This paper explores the implications of introducing digital public and private monies (e.g. tokenized central bank digital currency [CBDC] or tokenized deposits) for stablecoins and illicit crypto transactions. When they pay a high interest rate and guarantee a high degree of anonymity, these...

We introduce banks that issue liquid deposits backed by bonds and capital into an otherwise standard cash-in-advance economy. Liquidity transformation by banks increases aggregate consumption and investment relative to a cash-only economy but can also lead to inefficient overinvestment....

In this paper, we discuss the balance sheet mechanics of the Swedish government. We examine spending, government bond purchases, and tax payments. As long as the Swedish central bank, which is created through Swedish laws, supports the Swedish central government, it cannot run out of money. The...

Unsecured short-term creditors of banks face the write-off risk of their securities in the event of bank runs. To prevent frequent failures, banks are required to maintain a certain level of equity within their capital structure. Thus, the short-term investors expect the disclosed equity to...

Fractional reserve regimes generate fragile banking, and full reserve regimes (e.g., narrow banking) remove fragility at the cost of suppressing the role of banks as lenders. A Central Bank Digital Currency (CBDC) could provide safe money, but at the cost of potentially disrupting bank lending....

The efficiency of the current payment system rests not only on engineering technology but also on the legal tender and central bank system enacted by each country’s law. This essay compares the current payment system with an alternative payment system that uses electronic records, such as...

I present a novel model where Big Tech platforms create private money outside the regulated banking system. Big Tech platforms distinguish from other online markets by providing FinTech payment services, which are more cost-efficient than cash and traditional bank payments. I show that Big...

Chapter 1. Introduction -- Part I. On Money -- Chapter 2. What is Money: Debt or Equity? -- Chapter 3. The Utility of Money -- Chapter 4. Money in a Sequence Economy -- Chapter 5. Money Creation by Banks -- Chapter 6. Money, Banks and Seigniorage -- Chapter 7. Money Quanta -- Part II. On "Sound"...

A difference is made between open and hidden or veiled government bankruptcies. The latter are happening if budget deficits are covered by substantial money creation leading to inflation. In this case non-indexed government debt loses its value and is inflated away. This path is not open, if the...

Like many other countries, the U.S. money supply consists primarily of deposits created by private commercial banks. How we understand bank money creation matters enormously. We are currently witnessing a debate between two competing understandings. On the one hand, a long-standing conventional...

Despite being an identity, the money multiplier (MM) is also a useful summary of the financial intermediation process as it can be interpreted as the rate of substitution between inside and outside money. By modelling the supply and demand for inside and outside money, we provide this rate of...

Despite the impressive self-confidence displayed in the pages of what has been called the ‘new consensus on money creation’, a crisis is brewing under the hood. The notion of ‘banks as financial intermediaries’ is polarising the endorsers of the ‘credit creation theory’ and resisting...

When banks create credit and money endogenously, how do Basel III regulations affect the macroeconomy? This study develops a simple monetary circuit model based on the stock-flow consistent framework. It analytically solves for the equilibrium where banks comply with the capital adequacy ratio...

We model the behaviour of banks as a main driver of the changing components of the money multiplier (MM). So we provide behavioural underpinnings for the supply and demand for inside and outside money. We illustrate how the creation of large outside money balances by central banks induces...

We show that decentralized privately created money with unstable values can hinder the traded, more transaction-friction sensitive, sector of the economy. We do so in the context of the NationalBanking Act of 1864 in the United States that created a new federally-regulated, fully-backed currency...

We provide a rationale for bank money creation in our current monetary system by investigating its merits over a system with banks as intermediaries of loanable funds. The latter system could result when CBDCs are introduced. In the loanable funds system, households limit banks' leverage ratios...

Chapter 1. Introduction -- Chapter 2. Society -- Chapter 3. Value Theory -- Chapter 4. Exchange, Money, Society -- Chapter 5. Money -- Chapter 6. Money and "Socialism" -- Chapter 7. Summary: Or, What's New Here?.

The national accounts include the Fed's payments to the Treasury as a component of corporate taxes. These payments constituted 22% of reported corporate profits taxes in 1981. This paper discusses alternative concepts of inflationary finance. Measures for these concepts are reported for the...

Understanding gross capital flows is increasingly viewed as crucial for both macroeconomic and financial stability policies, but theory is lagging behind many key policy debates. We fill this gap by developing a two-country DSGE model that tracks domestic and cross-border gross positions between...

We examine how the money creation function of banks affects the relative cost of firm financing in the bank loan vs public bond market – the loan-bond spread. Using a sample of loans and bonds issued by the same firm with the same maturity and at the same time, we show that the loan-bond...

Stablecoins rise to meet the demand for safe assets in decentralized finance. Stablecoin issuers transform risky reserve assets into tokens of stable values, deploying a variety of tactics. To address the questions on the viability of stablecoins, regulations, and the initiatives led by large...

This is the first study to systematically assess the significance of the standard money multiplier vis-à-vis the bank credit transmission channel in the case of Pacific Island Economies, focusing on Papua New Guinea. The vector autoregressive model comprising six variables - interest rate,...

Stablecoins rise to meet the demand for safe assets in decentralized finance. Stablecoin issuers transform risky reserve assets into tokens of stable values, deploying a variety of tactics. To address the questions on the viability of stablecoins, regulations, and the initiatives led by large...

This paper documents a strong connection between payment system and credit supply. The dual role of deposits as financing instruments for banks and means of payment for bank customers implies spillover effects of bank lending. After a bank finances loans with new deposits, the deposit holders'...

This paper studies the implications of the circulation of interest bearing regional debt in a monetary union. Does the circulation of this debt have the same monetary implications as the printing of money by a central government? Or are the obligations of this debt simply backed by future...

Chapter 1. Introduction -- Chapter 2. The Risk and Time Value of Money -- Chapter 3. Sustainability in Finance: Frameworks, Standards and Scores -- Chapter 4. The Space Value of Money -- Chapter 5. Implications for Money Mechanics -- Chapter 6 Conclusion.