The Money Problem: Rethinking Financial Regulation by Morgan Ricks

By Morgan Ricks

Years have handed because the global skilled one of many worst monetary crises in background, and whereas numerous specialists have analyzed it, many imperative questions stay unanswered. may still funds production be thought of a ‘public’ or ‘private’ activity—or either? What can we suggest via, and wish from, monetary balance? What position may still law play? How could we layout our financial associations if lets commence from scratch?
In The funds Problem, Morgan Ricks addresses all of those questions and extra, delivering a realistic but based blueprint for a modernized process of cash and banking—one that, crucially, should be entire via incremental adjustments to the us’ present approach. He brings a severe, lacking size to the continuing debates over monetary balance coverage, arguing that the difficulty is basically one in all financial procedure design. The funds Problem offers the way to mitigate the chance of catastrophic panic sooner or later, and it'll extend the monetary reform dialog within the usa and abroad.

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Sample text

This book uses the functional term money-claims to denote short-term debt instruments (excluding trade credit)35 that are payable in the medium of exchange or its equivalent. The meaning of short-term is a central question and will be analyzed in detail in chapter 1; for now, think maturities of less than one year— the traditional dividing line between the money market and the capital market. I will add some further refinements to the money-claim definition in chapter 9. It is enough for now to note that the definition encompasses such instruments as demand deposits and cash equivalents.

In fact, corporate treasurers, institutional investors, and other businesspeople typically refer to cash equivalents as just cash. Second, consider financial markets terminology. “Money market”— which obviously suggests monetary attributes— has long been used in the financial and business world to signify the market for debt instruments that mature in a year or less. The market for longer-term claims, such as stocks and longer-term bonds, is of course called the capital market. A similar distinction prevails in the international financial markets.

What are the international ramifications? These questions are very important, but they can be deferred for now. These and related matters are addressed in chapter 9. ”50 The reformed system is designed to do the same, but on a functional basis. The issuance of broad money is confined and administratively capped; the broad money supply becomes fully sovereign and nondefaultable. And here we reach a point that often encounters strong pushback. This book argues that once the monetary-financial system has been made panicproof, other forms of stability-oriented financial regulation could be dramatically scaled back.

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