ultimately, a state's debt burden is borne through taxes. The latter at the same time explains why, under neoliberal monetary (and fiscal) policy, efforts must be made to optimize employment, whereby the more public debt increases, the more a sufficiently large proportion of the general population has to be put at work, for as long in life as possible, so that everyone belonging to the working (or self-employed) classes, remains able to contribute to paying taxes (besides, in some jurisdictions, social security contributions) in order to keep the increasing public debt—and, by extension, government finances in general—sustainable, for as long in his/her/their life as possible. Not by surprise does the mandate of the US Federal reserve explicitly comprise two basic policy objectives, namely: (1) to aim for maximum employment and (2) price stability.

This is, obviously, at the same time, very interesting for employers (hence for the entrepreneurial sector), who are thus ensured that most of the world’s population remains employable as cheap labour forces. The concern that the pressure on people and the planet’s resources resulting from such a neoliberal, economic policy, will become too high, hereby remains largely unaddressed under neoliberal economic policy itself, while with each additional growth of public debt, the situation becomes less rosy for both the working class in the broad sense of the word, as for states themselves. Neoliberal economic (and monetary) policy—which, in its historical roots, was once based on the idea of freedom-, has in such a manner (besides a variety of other neoliberal policy instruments) helped reducing most of humanity to a slave population that must work longer and longer to—inter alia—keep (public) debt in check. Hence, one of the effects of the Covid-19 crisis could very well be that in neoliberal run states, as part of a renewed, post Covid-19 austerity on a monetary (and fiscal) level, the retirement age will, once again, have to be heightened, in order to ensure that people contribute longer and longer in life to paying taxes, in order to keep this system of ever-increasing debt, sufficiently sustainable.

11.1.3 Similar Consequences of Neoliberal, Fiscal Policy

As explained in Chap. 4, during the Covid-19 crisis, western states (such as EU member states, the USA and even the EU itself) each in their own way, made massive amounts of financial support available to their respective economies, most notably to the corporate sector, thus protecting the latter from a deluge of bankruptcies.

In order to finance this support, such states (again) took out (new) massive loans on the financial markets. And through this, during the Covid-19 crisis, neoliberal fiscal policy itself also quickly arrived at a classical, neoliberal prescription for dealing with a crisis: states—certainly in crisis situations—make massive amounts of money available to ailing companies, to a large extent by means of non-repayable financial support measures, while taking up huge debt themselves. And a part of the latter debt may even end up being purchased by a central bank under future QE operations, however, still to be paid back eventually.

11.1.4 Increasing Debt Levels

Such a public policy through which the cost of a crisis is socialized by states taking up (ever) more debt is, both in its monetary dimension, as in its fiscal policy dimension, based upon the assumption that the majority of the population also benefits from it, to the extent that enterprises receiving states aid, continue to survive thanks to the government support, and can, hence, also continue to pay wages to the members of the working class—in essence implying a classic “trickle-down economics” argument for justifying this kind of financial support.Footnote 6

And now the peculiar thing is that said wages form the bases for states to impose taxes (on income of the working class), thus causing that money/debt basically runs in circles.Footnote 7

The flip side of the coin, however, remains that by applying such a policy in times of a crisis, such as the Covid-19 crisis (and recently before the financial crisis of 2008), states—e.g., EU member states, and to some extent even the EU itself, besides the United StatesFootnote 8—all had to borrow large sums, both in order to have sufficient financial means to combat the Covid-19 pandemic, as to be able to finance the support measures to the entrepreneurial sector. Although these loans could boast of the—during times of Covid-19 still maintained—historically low interest rates, they still are loans, which the borrowing states, eventually, will have to pay back at some point in time, or at the very least be able to refinance.

In other words, because of the Covid-19 support measures, there has been a significant increase in public debt which, ultimately, weighs on (future) taxpayers—adding to the classic intergenerational injustice that characterizes such a system of state financing for decades already. In this way, everyone who (by getting born) joins a neoliberal society, at the same time inherits a world which is basically ever more heavily burdened with government debt and is, as a result, condemned to have to work ever longer, and ever more, in order to help paying off this government debt (of the past), or at least to help keeping it sustainable—either through taxes or similar contributions.

Moreover, there is a suspicion that (several of) the EU countries, being burdened with larger debt mass (cf. Sect. 3.5), will, in post-Covid-19 times, be bound to (again) become subjected to a classic EU austerity policy, of which no one else but the average citizen will (again) be the victim.

In other words, as has also been the case after the severe financial crisis of 2008 (with regard to the bailouts of private banks), “a socialization of losses and privatization of gains” logic has been resorted to—shifting the burden of the crisis to the global population (via taxes), while the benefits of this policy, esp. once the economy will again revive, continue to benefit only the corporate sector, and its shareholders.

As long as neoliberal monetary and fiscal models will remain unchanged, it is hard to see how this will ever change. And thus, the average citizen of a neoliberal country is pedalling, ever more, on a treadmill the rhythm of which is constantly being increased—especially after each situation of crisis–, with as question whether this can be the purpose of a socio-economic order, a question we already have addressed in our various previous work and there answered negatively.Footnote 9

For the alternatives that we want to substitute for these neoliberal models, reference is made to this earlier work, which we shall briefly readdress hereafter in Sect. 11.3, but first, let us have a final look at some numbers of rising debt in 2020 because of (neoliberal) monetary and fiscal policy. (Cf., furthermore, Sect. 3.5)

11.2 What Will Be Further at Stake in the World Post Covid-19

According to the World Bank, the Covid-19 pandemic has basically triggered a steep increase in—both public and private—debt, particularly in the Emerging Markets and Developing Economies (EMDEs), which has come on top of a rapid debt increase since 2010—the period in the aftermath of the previous huge crisis, i.e., the financial crisis of 2008.Footnote 10

This can be shown in a simple chart (cf. Fig. 11.1Footnote 11).

Fig. 11.1
figure 1

Debt in emerging market and developing economies

Moreover, reference can also be made to our findings in Sect. 3.5.

These data are confirmed by findings of Bloomberg, who has pointed out that in the battle against Covid-19, governments around the globe were on the cusp of becoming more indebted than at any point in modern history, surpassing even the public debt load of World War II. The borrowing binge, hence, came with a hefty price tag—USD 19.5 trillion in 2020 alone, according to Institute of International Finance estimates (cf. Sects. and But, so far, the alternative—a deep and lasting depression—seems to have been avoided. Basically, rock-bottom interest rates in the EMU were still in place before the outbreak of Covid-19 (cf. Sect. 3.2.2), and have been remained so during the Covid-19 crisis, while the FED also positioned its key interest rates on similar low percentages. (Cf. Sect. 3.3) This helped keeping debt costs manageable and, therefore, still affordable. But, as has been pointed out by McCormick, Torres, Benhamou and Pogkas, if interest rates would start to rise faster and higher than expected, the end of the Covid-19 pandemic could at the same time mark the start of a period of unprecedented reckoning …Footnote 12

The foregoing is shown in Fig. 11.2,Footnote 13 pointing to the “Great Debt Spike” that happened in 2020 and, in addition, showing the evolution that occurred between 1946 and 2020.

Fig. 11.2
figure 2

The Great Debt Spike. Source: International Monetary Fund Fiscal Monitor, October 2020

On the upside, and as explained in Chaps. 3 and 4, huge borrowing by governments and corporations during the Covid-19 pandemic, served as a “bridge” across the economic chasm of lockdowns. During time of closures, it allowed enterprises to pay the employees they, hence, did not have to fire, while maintaining assets in working condition. It also funded jobless benefits for those who go fired, so they could keep financing life’s necessities, such as paying for rent and buying food.Footnote 14 It, moreover, avoided a huge wave of bankruptcies, which could have brought Western economies into ruins.

While in this manner government borrowing acted as a bridge to both emergency support and recovery, central banks were the main support systems of this borrowing. By on the one side slashing interest rates (cf. Sects. 3.2.2 and 3.3), and through QE and other monetary programs, buying more than USD 5 trillion of assets, central banks allowed countries to borrow huge sums. It is estimated that, in 2020, the FED alone added about USD 3 trillion to its balance sheet, an amount which was deemed similar in magnitude to the FED’s total monetary expansion during the entire decade as of the financial crisis of 2007–2008.Footnote 15

Ultimately, this unprecedented borrowing by enterprises and governments dramatically reduced the economic toll of the Covid-19 pandemic. Yet, according to McCormick et al., when the world will eventually come out the other side of the Covid-19 pandemic, it will be bound to face larger debt burdens which even could impede economic growth over a longer term.Footnote 16

In other words, as countries and their economies are starting to struggle to bounce back from the Covid-19 pandemic, the question will be how this immense increase of debt will be handled with—this time …

Bearing in mind the experiences in the aftermath of the financial crisis of 2008, the (neoliberal) methods of addressing this situation could consist of a combination of debt release measures—in as far as these are tolerated under capitalist monetary and fiscal policy –, besides austerity measures.

However, as argued in our previous work, there may still be another way, namely to really start thinking of alternatives for the prevailing monetary (and fiscal) system(s), which could imply handing over money creation power entirely to the public domain again.

It may even be a symbolic indication that the debt levels post Covid-19 are now at least as high as after World War II, which at the time had led to the instalment of the (then new) Bretton Woods monetary order (in 1944), which itself was part of the international, legal construct used in order to lead the world out of the ruins caused by World War II (but which was, in part, abandoned in 1971, while what was left of it was since then, to an increasing extent, submitted to the logic of economic neoliberalism). (Cf. Sect. 3.4.1)

Perhaps now, with in some territories Covid-19 coming to some kind of ending, the time will be deemed similarly ripe for governments all over the world to start taking the call for developing another monetary system more seriously.

11.3 Revisiting the Outlook of a New International Monetary Order

In some of our previous books, it has been argued that an alternative to the prevailing, neoliberal monetary order could be worked out in order to establish a fairer and more sustainable economic system.

Such an alternative monetary order could be based upon an approach in which not private initiative, but public authority itself would be vested with the power to create new money, and thus to decide upon how the wealth generated by the economic system should be (re)distributed among the members of society.

Such a newly perceived monetary system could, moreover, have as an underlying goal that of ensuring that all people, regardless of their circumstances at birth, would stand a similar fair, just and equal chance of having access to the wealth created by the combined efforts of nature and humanity (or, phrased differently, by “the economy”) in order to fulfil their life’s (basic) needs and, in general, be able to lead a happy and dignified life.Footnote 17

Under the model for a “new international monetary system” that has been worked out in our previous books, especially in ‘Towards a new, international monetary order”,Footnote 18 it would, more precisely, become possible to finance “care state models” which would allow to install a much more fair and just socio-economic order than ever has been possible under the rule of unbridled capitalism, or even under the classical welfare state model, to the extent that, even in the latter socioeconomic model, states are/were still dependent on capitalist financing methods (especially raising taxes and semi-taxes, next to taking up—expensive—loans from, amongst others, private market players, implying that in the neoliberal world order, states basically balance between being “tax states” and “debt states”, in the former capacity suppressing their general population (except for the rich), and in the latter capacity being at the constant mercy of the private banking and financial system).

By contrast, under the new monetary system proposed in our previous work, state financing would no longer occur through “taxes” (and/or “social security contributions”), but out of a newly proposed system of money creation, more precisely out of periodical allocations that a newly to be created Monetary World Institute ((N)MWI)—this could obviously be the IMF, after having altered its working rules, as established in its Articles of Association—would attribute to the countries participating to this new international monetary order.

Although such a system could, to some extent, already start happening within the presently prevailing international monetary order—which however would imply that the IMF would actually start using its power to attribute SDR’s to its member states in a far more systematic manner than is presently the caseFootnote 19 (cf. the remarks of Stiglitz in this regard, quoted at Sect. 10.5.1), the proposal that was formulated in our previous work would take Keynesian thinking (cf. Sect. 11.4) a (big) step further, by installing a system in which all the member-states participating to such a new international monetary order would obtain the entirety of their financial means out of such (periodical) allocations.Footnote 20

As then further elaborated upon in our book “The tools of law that shape capitalism”,Footnote 21 such a system of financing states could imply that, each (working) year, every one of the participating states would obtain a working budget out of the hands of the—in Chap. 5 of this bookFootnote 22—proposed (N)MWI, that should enable such state to turn away from the prevailing neoliberal “repressive state model” towards a “care state model”, based upon a view on society that all people should be willing to take care of each other.

Such a new system of financing states would, essentially, imply that the public domain could be withdrawn from the power of private money creation and, therefore, from the collectivity of the private, financial institutions and markets that, under the presently prevailing monetary order, dictate the whereabouts of everyone, including states.

In this vein, it may be worth to briefly revisit what the further, main characteristics of such a new monetary order could be:

  1. (1)

    For reasons explained in our previous work,Footnote 23 the new monetary order that would be based upon the power to create new money lying with public authorities, rather than private market players, would best be of an international nature. This would imply that there would be a single global currency, to be issued by a global monetary institution.Footnote 24

  2. (2)

    The new monetary and economic order should, moreover, be based upon the values of altruism, solidarity and a willingness to care for one another.

    A second underlying main principle of the new monetary system should be a willingness to make use of the natural resources of the planet Earth in a far more prudent and rational manner than the ideologies of economic liberalism and economic neoliberalism have ever been willing to do.

  3. (3)

    While working out the underlying goals of the to-be-established monetary order in one or multiple basic treaties, the international community will, obviously, have to consider what the institutional framework of this new, international monetary order will be. One idea could be to agree upon the formation of a central, supranational organization. In our book “Towards a New International Monetary Order”, this new supra-national institution has provisionally been referred to by the name “(New) Monetary World Institute” (“(N)MWI”), and has, moreover, already been described in some more detail.Footnote 25

  4. (4)

    The (N)MWI could be vested with the basic power to organize the creation of new money on behalf of all participating countries, as well as their inhabitants.

  5. (5)

    One of the basic tasks of the (N)MWI could be the creation and attribution of (entirely “for free”) new money to the participating countries (and/or regions or communities of such countries) themselves.

    The (revolutionary) aim of the new international monetary order could be that money creation on behalf of public authorities in the broadest sense of the word—i.e., including supra-national public organizations, alongside participating countries themselves—would happen in a totally “for free” manner, implying that public authorities would be entirely freed from the ties—notably “debt”—of the private financial sector, besides from taxation. Under this new-to-be-established international monetary order, the idea could simply be to replace the currently prevailing methods of state financing (based upon taxing the lower and middle classes and alleviating budget deficits through market loans) with (non-refundable) allocations to be handed out by the (to-be-established) (N)MWI.

    Hence, instead of leaving the power to create new money, mainly, in the hands of private (commercial) banks, the new-to-be-established international monetary order could, as regards money creation on behalf of public authorities (both national, and inter- or supra-national in nature), be based on empowering the (N)MWI with the power to periodically grant (non-refundable) allocations to the participating states. These allocations would come down to the granting of money “out of nothing”—as is at present the case with the money created by private (commercial) banks when they enter into a credit agreement with a credit taker—that, moreover, would not have to be repaid by the receiver of such allocations (contrary to the case when taking credit).

    The result of this would be that the member states of such a new monetary order would neither have to remain tax states, nor debt states anymore.

    In order to achieve these goals, there will obviously be a need for a clear insight into the set of tasks of general interest to be attributed to the governments of the participating countries for which the said periodical allocations will be given. This set of tasks of general interest will, moreover, have to be more-or-less uniform across participating countries, thus ensuring that the notion of “general interest” (or “public good”) will be approached in a similar manner universally, which in its own turn will help create a world socioeconomic order in which all human beings, wherever they are born or live, will be assured (more) equal life chances.

  6. (6)

    Under the new-to-be-established international monetary order, the methods of making new money available to the private sector could also be organized in a totally different manner than under the prevailing, capitalist monetary systems.

    Within the new-to-be-established international monetary order that would serve the underlying aim of creating a world economy based upon solidarity, altruism and all people learning to take care of one another, rather than on selfishness, egoism and greed, the manner of granting new money to private persons could (or should) be approached from a completely different perspective.

    First, the notion of implementing a universal fixed basic income could be considered. (Cf. Sect. 7.12) For this to happen, each country would have to be committed (as part of entering into the treaty establishing the new monetary order) to grant a basic fixed income to all of its inhabitants out of the periodical allocations that they would receive from the (N)MWI, thus ensuring access to a basic amount of income in order to facilitate a humane and dignified life for all people.

    Second, in order to finance other than the most basic life needs, private persons could obtain access to credit granted by the national central bank of the country in which they reside. The idea here would be that the new international monetary order would, as regards the creation of new money on behalf of the private sector, be based upon a network of national central banks in each of the participating countries. The further idea would be that all private persons residing in a given participating country would have access to its national central bank through a network of offices distributed across the territory. These national central banks themselves could, furthermore, be empowered with the possibility of providing these private persons with new money through a variety of credits, which could additionally be based upon the principle that the more a private person is in need of credit in order to finance a more basic need, the cheaper the price of such a credit would be, varying from credits against a low-interest percentage, to credits bearing no interest charge whatsoever, to even credits against a negative interest rating (basically coming down to subsidies to private persons).

    With regard to human beings themselves, “cheap” credits could, e.g., be those that finance (access to) decent housing or basic transport (such as a personal or shared car), certain essential goods (such as household items) and education (only applicable to specialist or further education forms that could not be accessed in cost-free public education systems).

    With regard to legal persons (such as enterprises, non-profit associations or foundations, and similar private institutions), the national central banks could, furthermore, work out a more diversified credit policy. Here, access to new money based upon such credits could be made conditional upon criteria of proper moral conduct, whereby the price of such a credit could be made higher or lower dependent on a variety of to-be-further-worked-out specific criteria, such as: the nature of the goods or services the enterprise provides (taking into consideration whether or not these are essential in meeting basic life needs); the impact of the enterprise or other private entity on society; the profit or non-profit character of such an enterprise or other entity; the (non-)harmful nature of the products it makes; the question of whether or not the entity serves a general interest purpose; the question of whether or not it pollutes the environment (and, if yes, to what extent); the question of how it treats its labour force(s); alongside numerous other similar issues.

Obviously, many other (practical) matters would have to be considered before the establishment of the here-proposed new international monetary order is to become feasible. On these other matters, we here suffice to refer to the blueprint for such a new international monetary order that has been previously laid out in some of our earlier work.Footnote 26

11.4 Addressing the Monetary Financing Prohibition Argument

Especially with regard to the EU, implementing the in Sect. 11.3 (re-)proposed new monetary system will, imply that, first, the objections against monetary financing would be abandoned.

This should not be all that difficult, to the extent that the origins of the monetary financing prohibition seem to be mainly of an emotional nature, and—more precisely—to go back to, a.o., experiences Germany endured during the first half of the twentieth century.Footnote 27

The circumstances of the 1920s leading to a worldwide depression, as well as these of World War II, which literally set a huge part of the world in ruins, were of course of an exceptional nature. Nevertheless, and without much further arguments, these experiences have since been mentioned as the main reason for introducing a severe prohibition of monetary financing in the architecture of the EMU. The prohibition of central bank financing of public entities, as this has been laid down into the ECB statutes, was in this way driven to prevent what were perceived as abuses of the central banks’ ability to print money (which would be directly to the benefit of the EU/eurozone member states).Footnote 28 Because of these developments, and especially due to the approach laid down in the TFAU, for decades, both economics academia and policymakers functioned under a virtually complete consensus that monetary financing “is akin to an extremely dangerous drug that should forever be locked away”. Both its use and just thinking of using it, got the status a “taboo”.Footnote 29

According to Tober, this knowledge at the same time leads to the insight that the prohibition of monetary financing is—as such—neither necessary, nor sufficient, to ensure price stabilityFootnote 30—or, put differently, that the prohibition of monetary finance does neither contribute to, or is necessary for, its main purported reason of existence. Its real purpose hence, seems to be protecting the central bank’s independenceFootnote 31 in creating money, which could purportedly be undermined in case governments would have a direct access to central bank financing (e.g., credit and/or the possibility to issue debt instruments subscribed by the central bank).Footnote 32

This, however, immediately raises the question if this latter purpose could not be better served through other means than by implementing a fundamental rule of law that, basically, favours the interests of (especially the rich and powerful) private market players above these of states and, through this, puts the pursuit of profits by private market players above the general good that states are supposed to serve.

It was, thus, not surprising that several proposals for overcoming the euro crisis which occurred in the aftermath of the financial crisis of 2008, in a still modest manner, started making the case for monetary financing of the public sector (or, phrased differently, for abandoning the classical prohibition of monetary financing). E.g., WattFootnote 33 proposed that the ECB would directly finance government investments, while Pâris and Wyplosz argued that public debt might be effectively restructured by transferring parts of this debt to the balance sheets of the Eurosystem (i.e., those of the ECB itself and of the euro area national central banks).Footnote 34 Both proposals involved putting the ECB at the centre of matters which are generally deemed to be of a fiscal nature, “in order to circumvent existing fiscal and political restrictions”. Watt, furthermore, suggested that monetary financing would imply that there does not need to be a cost to such financing.Footnote 35 However, according to Tober, a flaw in the arguments of these authors was that (government) debt does not disappear when shifted to the central bank.Footnote 36

While such proposals, obviously, had great merit, and at least testify to a willingness to pierce the artificial nature of the monetary financing prohibition, they lack some of the imagination shown by, e.g., Keynes in a more distant past. After all, the aforementioned proposals maintain an approach to money creation within the outlines drawn by capitalism, namely the idea that (scriptural) money may be created through the granting of credits by private banks to all possible other persons, including states, under the auspices of a central banking system that guards this money creation on the basis of its monopoly over the creation of “chartal money” (or: “printed – besides coined – money”), in other words, that states themselves also depend on this, in essence, “private money creation system”, implying that, when in need of (new) money, they come indebted towards the private banking system, just like anyone else.

And this is exactly where, from a historical point of view, the main flaw in the prevailing, capitalist money creation system has occurred, as elaborated upon profoundly in our previous work.Footnote 37 Moreover, it appears time and again that this capitalist model of money creation is no match for crises, to the extent that each new crisis impoverishes the states even further (because of new debts that states must take on to absorb the shock of the crisis) and thus makes them less resilient to a next crisis, while the benefits of state intervention, time and again, unilaterally benefit enterprises and their stakeholders.

Wray, furthermore, has argued that monetary systems, themselves, were invented to mobilize resources to serve what governments perceived to be “the public purpose”. According to Wray, this makes it hard to separate the economic from the political—and any attempt to separate money from politics, as economic neoliberal monetary thinking wants to do, itself, political.Footnote 38 From inception, then, it is clear that money basically gives command over socioeconomically created resources, and to decide how these get distributed among the general population.Footnote 39 From this, if also follows that, since government is the only true issuer of currency, any monopoly government can itself (re)define the terms on which it is willing to supply it.Footnote 40

And here, by basically continuing the private money creation system that started developing in the late Middle Ages,Footnote 41 (neoliberal) governments all over the world express a deliberate choice of giving private banks the power to issue what is, after all, still government money (to the extent that such private banks are the only ones to get access to the central bank system to get new (chartal) money to cover their own (scriptural) money creation), and by doing so, to be able to fuel speculative bubbles at their own convenience. Basically, private banks have thus been given a(n exclusive) license to access the (public) monetary systems, including the power to make states indebted, in order to pursue private interests to the detriment of the general or public good.Footnote 42

However (and thank God), there is still Keynes, to whom we owe the insight that, throughout history, it is the state who is the one who has (claimed) the right to determine exactly what “thing” corresponds to the name “money”, and to be able to alter this declaration from time to time—i.e., “the right to edit, and hence also re-edit, the dictionary” of what money is.Footnote 43

In the words of Keynes himself:Footnote 44

The State, therefore, comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contract. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time – when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of Money has been reached that Knapp’s Chartalism – the doctrine that money is peculiarly a creation of the State – is fully realized.


And the Age of Chartalist or State Money was reached when the State claimed the right to declare what thing should answer as money to the current money-of-account – when it claimed the right not only to enforce the dictionary but also to write the dictionary. To-day all civilized money is, beyond the possibility of dispute, chartalist.

Therefore, according to Wray, a true understanding how a monopoly money works, would at the same time advance the formation of public policy a great deal. And to the extent that what Wray is saying, is fully in line with the ideas expressed in our own, previous work,Footnote 45 we can, obviously, but concur. In this approach, it is not “affordability” that is the issue; instead, the real debate should be over the proper role of government, with as main question how the government should use the monetary system (including money creation power) to achieve the public purpose or, phrased differently, to serve the general interestFootnote 46—this also being exactly what we pleaded for in our own previous work.Footnote 47

The next step in this reasoning, hence, becomes that the monetary financing prohibition may be abandoned, provided that there are other safeguards installed to ensure the policy purposes usually upheld in defence of the monetary financing prohibition, which basically come down to protecting the stability of the monetary system by:

  1. (1)

    Ensuring price stability.

  2. (2)

    Ensuring that money creation can happen in a sufficiently independent manner (i.e., not to be directly dictated by the government of a given country who, otherwise, could just start the printing machines for printing money at its leisure, until such money would lose its value as, due to an excess of it, it would no longer be accepted as money—i.e., the classical inflation risk).

In our book “Towards a new international monetary order”, we have addressed both these concerns, based upon the insight that nothing in the dictionary Keynes refers to, implies that private banks should remain involved in the money creation process.

The question then becomes how the two mentioned safeguards would be ensured in our newly proposed monetary system.

Ensuring price stability, basically, happens through guarding the amounts of money brought into circulation in comparison to the underlying economic production and trade. This can as well happen by entrusting money creation power to a public institution—provided that the principle of price stability remains embedded in the basic working rules of such a new monetary system, and provided that the (N)MWI which would be entrusted with all money creation power, would have sufficient skills (e.g., qualified staff in sufficient numbers) in house to fulfil this task.Footnote 48

With regard to the second concern, namely the independence of the entity that is entrusted with the power to create money, it may be pointed out that in our previous work, we made the suggestion that the power to create new money to the benefit of states (besides other public, international institutions), would be entrusted to a newly to be established international institution, the (New) Monetary World Institute [(N)MWI], which would function in accordance with rules established in an international treaty, and in which decision-making power—i.e., with regard to the creation of new money—would be based upon a system of checks and balances among the participating countries. Such a checks and balances-system would prevent that any state would be directly involved itself in the decision-making processes with regard to its own situation (both with regard the allocations to be made to such a state, as with regard to the amounts of new money made available to its economy), but that such decision(s) would be entrusted to panels manned by representatives from other countries, which would, moreover, be composed differently from year to year. Such a system would, put differently, ensure that all decisions with regard to the monetary situation of a given country would be made completely independent from its own government.Footnote 49

Moreover, because of QE, there may even been both a further economic and a legal argument for putting money creation (back) in public hands.

According to Stiglitz, the purported compliance of the ECB with the monetary financing prohibition during the past years has, basically, but been a charadeFootnote 50 to start with:

While, as in Europe, there is a charade that the central bank does not lend money directly to the government, it is clear that that is precisely what has been happening.

From a more legal point of view, what QE has brought about is that states have become debtors of central banks. Now, in law, the highest public authority is that of the state, under which even monetary sovereignty resorts.Footnote 51 Central banks are hereby merely institutions to which the states have delegated (part of) their monetary sovereignty. On top of that, in matters of public affairs, no delegation can be considered irreversible. The latter implies that the state may at any time revoke the delegation given to its central bank or change the terms and modalities of such delegation. In essence, the latter is but the legal translation of the reality that Keynes himself alluded to, namely that any monetary system is essentially changeable (if state authority so desires).

No delegation to a supranational central bank, such as the ECB, may change this reality. Even the design of the ECB itself just goes back to the national, monetary sovereignty of the participating countries (as expressed in the EMU treaties). And even here, there is no impediment that such a delegation would be reversed, if necessary, by an exit from, or alteration of, these treaties.

What now happens because of a QE operation with sovereign debt as its object, is that the highest level of authority (i.e., the state) relegates itself to being the debtor of a delegate (i.e., the central bank), which immediately illustrates that there cannot be any need to do so. As soon as a state would simply change the terms of its delegation to the central bank, such a debt no longer has to exist, if it were only by enacting a legal rule that stipulates that as soon as the central bank becomes a creditor of the state itself, such a debt automatically expires.

In addition, there is a crucial problem of legitimacy. The authority of the state, at least in democracies, is based on democracy, which is not the case for the central banking system, which derives its legitimacy mainly from its technical expertise. Now, a democracy requires that technocrats serve the people, whereby the reverse, i.e., that the people are reduced to (semi-)slaves of the technocrats, should, obviously, be completely out of the question. However, exactly the latter is occurring during the current, authoritarian phase of neoliberalism, whereby, by way of further example, reference can be made to the far-reaching austerity policy of the EU institutions of which the completely undemocratic character has been adequately demonstrated. (Cf., e.g., Sect.

These insights lead to an important legal argument to give the power to create money back to the public domain, so that a monetary system can again be set up which is not dictated by soulless technocrats who only have an eye for the interests of a select part of the population (in particular the rich entrepreneurs and bankers), but one that, worthy of a democracy, is again put at the service of everyone—and in the framework of which the caste of technocrats themselves become servants of the people again, instead of illegitimate rulers.

And, in the end, all that is required for such a new monetary system to work, is universal trustFootnote 52—trust in democracy and in man’s skills and abilities to work out a better monetary system, by learning from past mistakes and by combining (new) insights from the heart with (old) knowledge of the mind.

And, in the very end, all what money is about, is trust that it works.

11.5 Re-establishing a Clear Public Good or General Interest Domain vs a Free Market Domain

Now, let us, to conclude, (re)address what the main advantage would be of such a new, monetary system.

One of the main consequences of neoliberal monetary and fiscal public policy—and of neoliberal public policy in general—has been a diminishment of the domain of “the public good” (or “the general interest”) to the benefit of the domain of the free market.

In practical all countries which applied neoliberal economics, choosing the latter as the main ideology for determining the content of public policy, has implied that a wide variety of public services (which under the welfare state model of the 1960s and early 1970s had been delivered by states), have to an increasing extent been transferred to private market players. This, obviously, has led to a diminishment of the domain of the public good, and an increase of the domain of the free market itself.

This process is, moreover, still ongoing on a global scale.

From Chaps. 5 and 6 of this book, it has become poignantly clear what the consequences of such a(n) (on-going) transfer of what in the past was largely public service provision to the free market, have been with regard to care for the sick and the elderly. E.g., numerous examples (dealt with in the Chaps. 5 and 6) show that private hospitals, for a variety of reasons (such as too little qualified staff; less emphasis on ICU beds because these are much less profitable in “normal” times; no stocks of preventive material because in “normal” times this is a non- profitable cost is …) were less suitable in the fight against Covid-19. And this appears to have been even more nefarious with regard to privatized/private retirement homes.

What, hence, has in general been shown during recent years is that, in many countries, a far-reaching neoliberal austerity and erosion policy had significantly eroded and/or shifted the domain of public services to the advantage of free market players. In addition to the sectors of care for the sick and elderly, this also appears, in e.g., sectors such as public education (at all levels), the organization of the labour market, in addition to many other domains of societal life, but even in the domain of certain core state activities such as justice and security.

The application of the proposals from our previous research (as—briefly—summarized in Sect. 11.3) would allow humanity to conceive a full restoration of the domain of public service, and this even at a minimum level on a global scale. Via the allocations to be allocated annually by the (N)MWI, each state would receive a sufficient operating budget to properly fill in this field of public services (with as underlying overall purpose establishing a “universal care state model”). (Cf. Sect. 11.3.)Footnote 53

In other words, our newly proposed monetary system would, in contrast to the prevailing neoliberal monetary (and fiscal policy) models, come down to the fact that there would be a public system of money creation in favour of the public domain, which would at the same time ensure a much more logical approach conceptually. This would also allow states to be taken from under the yoke of the financial markets, so that they would also be provided with sufficient oxygen again to play their role of ensuring the general interest properly (instead of, as has been shown in recent years, mainly to focus on phasing out their role in meeting austerity’s monetary and fiscal policy objectives, besides shifting policy domains to the free market).

In addition, the economic domain itself would still be left in the hands of the free market, for which—as also elaborated in our earlier work—the existing systems of money creation (based on lending) could continue to play their role.

11.6 The Covid-19 Crisis Fortifying the Case for a New International Monetary Order Even More

With further regard to the illustration most relevant in times of Covid-19, it can, e.g., be pointed out that in neoliberal states, funding of, healthcare comes from a range of mechanisms, such as through a combination of taxes, semi-taxes, health insurance funds and private sources,Footnote 54 all these sources so far having been unable to gather sufficient financial means for establishing a global, universal healthcare system at an acceptable minimum level.

It, regretfully, even suffices to point to the disastrous events in India during April and May 2021, to fully grasp what it means to live in a wrong place of a world that does not have universal healthcare.

By contrast, under the in our previous work proposed new monetary order, it would become possible to provide states (all over the world) with the necessary funding for establishing a universal healthcare—that would be in line with the WHO’s commitment to “the fundamental right of every human being to the enjoyment of the highest attainable standard of health, without distinction of any kind”Footnote 55—within their respective jurisdictions.

Such an approach would, moreover, substantially contribute to reducing, or even completely ending, the health inequalities prevailing under the present neoliberal, socio-economic order, as has also, regretfully and in a dramatic manner, been shown by Covid-19.Footnote 56

And what applies to healthcare, obviously—and as readdressed in Sect. 11.5—also applies to several other matters belonging to the public domain, such as elderly care, education, scientific research, (social) housing …

To phrase it differently: like the previous (financial) crisis of 2008, the current (Covid-19) crisis of 2020–2021 confronts humanity with the question whether it still wants to stick to the capitalist organizational models (especially on a monetary and fiscal policy level), or whether there will, this time, be a sufficient willingness to establish an alternative, fairer socioeconomic system.

It may hereby be clear from the foregoing, but also from our previous work,Footnote 57 that we firmly believe that a sufficiently serious reform should begin with a fundamental reorientation of the money creation system(s).

After almost half a century of implementing economic neoliberalism, besides, more or less three centuries of capitalism, the world and its humanity are exhausted, and it should be clear that things cannot continue like this.

When, in the words of neoliberal rulers themselves, a so-called “innocent” virus can wreak such havoc in but a year time, with the world economy almost ending up in a just as bad state as after the Second World War, the time seems more than ripe to start taking this matter more seriously.

Moreover, the devastating impact of capitalism is hardly limited to having caused the Covid-19 crisis itself—with some countries, at the time this book went to press, still suffering from the devastation of the Covid-19 pandemic, and others, due to a sufficiently advanced state of vaccinations, gradually rippling to their feet (cf. Sect. 9.6.2)–, but similarly extends to numerous other societal problems which have been insufficiently clarified in times before Covid-19.

Among these largely unaddressed problems rank, most certainly, climate change, the growing global debt burden, an extreme degree of polarization between rich and poor, among many others.Footnote 58 Looking for solutions for these problems was, more or less, put on hold because of Covid-19, but will soon, once again, start to demand increasing attention.

As at the end of one of our previous books, “Towards a New International Monetary Order”, the question still—and even more than ever—remains how long humanity will continue to suffer the scourge of the capitalist, socioeconomic order, and when—at last—democratic forces will begin to show enough political interest to push for a more just socioeconomic ordering model.Footnote 59

To paraphrase Keynes: man can rewrite the dictionary on what money is, and on how it comes to existence. So, considering the huge advantages of such a new monetary system, why should he not? Or to paraphrase Harari: let us just imagine another kind of money!


  1. 1.

    Streeck (2017), p. 126.

  2. 2.

    Brock (2021).

    Without the ECB willing to step into financing the state and enterprise sector directly—which would be tantamount to entering the taboo of monetary financing as laid down in Article 123 of the Treaty on the Functioning of the European Union, containing a prohibition of monetary financing—such a policy has the effect of making large injections of money into the economy possible (hence the term “quantitative easing”). (Cf., furthermore, Sect. 11.4).

    According to Brock, quantitative easing is particularly implemented when interest rates are already near zero, because, at this point, central banks have still fewer other monetary tools available to influence economic growth, to the extent that most of the other arsenal of central banks is based upon interest rates. (Cf. Brock (2021).)

  3. 3.

    Brock has pointed out that if central banks increase the money supply, this may cause inflation. In the opinion of this author, the worst possible scenario for a central bank is that its quantitative easing policy would indeed start causing such inflation without at the same time accomplishing the intended economic growth. Such an economic situation where there is inflation, without economic growth, is called “stagflation”. (Cf. Brock (2021).)

    In an opinion piece that appeared in The New York Times on May 13, 2021, Krugman has countered some of these concerns. (Cf. Krugman (2021a).)

  4. 4.

    Krugman (2021b).

  5. 5.

    Krugman (2021b).

  6. 6.

    With regard to, e.g., the EU SURE program (cf. Council Regulation (EU) 2020/672), this is even explicitly indicated in the preambles of the SURE regulation itself.

  7. 7.

    This could, schematically, be simplified (in an extreme manner) as follows: Banks => Loans to states => Loans bought by ECB => Cash/claims on the central bank as basis for new loans to enterprises who pay wages => wages being taxed in order to repay the (state) debt.

  8. 8.

    In the USA, a variety of the Covid-19 programmes of the Federal Reserve were based upon financial means provided by the US Treasury, hence on money the United States borrowed on the financial markets (cf. Sect. 3.3).

  9. 9.

    On the matter what the overall purpose of a socioeconomic system should be, cf. Byttebier (2019), pp. 1–4.

  10. 10.

    Nagle and Sugawara (2021).

  11. 11.

    “Aggregates are calculated using current GDP is U.S. dollars as a weight, based on data for up to 182 countries, including up to 145 EMDEs. Data for 2020 are estimates” [Nagle and Sugawara (2021)].

  12. 12.

    McCormick et al. (2021).

  13. 13.

    “Advanced economies and emerging markets are a sample of 25 and 27 countries respectively” [McCormick et al. (2021)].

  14. 14.

    McCormick et al. (2021).

  15. 15.

    McCormick et al. (2021).

  16. 16.

    McCormick et al. (2021).

  17. 17.

    Cf. Byttebier (2019), pp. 1–4.

  18. 18.

    Cf. Byttebier (2017), Chaps. 4 and 5 (pp. 353–487). Cf., furthermore, Byttebier (2019), Chap. 5. (pp. 137–180).

  19. 19.


  20. 20.

    Compare Ocampo (2017), p. 211.

  21. 21.

    Byttebier (2019), pp. 164–169.

  22. 22.

    As in Chaps. 4 and 5 of Byttebier (2017).

  23. 23.

    Cf. especially Byttebier (2021), pp. 363–380.

  24. 24.

    This idea is, as such, not new, and has in the past already a couple of times been defended. (For an overview, cf. Bonpasse (2006), p. 150–159).

    Bonpasse, who already in 2006 devoted a profound study on the subject, pointed to a variety of further benefits of such a single global currency, the overall benefit being the promotion of international financial stability which is the essential basis of (international) commerce and economic growth. Further advantages of such a single global currency would be: (1) the elimination of the costs of foreign exchange transactions; (2) an increase in asset values caused by the reduction of currency risk through the formation of a global, monetary union; (3) the elimination of the need for central banks to maintain foreign exchange reserves; (4) the elimination of the risks of excessive capital flows among currencies and countries; (5) economies of scale (by reducing the costs for countries connected to operating an entirely separate monetary system); (6) the elimination of the balance of payments/current account problem for single countries or regional monetary unions; (7) separating the value of money from the value of a particular country; (8) the elimination of national currency crises for single countries or regional monetary unions; (9) the elimination of the possibility of currency exchange rate manipulation and intervention by countries (or even multinationals); (10) the elimination of the fluctuations of currency values; (11) the elimination of currency speculation; (12) the reduction of worldwide inflation; (13) the increase of trade; (14) guaranteeing the human right to property by ensuring a stable currency; (15) the creation of an international financial system that is more fair among nations and people; (16) ensuring a fully accurate, global private busines and public economy measure unit; (17) establishing a permanent solution for all monetary problems; (18) having a system in which the value of money is set in accordance with international standards, instead of being determined by the supply and demand of the marketplace; and (19) ensuring an elegant an understandable simple monetary system. (Cf. Bonpasse (2006), pp. 161–185.)

    This author also points to some possible disadvantages. (Cf. Bonpasse (2006), pp. 186–188.)

  25. 25.

    Cf. Byttebier (2017), pp. 443–453.

  26. 26.

    Cf. especially Byttebier (2017), pp. 353–487; Byttebier (2019), pp. 137–180.

  27. 27.

    Tober (2015).

    In that period, according to Tober, Germany twice underwent a complete collapse of its monetary system. According to Tober, in 1923, monetary financing had been dwarfed by a loss of confidence in the German currency that resulted into a sharp increase in the velocity of money. E.g., a wave of hyperinflation wiped out as good as all savings, which even made monetary authorities resort to the desperate measure of introducing a new currency at a ratio of 1 trillion (of the old currency) to one (which indicated the extreme loss of value the German currency had suffered). While some two decades later, during and shortly after WWII, severe price controls and rationing prevented the reoccurrence of such an extreme degree of open inflation, it also created a shortage of goods, as well as a thriving black market activity. In order to restore monetary order, in 1948, a new monetary reform was carried out that simply cancelled out 90 per cent of all credits and savings. However, these experiences also embedded an extreme aversion for what, since then, has gotten referred to as “monetary finance” in the minds of many economists. (Cf. Tober (2015).)

  28. 28.

    As a result, article 123 of the Treaty on the Functioning of the European Monetary Union (TFEU) states that the Eurosystem may not grant public entities any type of credit or credit facility, or purchase debt instruments directly from such public entities.

    Cf. Article 123(1) TFEU: “Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.”

    In addition, Article 282 TFEU states “that the ECB has to be independent in the exercise of its powers and in the management of its finances, while being given the primary objective of maintaining price stability”. (Cf., furthermore, Tober (2015).)

  29. 29.

    Watt (2015), p. 13.

  30. 30.

    Tober (2015).

  31. 31.

    This is, obviously, not only a concern within the framework of the EMU.

    Taking the example of the United Kingdom, the Bank of England (along with the PRA) have prudential oversight over the Financial System, whereas the FCA retains the role of a regulator of conduct. Both the Bank and the FCA are independent from the Government. Their roles, although different, essentially converge in developing protective measures to check and enforce compliance thereto, by applying sanctions. Their work is, furthermore, complemented by a wider ecosystem of regulators with other functions.

    The same is true of their American equivalent, The Federal Reserve, the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority, etc.

  32. 32.

    Tober (2015).

  33. 33.

    Watt (2015).

  34. 34.

    Pâris and Wyplosz (2014).

    The proposal by these authors involves an agency—e.g., the ECB—that would acquire, at face value, a proportion of existing public debts and that would swap them into zero-interest (or even negative-interest) perpetuities. In practice, therefore, the corresponding debts are wiped out. To that effect, the agency itself would have to borrow on the financial markets the amounts needed to acquire the public debts. As it would, per hypothesis, itself pay interest on its obligations without receiving interest on the perpetuities, the agency would be bound to make losses. To the extent that it would keep rolling over its obligations, its losses would also be forever. The authors, furthermore, argued that their proposal is not inflationary, to the extent that it is, strictly speaking, not a monetization of public debts, because it does not involve any money creation. The ECB would only borrow on the financial markets to acquire public debts. However, still according to the same authors, in practice, the ECB could as well use its money creation capacity to buy the public debts, and then fully sterilize the money created in the first place, the order of actions remaining immaterial. (Cf. Pâris and Wyplosz (2014).)

  35. 35.

    Tober (2015).

  36. 36.

    Tober (2015).

  37. 37.

    Byttebier (2021), pp. 75–76.

  38. 38.

    E.g., adopting a “gold standard” (i.e., the monetary system prevailing in the nineteenth century until World War I.; cf. Byttebier (2001), pp. 76–77, nr. 88; Ocampo (2017), p. 4), or a “foreign currency standard” (“dollarization”) (i.e., the Bretton Woods system in the period 1944–1971, cf. Byttebier (2001), pp. 92–94, n°s. 105–106; Ocampo (2017), p. 95), or a “Friedmanian money growth rule”, or setting an “inflation target”, all are political acts—based on ideological choices—that serve(d) the interests of some privileged group. There can, hence, in this (correct) viewpoint, be no “natural” separation of a government and its fiscus from its money. By way of further examples (with regard to the US monetary system), Wray has rightly pointed out that: “[t]he gold standard was legislated, just as the Federal Reserve Act of 1913 legislated the separation of Treasury and central bank functions, and the Balanced Budget Act of 1987 legislated the ex ante matching of federal government spending and revenue over a period determined by the heavenly movement of a celestial object. Ditto the myth of the supposed independence of the modern central bank—this is a smokescreen to hide the fact that monetary policy is run for the benefit of particular interest groups (usually, the monied ones).” (Wray (2011), p. 6.)

  39. 39.

    Wray (2011), p. 7.

  40. 40.

    Keynes (1930), p. 4.

  41. 41.

    Byttebier (2021), pp. 26–57.

  42. 42.

    Wray (2011), pp. 8–10.

  43. 43.

    In our earlier work, we referred to this as to the per definition “changeable nature” of money. (Cf. Byttebier (2021), p. 15. Compare Harari (2014), p. 197.)

    As Harari has phrased this: “Money was created many times in many places. Its development required no technological breakthroughs – it was a purely mental revolution. It involved the creation of a new inter-subjective reality that exists solely in people’s shared imagination.” (Harari (2014), p. 197.)

  44. 44.

    Keynes (1930), pp. 4–5.

  45. 45.

    Byttebier (2017), p. 75. And before, Byttebier (2015a), pp. 87–88.

  46. 46.

    Wray (2011), p. 17.

    What Wray is basically implying, is that even the monetary financing prohibition is but an artificial construct, that but serves the interest of the participants in the private money creation processes, namely private banks and their shareholders.

  47. 47.

    Cf. especially Byttebier (2017), pp. 358–363.

  48. 48.

    Anyhow, there is no real proof that the prevailing monetary system based on private banks creating scriptural money backed by central banks’ authority to create chartal money, is per definition better equipped to guarding price stability than a system in which money would be solely created by an international, independent public institution.

    It suffices here to point to the fact that during 2020, under the prevailing private money creation system, trillions of USD of new debt were brought into circulation, with—although some pointed to a possible inflation risk—no one in charge of private or central banks expressing real worries about this fact. Another factor of interest is that public trust in the money creation system is in present times far bigger than roughly a century ago. Even the severe financial crisis of 2008—with its risk that there would have been a multitude of bankruptcies in the banking sector—did no longer lead to a run on the private banks, a fact that a century ago would have been unthinkable. Moreover, the growing preference of the general public for scriptural (and even electronic) payment systems (hence, money), is even so likely to provide an additional protection of the money creation system, even when this would be entrusted to a public institution.

  49. 49.

    Cf., furthermore, Byttebier (2017), pp. 396–398.

  50. 50.

    Stiglitz (2020), p. 17.

  51. 51.

    Ingham (2004), p. 76.

  52. 52.

    Trust is basically what money all is about. (Cf. Harari (2014), p. 207; Ingham (2004), p. 74.)

  53. 53.

    For further reading, cf. Byttebier (2021), pp. 353–500; Byttebier (2018), pp. 213–228; Byttebier (2019), pp. 137–217.

  54. 54.

    For an overview, cf. World Health Organization (2014), p. 23.

  55. 55.

    Global Conference on Primary Healthcare (2018) Declaration of Astana. From Alma-Ata towards universal health coverage and the Sustainable Development Goals., under point I.

  56. 56.

    Cf. Byttebier (2019), pp. 192–194 (as regards healthcare) and pp. 196–197 (as regards elderly care). Cf., furthermore, World Health Organization (2014), p. 23. By granting states the means to focus on prevention, the costs for such a universal healthcare could even be kept within very reasonable boundaries. (Cf. World Health Organization (2014), p. 23). According to the WHO, the per capita cost for a preventive universal healthcare would be representing only an annual investment of under USD 1 in low-income countries, USD 1.50 in lower middle-income countries and USD 3 in upper middle-income countries. Also according to the WHO, these figures represented just 1–4% of the at the time prevailing health spending.

  57. 57.

    Cf. Byttebier (2015a, b, 2017, 2018, 2019, 2021).

  58. 58.

    For an overview, cf. Byttebier (2018), pp. 133–212; Byttebier (2019), pp. 79–136. Cf. before, Byttebier (2015b), pp. 115–168.

  59. 59.

    Byttebier (2017), p. 500.


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Byttebier, K. (2022). Final Conclusions. In: Covid-19 and Capitalism. Economic and Financial Law & Policy – Shifting Insights & Values, vol 7. Springer, Cham.

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