A response to critiques of ‘full reserve banking’

Ben Dyson, Graham Hodgson and Frank van Lerven

Cambridge Journal of Economics, 2016, vol. 40, issue 5, 1351-1361

Abstract: In this response to critiques of ‘full reserve banking’ or ‘sovereign money’ proposals, we challenge four of the main criticisms made by Fontana and Sawyer (this issue): (i) the impact of the proposal on government finances and fiscal policy; (ii) the impact of the proposal on the supply of credit to the real economy; (iii) the danger of private money creation re-emerging in the shadow banking sector; and (iv) the argument that shadow banking, not commercial banking, is the real source of financial instability.

Date: 2016
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