Reply to Fontana and Sawyer

Christian Etzrodt

Cambridge Journal of Economics, 2025, vol. 49, issue 5, 1111-1113

Abstract: Fontana and Sawyer rebut my critique (Etzrodt, 2023) of the ‘Positive Money’ (PM) reform proposed by Jackson and Dyson (2012). Their key argument centres on the shadow banking sector (SBS), asserting that PM would restrict credit supply, prompting the SBS to fill the gap by creating near-moneys—a claim adjusted from their earlier work (2016). I agree with them that the SBS influences money supply in two ways: (i) creating near-moneys independently and (ii) amplifying leverage of existing money via securitization. While Fontana and Sawyer emphasize the former, I stress the latter, citing its role in the 2008 Lehman Brothers crisis. This divergence leads to opposing policy conclusions: Fontana and Sawyer oppose banking reforms that would reduce the commercial banks’ risk-taking behaviour, fearing SBS substitution, whereas I support reform but reject PM as ineffective. Fontana and Sawyer’s stance inherently protects the status quo.

Keywords: Banking sector reform; Positive Money; Shadow banking sector; Money creation (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/cje/beaf038 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:cambje:v:49:y:2025:i:5:p:1111-1113.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Cambridge Journal of Economics is currently edited by Jacqui Lagrue

More articles in Cambridge Journal of Economics from Cambridge Political Economy Society Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().