Prof Dr Joseph Huber Chair of Economic Sociology, Em Martin Luther University Halle an der Saale

1. Creatinga StableMonetary System. The Case forSovereign Money Conference The Future of MoneyUniversity of Economics and BusinessAthens, 24 Jan 2013 Prof Dr Joseph Huber Chair of Economic Sociology, Em Martin Luther UniversityHalle an der Saale

2. Financial Crises Abound • Currentbankinganddebtcrisesarenosingleevents, but latest links in a continuedchain. • From 1970 to 2007 manycriseshappened on migratoryhotspotsaroundtheworld, intensifiying in numberandgravity: • 145 bankingcrises • 208 currencycrises • 72 sovereigndebtcrises • ______________________________________________ • 425 systemicfinancialcrises • in additionnow also includingthesubprimecrisis, the US-EU bankingcrisis, andthe PIIGS sovereigndebtcrisis. Further such mess upcoming. • Sources: Laeven/Valencia 2008, Reinhart/Rogoff 2009, Lietaer et al 2012 49–52. Bundeszentrale für Politische Bildung: http://www.bpb.de/wissen/DP0D1P. Kennedy 2011, 96.

3. Among the many factors held responsible, one is poorly understood and has so far been misjudged – the monetary system. • The monetary system as it stands today is a system of unrestrained credit creation by the banks on a fractional basis of central-bank reserves, called fractional reserve banking. • The financial causes of the crises have a common monetary cause: excessive credit creation within the system of fractional reserve banking. • Unrestrained credit creation within the system of fractional reserve banking inevitably feeds speculative bubbles, asset and consumer price inflation, financial-investment income at the expense of earned income, and results in over-indebtedness, particularly of governments and the banks themselves, with ensuing crises and loss of money and assets alike. The misjudged factor – the monetary system • The financial system is plagued by malfunctions. It is the monetary system that is at the root of the problems.

4. Money Governs Finance, Finance Governs the Economy  Hierarchy of Control  Real Economy Financial System Monetary System  Hierarchy of Restrictions 

5. Uno-Actu-Identity of Credit Creationand Money Creation (demanddeposits) byledgerentry2 • Bank Balance Sheet Customer • Assets Liabilities Debit Credit • 10.000 10.000 - 10.000 + 10.000 • Claim on Liability Interest-bearing Credit as liquid customer towards debt to the bank bank money from credit customer (means of payment) creation = claim on cash • Banks create credit (non-cash money) when they - make out loans and overdrafts - purchase assets such as bonds, stocks, real estate, … • Accounting record: Bank Credit/Securities/Tangibles Account to Customer Current Account

6. Fractional Reserve Banking • i.e. Multiple Credit Creationon a Fractional Basis ofReserves • In order to create 100 units of demand deposits, the banking sector needs fractional 'coverage' in central-bank money of about 2,5% - composed of • • 1,4% cash (coin and banknotes) for the ATMs • 0,1% liquid reserves for settlement of daily clearings • 1,0% obligatory minimum reserve (of no use at all) • Put as banks' money multiplier: Bank money, i.e. demand deposits created by the banking sector = 900 times liquid reserves = 73 times cash • Today's money supply M1 (currency in circulation) consists of • 80–95 % bank money on current account (demand deposits) • 5–20 % sovereign money (state money in the form of coin, banknotes, and liquid central-bank reserves) – though not even this put into circulation by sovereign supply initiative, but by banking demand pull for fractionally re-financing themselves).

7. M1 Bank Money (demanddeposits) vs Cash Data: Swiss National Bank, Historical Time Series, No.1, Feb 2007, 1.3, 2.3

8. Cashless transactions by (1) clearing of customer accounts and (2) settlement of bank accounts in reserves Customer A 20 k Customer B 30 k 15 k Customer O Customer C 25 k 30 k Customer P 30 k Customer Q Bank X itself 15 k 10 k Bank Y itself 90 k 85 k  = 5 k Clearing Bank X Bank Y Settlement in inter-bank credit/debit or central bank reserves

9. Short-Term Restrictionsto Credit Creation out ofThin Air • 1) Market volume = preparedness to go into debt = potential of demand for securities and credit (loans) • 2) Expansion/Contraction of credit in step throughout the banking sector, domestic and international (thus ensuring near-balance of in- and outflows within the system) • 3) Size of banks. For large banks it is much easier to extend their balance sheet than for smaller banks • 4) Obligatory minimum reserves • 5) Capital adequacy according to Basel rules (assets-to-equity-ratio or loan-to-equity-ratio) • 6) Liquidity rules (liquid and near-liquid assets must be equal to or bigger than overnight liabilities) after H.Seiffert, Geldschöpfung, Nauen 2012, 78-97. • In thelongertermtherearenorestrictions. Bycrediting/debiting, buying/selling, paying out/taking in relative simultaneously, banksmutuallycreate all oftherequiredassetsandequitytheyneed.

10. Split Circulation of Money • 3. Cash (coin, notes) as a residual sub-quantity of the money in circulation, exchanged out of account, or back onto account . 1. Interbank circulationofreserves (on account) 2. Customer circulation (nonbank) of bank money (on account) Central Bank Banks Monetary and Financial Institutions Customers - private Haushalte - companies, organis. - public households CashIssue CashExchange

11. Banks' money creation is out of control, the money supply wildly overshooting. M1/GDP (Marshallian 'K') European Monetary Union Increase 1995–2010 Data: http://epp.eurostat.ec.europa.eu/portal/page/portal/national_accounts/data/database

12. Banks' money creation is out of control, the money supply wildly overshooting. Marshallian 'K' Germany (M1/GDP) 1950–2010 Data: http://www.bundesbank.de/statistik/statistik_wirtschaftsdaten_tabellen.php#wirtschaftsentwicklung

13. The MonetaryCauseof Financial Causes ofthecurrentcrises: Overshooting Money SupplyfromFractional Reserve Banking, i.e. Multiple Credit Creation on a Fractional Basis ofReserves • European Monetary Union 1995–2008 • M1 189 % ~6/8 ~3/4 • GDP nominal (price-inflated) 51 % ~1/8 • GDP real (price-deflated) 23 % ~1/8 • United States increase last ten years • M2 (broad liquid money) 80 % ~ 2/5 • GDP nominal (price-inflated) 45 % ~ 2/5 • GDP real (price-deflated) 16 % ~ 1/5 Sources: www.federalreserve.gov/releases/h6/hist; www.bundesbank.de/statistik/zeitreihen; Data: http:// epp.eurostat.ec.europa.eu/portal/page/portal/national_accounts/data/database: Bundesbank, Monthly Bulletins, tables II.2.

14. There are two main channels through which an expansion of banks' balance sheets, i.e. expansion of the money supply, contributes to credit bubbles, financial asset bubbles, and over-indebtedness of actors involved, including market 'exuberance' and asset price inflation. • - bank credit (additional creation of money) for direct leverage of financial-market investment in stocks, real estate, derivates, foreign exchange, private equity (e.g. hostile leveraged buy-outs most of which are credit-funded) • - bank credit (additional creation of money) for funding public debt, i.e. buying sovereign bonds by paying with newly created demand deposits. The volume of sovereign bonds and bills is nothing but just another bubble, in fact the biggest bubble of all. • Excessive Credit Creation, i.e. money-printing by the banks, • results in Inflation and Asset Inflation.

16. Expansion of bank money • as leverage forpaper investmentin financial assets FAZ 10.5.11, 9 Takenfrom The Economist

17. MFIs going in debt (everhigherleverage)

18. Accumulationofsovereigndebt in industriallyadvanced countries Japan 1950-2009 (Bln Yen) USA 1940-2010 (Bln US-Dollar)

19. Who profits from government debt, as long as governments are able to pay? • Banks 50 – 60 % • Funds and Insurance Companies (in UK and elsewhere also pension funds) 30 – 35 % • Private Households (Italy, Japan more than elsewhere) 7 – 16 % • Government Debt = Interest-Bearing Assets (Gov Bonds & Bills) Source: ECB, Monthly Bulletins, Table 6.2.1

20. Any current income (taxes, labour, interest and payback of pricipal) has to be paid out of current proceeds from GDP – or additional debt. If interest-bearing monetary and financial assets grow dispropor- tionately higher than GDP, this will lead to a disproportionately growing share of income from financial investment, or interest respectively, and correspondingly involve a declining share of earned income. • Shift in Income Distribution – to the Benefit of Financial Income at the Expense of Earned Income

21. DeclineofEarned Income, Growing Share of Financial Income

22. Increaseof Financial Income tothe Detriment ofEarned Income Economist 21 Jan 2012, 47

23. The financial causes of the crises have a common monetarycause: excessive credit = money creation. Financial markets cannot work properly on the basis of a malfunctioning monetary system. • Forsorting out bankingandfinancialmarkets, onehastocometogripswiththemoneysystem. • Measuresofbankingandfinancialreformcanhardlybesuccessfulunlessbased upon a reformoftheunderlyingmoneysystem. seeagainfigure The Case for Monetary Reform. Transition from banks' money surrogate (demand deposits) to plain sovereign currency

24. Money Governs Finance, Finance Governs the Economy  Hierarchy of Control  Real Economy Financial System Monetary System  Hierarchy of Restrictions 

25.  Obtaining full control of the money supply (M-to-GDP ratio) •  Control of inflation and asset inflation (asset/debt-to-GDP ratios) • Hence,  reintroduce plain sovereign currency in order to  reestablish the monetary prerogative as a sovereign right of constitutional importance, comparable to the state monopolies on legislation, public administration, jurisdiction, taxation, and the use of force) The Case for Monetary Reform – Goals

26. Sovereign money = chartal or state money. • E.g., coin (issued by the treasury) and banknotes (issued by the central bank) are sovereign money. • Demand deposits are private bank money. • A money reform today does with digital money on account the same that was done with private banknotes in the 19th century, when private banknotes were phased out in favour of the state or central-bank monopoly on banknotes such as it exists today. The Case for Monetary Reform. Transition from banks' money surrogate (demand deposits) to plain sovereign currency

27. 1. Restoring monetary sovereignty, and sovereign money respectively: ensuring the full state prerogative of  determining the currency of the realm (unit of account) creating the currency (= money in circulation = legal tender), including coin, banknotes, as well as digital currency (e-money) on account and on mobile storage media obtaining full seigniorage from the issuance of money. • 2. Independent Monetary Authority: Conferring responsibility for the entire stock of money to an independent monetary authority (in Europe the central banks, the ECB resp., under public law) • 3. No more bank money: Putting an end to the creation of bank money (demand deposits) which is credited into current accounts on a basis of fractional reserves • 4. Full seigniorage to the benefit of the public purse by spending new money into circulation through public expenditure (genuine seigniorage), or by loaning it to banks (interest-borne seigniorage). Key Components of a Sovereign Money Reform

28.  Extension of the monopoly on coins and banknotes to money on account and on mobile devices. From a set date on, the central bank has the exclusive right to create and put into circulation the entire stock of money (currency, legal tender). Amendment of Art.128 TFEU, Art.16 ECB/ESCB Statutes. •  Taking customers' current accounts off the banks' balance sheet, thus putting an end to banks' ability to create demand deposits. • This is no nationalisation of banks and credit. Banks continue to be free market enterprises. The reform is just about renationalising the money. • Overnight liabilities to customers are redeclared to be liabilities to the central bank, getting out of the books to the extent that outstanding old customer loans are repaid and the money passed on to the central bank – where it is formally extinguished and replaced with newly issued plain money. Main Measures to be Taken for a Transition to Plain Sovereign Money

29.  Revision of Art. 123 (1) TFEU (Prohibition for ECB/NCBks to directly contribute to funding government budgets). Central Banks shall be • - not just lender of last resort for the banks, but also for the state • - not just re-active issuer of least reserves in re-financing the banks, but pro-active issuer of first instance, in fact the sole issuer of money • - acting not just as the bank of banks, but again as the bank of the state. • Central banks will thus be upgraded in formal status, becoming de facto what they are already supposed to be de jure, i.e. an independent monetary state authority (in a sense analogous to the judiciary) with full control of the money supply – a function they now cannot fulfill because under fractional reserve banking the banks have largely usurped the state prerogatives of money creation and seigniorage. Main Measures to be Taken for a Transition to Plain Sovereign Currency

30. www.monetative.de www.vollgeld.ch www.positivemoney.org.uk www.monetary.org(USA) www.positivemoney.org.nz www.sensiblemoney.ie www.monetaproprieta.it

31. A transition from bank money to sovereign money •  involves a minimum of institutional change . It leaves most structures intact and banking practices unchanged. •  It keeps the advantages of the present system, such as e.g. • sufficient and flexible money supply (only a partial reality today)• affordability of credit• maturity transformation• easy money transfer (payment systems) both domestically and internationally• full convertibility of the currency • In addition it comes with five more important advantages Advantages of Plain Sovereign Money

32. 1. Money-on-account cannot disappear and is thus safe. In a banking crisis, the payment system is no longer at stake. In so far, government and society aren't susceptible to banking blackmail any more. • 2. Money supply under effective control. No more inflationary bank-money supply. Monetary inflation close to zero possible. • 3. No more procyclical overshooting, or undershooting, of money supply. More steady flow of money and capital. Business and financial cycles more moderate. No more additional 'money fuel' for speculative leverage. • 4. Full regular seigniorage to the benefit of the public purse (annualy about 1–4 % of total public households, depending on country and growth). Banks' margin extra profit and privileges from credit creation abolished. • 5. One-off transition seigniorage. Allows for a 50–100 % redemption of public debt within two to four years (dependending on country). Advantages of Plain Sovereign Money

33. Regular Annual Seigniorage as an Addition tothe Stock of Money Figures available for 2011. Quellen: European Central Bank, Monthly Bulletin, Tables 2.3.1+2 (www.ecb.int). - Deutsche Bundesbank, Monatsberichte, Tabellen II.1+2 (www.bundesbank.de). - Österreichische Nationalbank, Statistik und Meldeservice, http://www. oenb.at/de/stat_melders/statistik_und_melderservice.jsp - Schweizerische Nationalbank, Statistische Monatshefte, Tab. A2, B2. - http://www.bankofgreece.gr/Pages/en/Statistics/monetary/ nxi.aspx

34. One-off Transition Seigniorage EU-17, Gr, D, A, CH * Untypical effect through QE. Sources: Europäische Zentralbank, Monthly Bulletins, Tab. 2.3.2 (SightDepos), 2.5.1 (Interbk Deposits), 6.2.1 (Public Debt). - Deutsche Bundesbank, Monatsberichte, Tab. II.2+3 (Sichteinl), IV.3 (Interbk-Sichteinl), III.2 (Reserven EU+D), IX.1 (Staatsschulden). – Österreichische Nationalbank, Statistiken, Daten & Analysen, Tab. 1.1.2 (Reserven), 7.24.1 (Staatsschuld), 3.3.1–3 (Zwischenbankforderungen) - AK Österreich, Wirtschafts- und Sozialstatistisches Taschenbuch 2011, Tab. Geschäftsstruktur der inländischen Kreditinstitute (Zwischenbank-forderungen). - Schweizerische Nationalbank, Statistische Monatshefte, Tab. A1.17, A2, B2. - SNB, Die Banken in der Schweiz 2010, Tab. 18 Passiven. - Statistik Schweiz/Bundesamt für Statistik, http://www. bfs.admin. ch/bfs/portal/de/ index. Eidgenössische Finanzverwaltung, Finanzstatistik der Schweiz 2010, 3. - Eurostat Statistical Books, Government Finance Statistics, 2012

35. Under given circumstances there is no smooth way out of the present banking and sovereign debt crisis of the old-industrial world. • Under prevailing conditions, overcoming the crisis unavoidably includes - creditor write-downs (haircuts) to an important extent - inflation and/or negative interest (real interest rate below inflation rate)- austerity regimes (strangling the economies, increasing unemployment and impoverishment ). • A transition to plain sovereign money, by contrast, would actually make for a smooth ending of the banking and debt crisis – neither requiring austerity regimes, nor inflation or negative interest, nor creditor haircuts. • It is difficult to understand why those in charge do not embrace this opportunity. Advantages of Plain Sovereign Money

36. Creating a Fair andStableMonetary System. The Case forSovereign Money Conference The Future of MoneyUniversity of Economics and BusinessAthens, 24 Jan 2013 Prof Dr Joseph Huber Chair of Economic Sociology, Em Martin Luther UniversityHalle an der Saale

37. Euro Sovereign Debt Crisis. What should have been done (1) •  Keep to the law: No Bail-out (Art.125 TFEU) •  Value adjustment of sovereign debt (in fact debt haircut) by markets. Accept insolvency of affected states. •  Systemically relevant creditor banks (some of the 90 out of 8.300 banks in the EU) which were possibly threatened by bankruptcy could have been stabilised through bail-in and government partici- pation in banks' equity (= partial nationalisation). Insolvent govern- ments could have obtained necessary means from other euro member countries (≠ bail-out). •  In the federal structure of the U.S. there are no bail-outs. Insolvent States or municipalities cannot claim 'solidarity' from outside. External help, though, may come from stimulus plans and recuperation aid.

38. Euro Sovereign Debt Crisis. What should have been done (2) •  Insolvent debtors face a difficult period of time anyway. Imposed austerity to the single-side befenit of creditors causes sharply shrinking economies and purchasing power, increasing unemployment and impoverishment, and is certainly the worst option of all. •  A sovereign debt crisis is not to be equated with a currency crisis. Possible insolvency of some nation-states would not have resulted in a an existential crisis of the euro. Public insolvencies in the U.S. never aroused concern about the U.S. dollar. • Probably transitional devaluation of the euro of about 20–35 % for about one to three years. Not too tremendous a problem. The 'euro crisis' is a pressure pretext to be bailed out.

39. Pro •  Return to former national currency would result in a low valuation (devaluation respectively) of the new national currency. This creates a strong advantage of international cost competitiveness. •  If the return to a national currency is combined with an imposed reduction, or even cancellation of all claims and debts in euro, this would result in a relief of total national debt, i.e. getting things straight for a new beginning • … though, of course, at the expense of domestic and foreign creditors, which is where trouble comes in … • Leaving the euro. An option worth considering?

40. Leaving the euro. An option worth considering? • Contra •  If not combined with reduction or cancellation of national debt, a return to the national currency would actually worsen the burden of foreign debt. •  If combined with imposed debt relief, this causes massive damage to/problems for domestic creditors and investors. Lack of financial resources. Credit drought and investment restraint. As a result, shrinking economy in spite of debt relief, and maybe political unrest. •  Long-winded legal disputes over contract violations. •  Massive flight from the new currency. Another drain on foreign reserves. •  Due to lack of foreign reserves imports would stay below what is required. Remaining imports would trigger (imported) inflation. •  Equally, internationally active firms would face difficulty in meeting their obligations. Thus many firms threatened in their existence. •  Incoming foreign direct investment would be low, or fail to materialise at all. •  Foreign credit would be obtained under unfavourable conditions only, and come with exchange-rate risk and new dependency on foreign creditors. • All things considered … leaving does not really look like a good bargain.

41. Creatinga StableMonetary System. The Case forSovereign Money Conference The Future of MoneyUniversity of Economics and BusinessAthens, 24 Jan 2013 Prof Dr Joseph Huber Chair of Economic Sociology, Em Martin Luther UniversityHalle an der Saale

42. Disproportionate Growth ofMonetary Assets and Financial Asset Bubbles Financial assets / BIP ≈ 335 per cent Financial assets / GDP ≈ 1.000 per cent

43. Plain Sovereign Currency • In German • - Vollgeld (fully valid legal tender), term well established by now • Wording in English not settled yet: • - Plain money • - Sovereign money, sovereign currency • - State money • - US money (American Monetary institute) • Not to be confounded with Full-reserve approaches: • - 100%-money (I.Fisher) • - 100% reserve-covered bank money (Chicago Plan)

44. The Plain Money Approach hasandfurtherdevelopedtogetherfirstbeenpublished in 1998 with James Robertson in 2000 • on behalf ofthe New Economics Foundation, London. Severaltranslations. Availableat http:// www.monetative.de/wp-content/uploads/creating-new-money-original-version-2000.pdf

45. Currency-School Policy Banking-School Practices • Money • is state currency, a legally well-defined 'token' (coin, banknote, electronic unit on account or on memory chip). • Distinction between money and credit. • issued on the basis of a state prerogative by a public authority, e.g. the national central bank, or currency board, or parliament, or ministry of finance. • circulates as fully valid legal tender. • Quantity of money in circulation results from market demand and the authority's discretion to provide money, whilst taking into account actual economic growth potential as well as consumer and asset prices. • Money • emergesfrommarketconvention. Anythingyou (orratherbanks) likecanserveas a meansofpayment. • isbankmoney (= credit), formerlyissuedas private banknotes, nowadaysasdemanddeposits; i.e. a moneysurrogate, quasi money. whichisusedasifitwerechartalmoney, althoughitis just a claim on chartalmoney. • isbased on a fractionalreserveofabout 2% cash and 5% operational balances. • Quantityofbankmoney in circulationresultsfrommarketdemandandbanks' private businesspolicy.

46. The most important historical precursor of current monetary reform programs is • Full-reserve banking, in particular100%-banking (Chicago plan, Henry Simons, Frank Knight, Milton Friedman) 100%-money (Irving Fisher 1934) • Basic principle: 100% reserves on all overnight or demand or transaction deposits, thus inhibiting fractional reserve banking, or multiple credit creation respectively. • Another current proposal is • Limited Purpose Banking (Lawrence Kotlikoff 2010) • Basic principle: All demand deposits as well as savings and other investment deposits are run as mutual funds. Demand deposits are converted into Cash Mutual Funds. New additional money exclusively issued by a government authority. Banks could no longer issue means of payment, not even debenture certificates or bonds, or other securities (which would be the business of loan and investment funds). Banks would be mere intermediaries without any proprietary business. RelatedMonetary Reform Approaches

47. Sovereign Currency System Full Reserve System • Chartalcurrencyunits (cash andnon-cash) arefully valid legal tender in andofthemselves . • Other termsproposed: • PlainmoneyGenuine moneyPositive moneyU.S. money • Reserves in traditional sense rendered obsolete. • Transition smooth. Everydayoperations easy. • 100% reserve-coveredbankmoney • isbankmoney (demanddeposits) fullycoveredbyreserveswiththecentralbank. • Even if not fractional, still a reservesystemwithsplitcirculation (inter-bank vs public) andintertwiningofcustomers' andbanks' accounts. • Banks keepthe initiative. Liabilities, not credits, wouldhavetobecovered- ex post forweeksormonths. • Transition fraughtwithproblems. Everydayoperationsunnecessarilycomplicated.

48. 100%-banking, 100%-money, full-reserve banking • In certain details – regarding monetary theory and policy, institutional and market arrangements, and technicalities – full-reserve approaches are different from current reform approaches. Questions at issue include: • Notion of money: Cash as 'actual physical money' as if it still were gold and silver. No clear notion of non-cash book money or digital money. Not clear about the difference between money and credit (debt). • Divergent understanding of the function of deposits and monetary aggre-gates: Deposits in M2/M3 are supposed to be used to make out loans; which, at best, is true just to a fractional degree. Most of the deposits in M2/M3 are simply inactivated bank liabilities to customers. • Retaining the reserve system with split interbank circulation and public circulation is unnecessarily complicated and costly. Problem of interbank demand deposits not recognised. Customers still won't have digital money on a money account of their own, separate from bank accounts. RelatedMonetary Reform Approaches

49. 100%-banking, 100%-money, full-reserve banking (cont.) • 100% reserve requirements are derived from the aggregate liability side of a bank's balance sheet (ex post); not ascribed to the asset side when a bank is making out a loan (which would require loans to bepre-financed at 100%). • Unresolved problems of transition: How should banks acquire enough and acceptable bills of exchange and securities for a 100% pre- or re-financing of their loans? By uncovered central bank credit?, or give it as a state present to the banks? • If the transition is achieved gradually, by spending new demand deposits into circulation in parallel with new reserves by way of government expenditure, before discontinuing banks' multiple credit creation, this would backfire and in effect greatly augment the banks' operational reserves and thus the money multiplier for credit creation. RelatedMonetary Reform Approaches

50. Auch am Ansatz des • Limited Purpose Banking LPB (all-in-funds approach) • Various of aspects in need of explanation, e.g. • ● author says LPB fulfills same function as 100% banking. He nevertheless requires 100% reserve holdings on all units in Cash Mutual Funds? Why? Is the reserve system abolished or retained? • ● Customers still do not have digital money in a money account of their own. The money is in a collective fund. What the customer has are credit items representing shares of the Cash Mutual Fund. • ● LPB possibly not flexible enough for overdraft (swing). • ● LPB might appear to experts and lay persons alike even more alien than 100%-money or plain money. Thus less cummunicable. • ● Interdiction of any proprietary dealings whatsoever and 'degradation' of banks to mere fund managers (cash funds, loan funds, security funds) might affect acceptability of the concept of LPB. • ● Bankers (as fund managers) continue to decide on granting loans, buying/selling equity, bonds, etc., whereas the risk entirely remains with the creditors (investors). This is not the answer to the problem of 'too big to fail' which it claims to be. Transition from Demand DepositstoPlain Money