Financial Money with Central Bank Money

This chapter begins by divulging the motivation for how the introduction of early public deposit banks (i.e. central banks) came to pass. The chapter argues that the introduction of central bank money was predominantly founded to support the novation of claims, and as a by-product meant that for the first time individual traders were able to accrue account-based IOUs that were free from any credit risks. How early central banks formed a symbiosis with bills of exchange to facilitate the introduction of central bank money is then presented. Finally, the chapter considers public deposit banking from a twenty-first century perspective, and argues that as it is generally not desirable for individual traders to directly access the central bank balance sheet with regard to account-based financial money claims, another solution needs to be sought.