Abstract
This chapter deals with the transition from the present regime of bankmoney to a plain sovereign money system, explaining the basic features and possible variants of such a transition, and discussing the continuities and changes for central banks, banks, government and bank customers, as well as the related advantages and supposed disadvantages.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Werner (2012), Anderson and Morrison (2014), Yamaguchi (2014), Mellor (2016), Zarlenga (2014), Striner (2015), Huber and Robertson (2000).The term sovereign mo ney is different from the term sovereign currency as used by modern money theory (MMT). The usage of ‘sovereign currency’ in MMT is part of a questionable construction in which banks’ credit and deposit creation in the fractional reserve system is seen as a benign part of what is misleadingly portrayed as a ‘sovereign currency system’, as if what still needs to be achieved already exists. Cf. sovereignmoney.eu>money theory>modern money and sovereign currency.
A group of French social anthropologists also used the term monnaie souveraine, but in a different sense. The group started from the systemic hierarchy of money and finance being prior to real economic transactions, but then overstretched the position. In the vein of Marxist ideas on economic alienation, money itself is seen in the role of an independent sovereign entity rather than being a means of payment originated from a sovereign body. Cf. Aglietta Orléan (1998).
- 2.
- 3.
- 4.
Art. 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.’
- 5.
Art. 123 (1) TFEU applies to all EU member states, including the UK and other non-euro states. The British Government, however, won a derogation concerning its ways-and-means facility with the Bank of England.
- 6.
- 7.
Pash (2013).
- 8.
Calculated on the basis of M1 in the euro, and 50 % of M2 in the USA as well as 50 % of M4 in the UK, taking this as a rough proxy for what liquid M might be in a sovereign money system.
- 9.
Hixson (1993, p. 56).
- 10.
Ferguson (2008, p. 3).
- 11.
Such an element of real economic conditionality, or say credit guidance, is part of ‘The Chicago Plan Revisited’ by Benes and Kumhof (2012) and is occasionally also expressed in the writings by Werner.
- 12.
Huerta de Soto (2009, Chap. 5, pp. 265–396).
- 13.
Graziani (1990, p. 12), Fontana (2000, p. 42), and Rossi (2007, p. 121)
- 14.
- 15.
- 16.
Hudson (2012, pp. 335, 298).
- 17.
- 18.
Borio (2012, pp. 16–23).
- 19.
Iqbal (2009).
- 20.
- 21.
O’Brien (2007, p. 151).
- 22.
- 23.
Benes and Kumhof (2012, p. 6).
- 24.
Keeping individual money accounts of customers with the banks is the preferred procedure of Huber and Robertson (2000, p. 23).
- 25.
The omnibus variant is preferred in the draft of a ‘Bank of England Act’ by Positive Money. See Jackson and Dyson (2012, p. 186), and Positive Money (2011).
- 26.
Cf. Schemmann (2012b, pp. 51–69).
- 27.
- 28.
- 29.
- 30.
P.H. Douglas et al. (1939, para 11a, b).
- 31.
For an appraisal of 100 % banking cf. the contributions at http://sovereignmoney.eu/100-per-cent-reserve-chicago-plan, including a critical synopsis of the core elements of 100 % money and sovereign money. A similar synopsis has been compiled by Andrew Jackson, Positive Money. This is available at http://www.positivemoney.org/2013/01/the-chicago-plan-versus-positive-money
- 32.
For more details of the ‘emulation’ problem, see my papers at http://sovereignmoney.eu/how-to-emulate-plain-money-within-a-full-reserve-sytem, and ‘Many roads lead to Rome—not all by the shortest path’ at http://sovereignmoney.eu/on-kumhof-the-chicago-plan-revisited.
- 33.
Walter (2011, 2013, p. 204).
- 34.
Wolf (2013, 2015, p. 209).
- 35.
Turner (2015, pp. 213, 218, 227–230, 237–240).
- 36.
Jackson and Dyson (2013b, p. 16).
- 37.
Jackson and Dyson (2013b, p. 19).
- 38.
Striner (2015, pp. 84, 59–64); also cf. http://globalmonetaryforum.blogspot.de run by Keith L. Rodgers.
- 39.
Ryan-Collins (2015).
- 40.
- 41.
- 42.
Cf. ‘Digital E-Cash Accounts’ by Dyson and Hodgson (2016). That proposal converges in its basic features with the proposal of sovereign money accounts as outlined here.
- 43.
- 44.
Systems with a corresponding transaction capacity already exist, for example in various electronic payment systems, or in the systems of Google, Amazon, Twitter and Facebook.
- 45.
References
Aglietta, Michel, André Orléan, eds. 1998. La monnaie souveraine. Paris: Odile Jacob.
Ali, Robleh, John Barrdear, Roger Clews, and James Southgate. 2014a. Innovations in Payment Technologies and the Emergence of Digital Currencies. Bank of England Quarterly Bulletin Q3: 262–275.
———. 2014b. The Economics of Digital Currencies. Bank of England Quarterly Bulletin Q3: 276–286.
Aliber, Robert Z., and Charles P. Kindleberger. 2015 [1978]. Manias, Panics, and Crashes. A History of Financial Crises, 7th edn. New York: Basic Books.
Allais, Maurice. 1987. The Credit Mechanism and its Implications. In Arrow and the Foundations of the Theory of Economic Policy. Essays in Honor of Kenneth J. Arrow, ed. George R. Feiwel, 491–561. New York: New York University Press.
———. 1988. L’Impôt sur le capital et la réforme monétaire, Nouvelle édition. Paris: Hermann Éditeurs des Sciences et des Arts. Première édition 1977.
Baba, Naohiko, Robert N. McCauley, and Srichander Ramaswamy. 2009. US Dollar Money Market Funds and Non-US Banks. BIS Quarterly Review March 2009: 65–81.
Bank of England. 2015. The Bank of England Act 1998, the Charters of the Bank and Related Documents. London: Bank of England. http://www.bankofengland.co.uk/about/Documents/legislation/1998act.pdf
Benes, Jaromir, and Michael Kumhof. 2012. The Chicago Plan Revisited. IMF-working paper, 12/202 August 2012. Revised draft February 2013.
Borio, Claudio. 2012. The Financial Cycle and Macroeconomics: What Have We Learnt? BIS Working Papers, No. 395, December 2012. Basel: Bank for International Settlements.
Currie, Lauchlin. 1934a. The Supply and Control of Money in the United States. Cambridge, MA: Harvard University Press.
———. 1934b. A Proposed Revision of the Monetary System in the United States (submitted to the Secretary of the Treasury, Henry Morgenthau). Reprinted in Currie, Lauchlin. 1968. The Supply and Control of Money in the United States. New York: Russell & Russell.
Del Mar, Alexander. 1895. The History of Monetary Systems. New York: Cambridge Encyclopedia. Reprinted by A.M. Kelley, New York, 1978.
Denk, Oliver, and Boris Cournède. 2015. Finance and income inequality in OECD countries. OECD Economics Department Working Papers, No. 1224. Paris: OECD Publishing.
Douglas, Paul H., Earl J. Hamilton, Irving Fisher, Willford I. King, Frank D. Graham, and Charles R. Whittlesey. 1939. A Program for Monetary Reform. Unpublished, but widely circulated among economists at the time. Available from the Kettle Pond Institute for Debt-Free Money. http://www.economicstability.org/history/a-program-for-monetaryreform-the-1939-document
Dyson, Ben, and Graham Hodgson. 2016. Digital Cash. Why Central Banks Should Start Issuing Electronic Money. London: Positive Money.
Dyson, Ben, Graham Hodgson, and Andrew Jackson. 2015. Would a Sovereign Money System Be Flexible Enough? London: Positive Money. http://positivemoney.org/wp-content/uploads/2015/01/Would_A_Sovereign_Money_System_Be_Flexible_Enough_WEB20140113.pdf
Ferguson, Niall. 2008. The Ascent of Money. A Financial History of the World. London: Allen Lane.
Fisher, Irving. 1935. 100%-money. New Haven: Yale University. Reprinted in William J. Barber et al., eds. 1996. The Works of Irving Fisher. London: Pickering & Chatto.
Friedman, Milton. 1948. A Monetary and Fiscal Framework for Economic Stability. The American Economic Review 38:245–264. Reprinted in: Friedrich A. Lutz, and Lloyd W. Mints, eds. 1951. Readings in Monetary Theory, 369–393. Homewood, IL: Richard D. Irwin. Reprinted again in M. Friedman, ed. 1953. Essays in Positive Economics, 133–156. The University of Chicago Press.
———. 1959. A Program for Monetary Stability. New York: Fordham University Press.
———. 1969. The Monetary Theory and Policy of Henry Simons. In The Optimum Quantity of Money and other Essays, ed. M. Friedman, 81–94. New York: Aldine de Gruyter.
Galbraith, John Kenneth. 1995. Money. Whence It Came, Where It Went. New York: Houghton Mifflin (1st edn. 1975).
Graziani, Augusto. 1990. The Theory of the Monetary Circuit. Économies et Sociétés 7: 7–36.
Gudehus, Timm. 2015a. Dynamische Märkte. Grundlagen der analytischen Ökonomie. Berlin: Springer.
———. 2015b. Sicherheitskonten und Geldsicherungsbanken. Gleitender Übergang zu einer neuen Geldordnung. Available at: http://www.vollgeld.de/trennkonten-und-sicheres-geld
Hart, Albert G. 1935. The Chicago Plan of Banking Reform. The Review of Economic Studies 2:104–116. Reprinted in Friedrich A. Lutz, and Lloyd W. Mints, eds. 1951. Readings in Monetary Theory, 437–456. Homewood, IL: Richard D. Irwin.
Hilton, Adrian. 2004. Sterling Money Market Funds, Bank of England. Quarterly Bulletin Summer 2004: 176–182.
Hixson, William F. 1993. Triumph of the Bankers. Money and Banking in the Eighteenth and Nineteenth Centuries. Westport, CO: Praeger.
Huber, Joseph, and James Robertson. 2000. Creating New Money. London: New Economics Foundation.
Hudson, Michael. 2012. The Bubble and Beyond. Dresden: Islet Verlag.
Huerta de Soto, Jesús. 2009. Money, Bank Credit, and Economic Cycles, 2nd edn. Auburn, AL: Ludwig von Mises Institute (1st edn. 2006).
Iqbal, Jaquir. 2009. Islamic Finance Management. New Delhi: Global Vision Publishing House.
Jackson, Andrew, and Ben Dyson. 2013b. Sovereign Money, ed. Ben Dyson. London: Positive Money. http://positivemoney.org/our-proposals/sovereign-money-creation
Jordà , Òscar, Moritz Schularick, and Alan M. Taylor. 2014. The Great Mortgaging: Housing Finance, Crises, and Business Cycles. NBER Working Papers, No. 20501, Sep 2014.
Mayer, Thomas. 2013a. How Can Sovereign Money be Brought Into Circulation? Accounting Options for a Central Bank. [Monetative]. Available at: http://sovereignmoney.eu/papers-and-manuscripts; scroll down to the paper.
———. 2013b. Banish fractional reserve banking for real reform. Financial Times, June 24.
Mian, Atif R., Amir Sufi, Emil Verner. 2015. Household Debt and Business Cycles Worldwide. NBER Working Paper, No. 21581, September 2015.
O’Brien, Denis Patrick. 2007. The Development of Monetary Economics. Cheltenham: Edward Elgar.
Pash, Mark. 2013. Monetary Reform—‘The Big One’. Encino, CA: Center for Progressive Economics. http://cpe.us.com/?article=monetary-policy
Positive Money. 2011. Bank of England Creation of Currency Bill. London: Positive Money.
Rey, Hélène. 2013. Dilemma not Trilemma. The Global Financial Cycle and Monetary Policy Independence. Proceedings of the Jackson Hole Economic Policy Symposium. Federal Reserve Bank of Kansas City, August 2013, 286–333.
Rochon, Louis-Philippe. 1999a. Credit, Money and Production. An Alternative Post-Keynesian Approach. Cheltenham: Edward Elgar.
Rossi, Sergio. 2001. Money and Inflation A New Macroeconomic Analysis. Cheltenham: Edward Elgar.
Ryan-Collins, Josh. 2015. Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935–75. Working Paper, No. 848, Levy Economics Institute of Bard College. October 2015.
Schemmann, Michael. 2012b. Liquid Money—the Final Thing. Federal Reserve and Central Bank Accounts for Everyone. IICPA Publications.
Shaw, William Arthur. 1896. The History of Currency 1252–1896. New York: Putnams. Reprinted by A.M. Kelley, 1967.
Simons, Henry C. 1948. A Positive Programme for Laissez Faire. Some Proposals for a Liberal Economic Policy, and: Rules versus Authorities in Monetary Policy. Both articles in: H.C. Simons, Economic Policy for a Free Society. The University of Chicago Press, 1948. First published as ‘Rules versus...’. The Journal of Political Economy 44(1936):1–30.
Soddy, Frederick. 1926. Wealth, Virtual Wealth and Debt. London: G. Allen & Unwin Ltd. Reprint 1987, Noontide Pr.
Striner, Richard. 2015. How America Can Spend Its Way Back to Greatness A Guide to Monetary Reform. Santa Barbara, CA: Praeger.
Tobin, James. 1987. The Case for Preserving Regulatory Distinctions. Challenge 30(5):10–7. Available at: https://www.kansascityfed.org/publicat/sympos/1987/S87tobin.pdf
Turner, Adair. 2015. Between Debt and the Devil. Money, Credit and Fixing Global Finance. Princeton: Princeton University Press.
van Lerven, Frank, Graham Hodgson, and Dyson Ben. 2015. Would There Be Enough Credit in a Sovereign Money System? London: Positive Money. http://positivemoney.org/wp-content/uploads/2015/07/Credit_in_Sovereign_Money_System_FINAL_20150609.pdf.
Wolf, Martin. 2013. The Case for Helicopter Money. Financial Times, 12 Feburary 2013.
Zarlenga, Stephen A. 2002. The Lost Science of Money. The Mythology of Money—The Story of Power. Valatie, NY: American Monetary Institute.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2017 The Author(s)
About this chapter
Cite this chapter
Huber, J. (2017). Bankmoney to Sovereign Money. In: Sovereign Money. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-42174-2_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-42174-2_6
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-42173-5
Online ISBN: 978-3-319-42174-2
eBook Packages: Economics and FinanceEconomics and Finance (R0)