Reclaiming sovereignty through monetary reform: Three inquiries into sovereign money creation

Abstract

This essay investigates three major debates on monetary reform stimulated by the Great Financial Crisis of 2007/09 (GFC). It touches briefly on similar monetary reform debates spurred by the Great Depression of the 1930s and known collectively as the Chicago Plan. It suggests that although there are significant differences between the two proposals, their eventual purpose is the same. The cornerstone of both arguments being that the insertion of the banking industry between the individual and the repository of their wealth needs to be redressed. That is, private commercial and profit seeking corporations constituted as 'banks' should not be the issuers of liabilities, which are then used as the medium of exchange. In a modern and democratic exchange society such as ours, the issue and management of the medium of exchange, what is ultimately a public good, should be in public and not private hands. The three Sovereign Money Creation (SMC) inquiries referred to in this essay all argue this point and pose that the current split circuit monetary system needs to revert to a single circuit sovereign money system. Non-financial businesses and households should be able to access the safety provided by a medium of exchange that is safe, predictable and stable. Direct access to public and sovereign money, issued by a duly constituted public institution as an asset, would provide such a solution. Finally, we consider the work being currently done by central banks and others around the globe investigating the possibility of Central Bank Digital Currencies. Is this a way forward for SMC?