Some Unusual Consequences Arising from the Alternative Money Theories

Abstract

In the paper, it is considered the main consequences arising from the modern money theory, the monetary theory of production, and the continuity principle. The new standpoint on the processes of making loans and deposits is presented. As a result, it is proposed the new classification of deposits regarding their crucial ability to create or absorb liquidity. And it is also suggested to consider the bank loans and deposits as lifetime annuities. It is discovered the perspective of development of completely new direction in risk management for banking system and separate bank as well. Particularly, it is substantiated the replacement of the loans’ and deposits’ maturities by the customers’ lifetimes as the time horizons to estimate the credit and liquidity risks. The new content for such financial stability indicators as the loan-to-deposit ratio, the total exposures at credit risk, money inflows/outflows indicator and the reserves at Central bank-to-loans ratio is suggested.