Making Money Work (how To Rewrite The Rules Of Our Financial System)

Description

By (author) Sekerke Matt; By (author) Hanke Steve H.

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The Global Financial Crisis broke the monetary system. Here”s how to fix it.

In Making Money Work: How to Rewrite the Rules of Our Financial System, Matt Sekerke and Steve H. Hanke deliver a rigorous and fascinating exploration of the monetary economy. You”ll find a detailed and clear roadmap of how and why fiat money is created and destroyed, its connections to the broader economy, and the objective mechanisms that underwrite and maintain its value.

In their exploration, Sekerke and Hanke solve many problems and puzzles and shed light on several important questions:

• Why economists misunderstand the structure and function of the monetary system
• The central role of the commercial banking system in fiat money regimes, and why commercial banks are not like other financial intermediaries
• The economic and regulatory constraints on bank money creation
• The interplay between banking and capital markets in funding investment projects
• How the “banks” that dominate the international financial landscape distort the lines between banking and capital markets business
• Why banking regulation and fiscal policy determine and constrain monetary policy to an equal or greater extent than central bank actions

Sekerke and Hanke trace important post-crisis policy developments and sketch the broad strokes of a new operating model that would restore the performance of the monetary system and make better use of aggregate savings:

• Making neutrality the explicit goal of monetary policy, properly understood
• Increasing the supply of bankable projects and keeping them on bank balance sheets
• Breaking the financial system”s fatal attraction to land and real estate
• Reducing regulatory distortions in lending markets
• Reforming universal banking institutions and stimulating competition
• Transitioning to a quantity-based monetary policy framework

An engaging and incisive guide to the global systems of money and banking, Making Money Work is destined to become a sought-after classic for bankers, finance professionals, policymakers, regulators, academics, and laypeople with an interest in money and banking.

Table of contents:

Foreword xvii

Introduction xix

Part One: How Money Works: Institutions of the Monetary Economy 1

Chapter 1: Rethinking Monetary Economics 3

Macroeconomics Without Money 4

Broad Money and the Banking System 5

From Interest-rate Policy to Quantity-based Policy 7

Neutral Monetary Policy 9

Productive Capital Markets 9

Chapter 2: Fiat Money Systems 13

Specifying Money So That Money Matters 14

Money Is Essentially an Abstract Measure of Value 14

Money Consists in a Claim or Credit 16

The State, or an Authority, Is an Essential Basis for Money 18

Money Is Not Neutral in the Economic Process 19

Fiat Monetary Standards 21

Metallic Standards 21

Standards After Metallic Standards 23

Foreign Exchange and the Quest for an International Monetary Standard 25

Revisiting the Foundations of Monetary Economics 27

Chapter 3: The Institutional Structure of the Monetary Economy 35

The Government Sector 36

The Fiscal Authority 36

The Monetary Authority 38

The Consolidated Government 39

The Commercial Banking System 41

Deposit Creation by Individual Banks 43

Fallacious Accounts of Bank Funding and Deposit Creation 45

Financial Intermediaries 48

Asset Managers 49

Money Market Funds 50

Asset-backed Securities 51

Consolidated Financial Intermediation Sector 53

The Nonbank Public: Nonfinancial Firms and Households 54

Nonfinancial Business 54<