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Register, issue, cap and trade: A proposal for ending current and future financial crises

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  • Milne, Alistair

Abstract

A fundamental cause of the global financial crisis was excessive creation of short-term money-like liabilities (quasi-money), notably in shadow banking holdings of sub-prime MBS and other US dollar structured credit instruments and in cross-border flow of capital to the uncompetitive Euro area periphery. This paper proposes a registration system for: (i) controlling quasi-money and resulting economic externalities and systemic risks; and (ii) supporting public sector monetary issue to counter collapse of private sector credit in the aftermath of crises. This policy would trigger a profound but also economically beneficial change in the business models of both banks and long-term investors.

Suggested Citation

  • Milne, Alistair, 2012. "Register, issue, cap and trade: A proposal for ending current and future financial crises," Economics Discussion Papers 2012-34, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201234
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    More about this item

    Keywords

    Basel III; debt deflation; endogenous money; financial regulation; global financial crisis; limited purpose banking; maturity mismatch; narrow money; Pigouvian taxes; ring fencing; systemic financial risk; systemic financial externalities; Tobin tax;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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