With or Without Usura? Monetary Policy and Market Creation

Some selected examples from trade history and even more the rise of superstar firms in the early twenty first century make visible the eminence of monetary delocalization in the process of market creation. Market creation is highly concentrated in space. As a result, inside and outside money have evolved as complements. Extensive market creation today has become a main source of excess reserves in the banking sector. Monetary delocalization forces the process of market completeness to demand more safe assets of good quality, driving up their price. A monetary authority facing network collateral channel effects of superstar firms would have to rely on increased volumes of safe assets, to be deployed in case a lack of complete markets interrupts inside-outside money flows. Higher interest rates would make market completion more costly, slowing it down.