The Case for Sovereign Money

Sovereign money is legal tender issued by the national central banks, or the ECB in the euro area. The counterpart to sovereign money is bankmoney, i.e. demand deposits on current bank account, which dominate the present monetary system to an extent that justifies speaking of a bankmoney regime. This article explains the problem-ridden interplay between sovereign money, bankmoney, additional new types of money, explains what a sovereign money system looks like, why it is overdue, and in which ways it is feasible.     
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Central Bank Digital Currency (CBDC). Design principles that make the difference

Monetary reformers as well as central bankers are thinking about the introduction of sovereign money in the form of digital currency in coexistence with bankmoney. The paper linked to below discusses the advantages, problems and false problems of that approach and, most importantly, the design principles that decide on whether digital currency, rather than maintaining the present bankmoney regime, opens up the perspective of a gradual shift towards a sovereign money system.  
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or see > The upcoming rise of CBDC >  

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Government Debt and Monetary Financing

Due to the multiple crises situation since the 2020s Quantitative Easing (QE) has been entering a new round worldwide, this time as QE for the real economy. How to deal with high government indebtedness combined with rising interest rates?
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Prohibition of monetary financing under Article 123 Lisbon Treaty.

Art. 123 Lisbon Treaty prohibits the ECB and national central banks from contributing to the financing of government spending by lending directly to the treasuries or absorbing directly from them sovereign bonds. Ostensibly, this prohibition is meant to prevent government 'money printing' and inflation. In reality, the opposite is happening. The ban actually serves other interests and should be repealed.
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The future of money between sovereign digital currency (CBDC) and stablecoins. The Diem example

The future of money is digital – and which money will come out as dominant and system-defining will be decided in the competition between central bank digital currency (CBDC, that is, sovereign money for example as a digital dollar, euro, pound,...) and private stablecoins from new financial corpo­rations. The prototypical case in point is Diem, the modified successor plan to the stablecoin Libra initiated by Facebook in 2019. Whether between CBDC and stablecoins there will still be room for other types of money – especially bankmoney, or money market funds as a means of payment – is questionable.
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How to account for sovereign money. The case for a currency register

Modern money is genuine fiat money in its own right. It does not refer to another monetary base such as formerly silver and gold. Thus, the current practice of accounting for notes and money-on-account as a liability of the money creator has become inadequate and misleading with regard to the alleged credit-and-debt nature of money. Central banks ought to account for money as a liquid asset only, not as a liability. This can be implemented by connecting the central-bank balance sheet to an upstream currency register of the central bank. 
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Sovereign Money in Critical Context

As sovereign-money reform has been gaining attention, more economists from various schools of thought have felt called upon to comment on it - mainstream commentators, Neoaustrians, demand-side Keynesians, and various strands of post-Keynesians. This provides an opportunity for clearing up misrepresentations of sovereign money. Continue > 

On Modern Money Theory (MMT)

At first glance, American MMT and Monetary System Analysis and Sovereign Money Theory as held on this site might look like close relatives, at least with regard to the analysis of the present money system. Don't be fooled. It turns out that MMT - despite its claim to be chartalist currency teaching - is closer to representing new banking doctrine. Regarding economic imbalances and public debt, MMT stands for a number of upside-down propositions making false promises. Continue >  

The Digital Euro First Generation:
A big step in the smallest way

The European Central Bank intends to introduce the digital euro in 2026-28. But it has become clear by now that first-generation CBDC is not something monetary reformers could be happy about. Even so, it's still worth it to look into some operational details, systemic interconnections, interests involved, and further perspectives.
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How the present money system actually works

Here is a paper providing an up-to-date outline of the functioning of the present money system. This then serves as a backdrop to discuss a number of orthodox fallacies and heterodox flaws in money theory, followed by a summary of the dysfunctions of split-circuit reserve banking and a brief outlook on the perspective of a single-circuit sovereign money system. 
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Dominant Money Theory

Part I: The hierarchy of monies and tidal changes in the composition of the money supply
This paper outlines a theory of dominant money, i.e. the means of payment that determines the monetary system and policy during a certain epoch. In modern times, there have been three tidal changes in the composition of the money supply with a new type of money on the rise: paper money since the 1660s, the rise of central-bank legal tender notes towards the mid-1800s, and the rise of bankmoney from around 1900.
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Part II: The upcoming rise of sovereign digital currency (CBDC) 
The present regime of dominant bankmoney has proven unable to solve the problems it creates and is approaching a state of ungovernability. A new tide change is dawning, upcoming from the 2020s with sovereign digital currency (CBDC) set to becoming the next dominant type of money.
See part II >  

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The hemispheres of finance: GDP finance (real economy) and non-GDP-finance

It has been said there is 'too much finance'. That needs to be put in perspective. While there is sometimes not enough money for financing certain real-economic activities, there is in fact too much rent-seeking money in non-GDP finance that does not contribute to economic output, but gives its beneficiaries purchasing power allowing privileged access to real-output items.
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Monetary Puzzlement.
Why central banks perform worse than they could

Central banks are nowadays portrayed as the most mighty and powerful institutions, controlling the banking industry and exerting tremendous influence on financial markets and the economy beyond. Central banks themselves are keen to leave no doubt about their being in control of the situation. In actual fact, the decisive monetary power is with the banks. Here is an article that tries to sketch out what central banks actually can do and what they cannot.  
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Negative Interest

Until 2021/22 the general level of interest was persistently at or near the natural lower bound of 0% - and conventional monetary policy was paralysed. Some wanted to resort to desperado politics of some kind, for example, breaking the lower bound by imposing negative interest. The real meaning of that concept is poorly understood. In fact, it is a technocratic folly that is bound to fail, doing no good, just harm.
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The euro - Whence it came, where it goes

The euro was expected to catalyse 'ever deeper union' among its member states. Instead, the euro has been captured by bad financial habits of old and has put the euro north and south in fierce neonationalist confrontation with each other. The currency union is now at the crossroads between either getting stuck in the mud of an ever deeper joint liability community bound to continual decline, or a reset of the euro and realignment of the Eurosystem based on a return to the no-bailout rule, national responsibility for national debt, and a number of rule changes in the Eurosystem (TARGET payment balances, voting rights).  
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The Chicago Plan and a Single-Circuit Sovereign Money System

In dealing with monetary reform, a recollection of older concepts is quite natural. Most prominent are approaches to a 100%-reserve of the 1930s, among them the original Chicago Plan. There is now a tendency to identify this plan with the up-to-date approach to a single-circuit sovereign money system as championed by most contemporary reform initiatives. Is the Chicago Plan and '100% money' (Fisher) the same as plain sovereign money? Or is this about two different systems?
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The book ist about the current transformation of the monetary system and monetary policy, the impending demise of bank deposit money, and the race among CBDC, private cryptocurrencies and stablecoins for becoming the future dominant type of money.
Print edition, e-book and single chapters available from ►  palgrave macmillan


Mackenzie King 1945. Photo: National Archives of Canada

Mackenzie King 1945. Photo: National Archives of Canada

'Once a nation parts with the control of its currency and credit, it matters not who makes the nation's laws. ... Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.'
W. L. Mackenzie King, Canadian Prime Minister 1935-1948

'For the government to permit banks to issue money, borrow that money, and pay interest on it is idiotic.' 
William F. Hixson, concluding remark of his talk at the AMI Monetary Reform Conference, 2005.