Register, issue, cap and trade : a proposal for ending current and future financial crises

A fundamental cause of the global financial crisis was excessive creation of short-term money-like liabilities ("quasi-money"), notably in shadow banking holdings of sub-prime MBS and other US dollar structured credit instruments and in cross-border flow of capital to the uncompetitive Euro area periphery. This paper proposes a registration system for: (i) controlling quasi-money and resulting economic externalities and systemic risks; and (ii) supporting public sector monetary issue to counter collapse of private sector credit in the aftermath of crises. This policy would trigger a profound but also economically beneficial change in the business models of both banks and long-term investors. -- Basel III ; debt deflation ; endogenous money ; financial regulation ; global financial crisis ; limited purpose banking ; maturity mismatch ; narrow money ; Pigouvian taxes ; ring fencing ; systemic financial risk ; systemic financial externalities ; Tobin tax