Critics have argued that a sovereign money system, in which banks are unable to create money, would not be flexible enough to meet the needs of an economy. In response, this paper explains the range of policy options that mean that a sovereign money system can be as flexible – or inflexible – as authorities would like it to be.
Critics have claimed that a sovereign money system, in which banks are not permitted to create money, would leave the economy with a money and credit supply that is rigid, inflexible and unresponsive to the needs of the wider economy. According to one critic, such a system would result in “a shortage of money, high unemployment and low economic activity”.
PDF Download: Download Here (Free, PDF, 20 pages)
- Executive Summary
- The distinction between (a) which entity creates money and (b) which criteria triggers the creation of money
- The flexibility of the existing monetary policy regime
- Policy options under a sovereign money system: from inflexible to extreme flexibility
- Our recommendations