Titelaufnahme

The paper provides a critical assessment of several proposals for monetary reform in the wake of the Great Financial Crisis and of the underlying concepts of "money". The word "money" is used for different objects and with different meanings. A paradox appears when discussions about the monetary policy of the central bank, including the jurisdiction of the Federal Constitutional Court of Germany, proceed on the basis of the presumption that the central bank's issues of cash, as well as the commercial banks' deposits with the central bank, are a form of debt while at the same time discussions about commercial banks proceed on the basis of the presumption that commercial banks create "money" (demand deposits) when they lend and therefore demand deposit funding of commercial banks should not be treated as a form of funding by debt. Both views are flawed, one because the issue of bank notes does not oblige the central bank to anything, the other because funding by demand deposits does impose obligations on commercial banks, which entail risks for liquidity and solvency. The second half of the paper discusses radical reform proposals such as the abolition of cash and the abolition of money creation by commercial banks, as stipulated in various narrow banking proposals. Proposals to abolish cash neglect the role of cash as the basis for defining the content of nominal obligations, e.g. obligations associated with demand deposits. Proposals to abolish money creation by commercial banks underestimate the scope for and the risks of replacing demand deposits by "near money" such as shares in money market funds. The idea that, through such measures, one can reduce the complexity of the interdependence between the monetary system and the banking system and to simplify the task of the central bank are unrealistic.