A response to critiques of ‘full reserve banking’

Dyson, Ben; Hodgson, Graham; Lerven, Frank van

doi:10.1093/cje/bew036

Cited by 22 publications

(18 citation statements)

References 11 publications

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“…Since the London-based group Positive Money launched its operation in 2010, similar initiatives have sprung up across Europe, including in Germany (Monetative), the Netherlands (Ons Geld) and Switzerland (Vollgeld-Initiative). Aiming to wrest the privilege to create money from banks, these groups advocate the nationalization of money creation via a full reserve banking system (Dyson et al 2016; for a critique, see Fontana/Sawyer 2016 It was against this backdrop that, in 2014, the Bank of England addressed the general public to make a "game-changing acknowledgement" (Baker 2016) that is without precedent in recent monetary history. In two articles in its Quarterly Bulletin and in two online videos, the Bank made a point of refuting each of the three myths described above (Bank of England 2014a, b).…”

Section: Fighting Deflation: the Bank Of England's Insistence On Non-mentioning

confidence: 99%

Speaking to the people? Money, trust, and central bank legitimacy in the age of quantitative easing

Braun

2016

Review of International Political Economy

112

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. MPIfG Discussion Papers are refereed scholarly papers of the kind that are publishable in a peer-reviewed disciplinary journal. Their objective is to contribute to the cumulative improvement of theoretical knowledge. The papers can be ordered from the institute for a small fee (hard copies) or downloaded free of charge (PDF). Terms of use: Documents in ZusammenfassungDie durch die Finanzkrise und die unkonventionellen Maßnahmen der Zentralbanken bewirkte Politisierung des Geldes erlaubt einen seltenen Einblick in den Zusammenhang zwischen Geldvertrauen und Zentralbanklegitimität. Die Kommunikation von Zentralbanken mit der breiten Öffentlichkeit -im Gegensatz zur gut erforschten Kommunikation mit Finanzmärkten bisher weitgehend vernachlässigt -sieht sich mit einem Dilemma konfrontiert. Einerseits hängt die Legitimität der Zentralbank davon ab, ob ihr Handeln den Maximen entspricht, die sich aus der in der Öffentlichkeit vorherrschenden Theorie des Geldes ableiten. Andererseits weicht diese Theorie in wichtigen Punkten von der tatsächlichen Funktionsweise des Geldsystems ab. Wie Zentralbanken mit diesem Dilemma umgehen, hängt von der allgemeinen geldpolitischen Situation ab. Anhand der Beispiele der Deutschen Bundesbank und der Europäischen Zentralbank wird argumentiert, dass Zentralbanker unter inflationären Bedingungen die Öffentlich-keit gerne in dem Glauben lassen, die Geldmenge sei vollständig von der Zentralbank kontrolliert. Die außergewöhnliche Initiative der Bank of England, die Öffentlichkeit von der Irrtümlichkeit dieser Vorstellung zu überzeugen, zeigt hingegen, dass deflationärer Druck und rapide geldpolitische Expansion das diskursive Verhältnis zwischen Geldvertrauen und Zentralbanklegitimität grundlegend verändert haben.

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Section: Fighting Deflation: the Bank Of England's Insistence On Non-mentioning

confidence: 99%

Speaking to the people? Money, trust, and central bank legitimacy in the age of quantitative easing

Braun

2016

Review of International Political Economy

112

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“…PMAs suggest that this can be counteracted by prohibition, while PKCs argue that such regulation would be difficult to enforce (Dyson et al, 2016;Fontana and Sawyer, 2016). Some assets will function as near-monies, and the shadow banking system will blossom.…”

Section: Conflicting Positions On Full Reserve Bankingmentioning

confidence: 99%

“…For instance, some forms of investment accounts may be used as media of exchange and means of payment. PMAs suggest that this can be counteracted by prohibition, while PKCs argue that such regulation would be difficult to enforce (Dyson et al, 2016;Fontana and Sawyer, 2016). Depositors will have an incentive to use investment accounts because having deposits in transaction accounts becomes relatively costly when banks, due to FRB, require higher fees to run the payment system.…”

Section: Conflicting Positions On Full Reserve Bankingmentioning

confidence: 99%

“…They argue that the PMAs' approach may even be procyclical, for instance, if the automatic stabilizers during a recession increase the budget deficit by more than is desirable from a monetary perspective thereby leading to contractionary measures (Fontana and Sawyer, 2016). Dyson et al (2016) have responded that this critique is misleading because the state would still be allowed to issue bonds in the PMAs' proposal.…”

Section: Conflicting Positions On Full Reserve Bankingmentioning

confidence: 99%

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Sustainability and the Governance of the Financial System: What role for full reserve banking?

Røpke

2017

Env Pol Gov

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The financial crisis demonstrated the importance of money and finance for the key concerns of ecological economics: inequality, wellbeing and the conditions for sustainability transitions. To cope with the combined challenge of economic and environmental crises, one of the most popular governance proposals within the ecological economics community is to introduce full reserve banking, where retail banks are required to fully back demand deposits with reserves of government-issued money. Banks can have separate investment activities where they lend funds from time deposits and equity capital, but they are no longer allowed to create new money. In principle, money creation is left to the state and the central bank. Proponents argue that such a system would increase economic stability, remove the undue profits that banks earn due to money creation and make this money available for social purposes instead. However, the idea has met substantial criticism from Post-Keynesians, who are seen as natural allies of ecological economics. The purpose of this paper is to explore the usefulness of the proposal as a response to the combined challenge of governing economic and environmental crises. First, the roots of the present economic crisis are sketched out, and the key ecological economic concerns related to the crisis are outlined. Then, the main arguments in the debate on full reserve banking are explored, concluding that an intermediate position that combines tough restrictions on finance with increased public money creation is a better option. Finally, the discussion is put into a broader perspective.

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“…Incidentally, the above shadow bank point was one of the four points addressed by Dyson, B., Hodgson, G. and van Lerven, F. (2016).…”

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confidence: 99%

Malcolm Sawyer claims advocates of full reserve banking are “cranks”.

Musgrave¹

2019

ASSRJ

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Giuseppe Fontana and Malcolm Sawyer (F&S) penned a paper published in the Cambridge Journal of Economics entitled "Full Reserve Banking: More 'Cranks' Than 'Brave Heretics'" (Fontana and Sawyer (2017). The paper basically argued against full reserve banking. The purpose of the paper below is to show that the F&S paper is riddled with errors. The F&S paper was answered in the Cambridge Journal of Economics by Dyson, Hodgson and van Lerven (2016)). The latter paper was by its own admission limited in scope: it addressed just four points made by F&S. The paper below enlarges on the latter paper: i.e. the paragraphs below point to the errors in F&S's paper missed by or not dealt with by Dyson & Co (21 errors to be exact). The paper below deals with each error as it occurs. Errors are numbered. Some of the errors are serious, which raises the question as to who the "cranks" are. Another question that arises is: what is a respectable economics journal like the Cambridge Journal of Economics is doing publishing this defective material? I.e. it raises the question as to whether respectable economics journals are really any better than "nonestablishment" journals like Advances in Social Sciences Research Journal. The paper below was not submitted first to the above Cambridge journal because they place a 1,500 word limit on papers which comment on other papers, and 1,500 words is nowhere near enough to deal with the numerous errors made by F&S.

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A response to critiques of ‘full reserve banking’

Cited by 22 publications

References 11 publications

Speaking to the people? Money, trust, and central bank legitimacy in the age of quantitative easing

Speaking to the people? Money, trust, and central bank legitimacy in the age of quantitative easing

Sustainability and the Governance of the Financial System: What role for full reserve banking?

Malcolm Sawyer claims advocates of full reserve banking are “cranks”.

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