Proposal preview

Critical moments in the development of modern monetary systems: Crises, money doctors and reforms

Modern monetary systems with a single unit of account associated with a single issuing entity (a central bank) has developed to deal with the problems of the pre-modern system; inefficiency in payments, lack of the lender of last resort (LLR), need for coordination with other macroeconomic policies such as fiscal and exchange rate policy. However, as we have not solved these problems yet in the 21st century (Goodhart and Jensen 2015),(fn.1) it is worthwhile to look back at the critical moments in the development of modern monetary systems.

This session explores how modern monetary systems emerged and developed from a variety of pre-modern arrangements. To this end, the session focus on 1) driving forces for monetary reforms such as crises and political changes, 2) reforms, especially the integration of theory and practice of money, and 3) consequences of reforms such as changes in the policies, regimes and institutions.

The session aims at combining monetary history with the history of economic ideas and debates. The session put together inquiries contributing with empirical historical new data and the analysis of theoretical thinking of money and its application in a variety of contexts. By bringing together cases from different parts of the world and different time periods we aim to unveil general patterns of the basis for well working monetary systems given different contextual settings.

In the pre-modern periods, agents used different monies for different transactions (Kuroda 2008).(fn.2) The modern monetary system provided a single unit of account, hence, a single standard of value in the economic term. At the same time, we have lost alternative ways of expressing values. Recent movements towards the development of local currencies and crypto currencies may be seen as attempts at restoring alternative value systems also into modern monetary systems.

Monetary reforms were often implemented to deal with crises. To name a few, Bank of England gained the monopoly of note issuance within the debates over the stabilization of the value of currency after the Napoleonic War; The U.S. Federal Reserve System was established after the banking panic in 1907. Reforms were often associated with sweeping political changes such as independence and revolution. For example, Japan in the late 19th century and China as well as Latin America in the early 20th century conducted monetary reforms within the wide range of political and economic reform for modernization.

From Nicholàs de Oresme in the 14th century to contemporary monetary economists and policy makers today, monetary thinkers have played a pivotal role not only in building monetary theories but also in translating the theories into practical reforms. The term “money doctor” is often referred to as an adviser who engaged in implementing monetary reforms. We redefine the term in a broader sense as “a person who, with theoretical and practical knowledge, advices on how to build a stable monetary and financial system.” Advices may have or may not have been implemented, and if implemented, reforms may have succeeded or failed.

footnotes:
1) Charles Goodhart and Meinhard Jensen, “Currency School versus Banking School: an ongoing confrontation,” Economic Thought, 4 (2), 2015, pp.20-31.
2) Akinobu Kuroda, “What is complementarity among monies? An introductory note,” Financial History Review, 15 (1), 2008, pp.7-15.

Organizer(s)

  • Andrés Álvarez U. Los Andes ca.alvarez967@uniandes.edu.co Colombia
  • Vincent Bignon Bank of France vibignon@gmail.com France
  • Anders Ögren Lund U. anders.ogren@ekh.lu.se Sweden
  • Masato Shizume Waseda U. masato.shizume@waseda.jp Japan

Session members

  • Pamfili Antipa, Bank of France (PhD student)
  • Patrice Baubeau, U. of Paris Ouest Nanterre La Défense
  • Ushehwedu Kufakurinani, University of Zimbabwe
  • Akinobu Kuroda, University of Tokyo
  • Hiroaki Morota, Yamagata U.
  • Takeshi Nishimura, Kansai U.
  • Hugh Rockoff, Rutgers U.
  • Pierre-Hernán Rojas, Paris-Nanterre U.
  • Hisashi Takagi, Yasuda Women's U.
  • Stefano Ugolini, Sciences Po Toulouse
  • Tim van der Valk, Utrecht U.
  • François R Velde, Federal Reserve Bank of Chicago
  • Eugene N. White, Rutgers U.

Discussant(s)

Papers

Panel abstract

This session explores how modern monetary systems emerged and developed from a variety of pre-modern arrangements. The session is divided into two sub-sessions. The first studies the characteristics of crisis management by monetary institutions and how crises change monetary regimes while the second looks at key features of monetary regimes such as the choice of money issuance mechanisms, the coexistence of different money or the picking of the correct denomination of monetary units. Given the large number of papers we have, and in order to have fruitful discussions, the session organizers propose the follwing procedures and format: 1) All the participants are required to upload his/her paper no later than June 30, Saturday, and 2) All the registered participants (as well as others who are willing to participate in our discussion) are expected to read the papers beforehand.

1st half

Three Early Crises

François R. Velde

Financial and monetary crises have often been catalysts for progress in economic thinking, either because individuals (inside or outside of power structures) have justified policy responses with theoretical arguments during the crisis, or because close observers have tried to make sense of the events ex-post. I will focus on three monetary crises in three countries: the early 1600s in Naples and the writings of Antonio Serra, the 1690s in England and the controversy between Locke and Lowndes, the 1720s in France and the debates between Melon and Dutot, on which Hume later drew. All three events took place before economics had become an autonomous discipline, but they prompted important conceptual advances.

Financial and monetary crises have often been catalysts for progress in economic thinking, either because individuals (inside or outside of power structures) have justified policy responses with theoretical arguments during the crisis, or because close observers have tried to make sense of the events ex-post. I will focus on three monetary crises in three countries: the early 1600s in Naples and the writings of Antonio Serra, the 1690s in England and the controversy between Locke and Lowndes, the 1720s in France and the debates between Melon and Dutot, on which Hume later drew. All three events took place before economics had become an autonomous discipline, but they prompted important conceptual advances.

Monetary Policy Regime Changes

Pamfili Antipa

I analyze the policy choice of resuming the gold standard after the French Wars (1793-1815) in the face of an exceptionally high debt burden. The choice was neither inevitable nor based on economic rationale. Rather, it hinged on the identity of public creditors and the geographical distribution of economic hardship and political representation. Resuming the pre-war parity of the pound induced large scale deflation and recession. This outcome was politically feasible because the franchise was limited and political repression was comprehensive. Means and causes of the resumption were political. The paper informs current policy choices between maintaining a fixed exchange rate and restructuring an outstanding debt overhang.

I analyze the policy choice of resuming the gold standard after the French Wars (1793-1815) in the face of an exceptionally high debt burden. The choice was neither inevitable nor based on economic rationale. Rather, it hinged on the identity of public creditors and the geographical distribution of economic hardship and political representation. Resuming the pre-war parity of the pound induced large scale deflation and recession. This outcome was politically feasible because the franchise was limited and political repression was comprehensive. Means and causes of the resumption were political. The paper informs current policy choices between maintaining a fixed exchange rate and restructuring an outstanding debt overhang.

Censored Success: How to Prevent a Banking Panic, the Barings Crisis of 1890 Revisited

Eugene N. White

Financial histories have treated the Barings Crisis of 1890 as a minor or pseudo-crisis, presenting no threat to the systems of payment or settlement and readily managed by following Bagehot’s LOLR rule. New evidence reveals that Barings Brothers, a SIFI, was a deeply insolvent institution. Just as its true condition was revealed and a full-scale panic was about to ignite, the Bank of England stepped in; but it did not respond as Bagehot recommended. While lending freely at a high rate on good collateral to other institutions, the Bank organized a pre-emptive lifeboat operation. Barings was split into a good bank that was recapitalized and a bad bank that had a prolonged but orderly liquidation supported by credit from the Bank. A financial crisis was thereby avoided, while steps were taken to mitigate the effects of moral hazard from this discretionary intervention. Contrary to the historical consensus for the pre-1914...

Financial histories have treated the Barings Crisis of 1890 as a minor or pseudo-crisis, presenting no threat to the systems of payment or settlement and readily managed by following Bagehot’s LOLR rule. New evidence reveals that Barings Brothers, a SIFI, was a deeply insolvent institution. Just as its true condition was revealed and a full-scale panic was about to ignite, the Bank of England stepped in; but it did not respond as Bagehot recommended. While lending freely at a high rate on good collateral to other institutions, the Bank organized a pre-emptive lifeboat operation. Barings was split into a good bank that was recapitalized and a bad bank that had a prolonged but orderly liquidation supported by credit from the Bank. A financial crisis was thereby avoided, while steps were taken to mitigate the effects of moral hazard from this discretionary intervention. Contrary to the historical consensus for the pre-1914 era, central banks did not follow a strict Bagehot rule but exercised discretion when faced with the failure of a giant financial institution. Their success has led to a reading of history that has censored lessons in effective approaches to halting incipient crises.

Oh, How the Mighty Have Fallen: The Reputations of the Banks that Failed, or Nearly Failed, and Started America’s Greatest Financial Panics

Hugh Rockoff

Typically, America’s financial panics were precipitated by a sequence of unexpected bank failures. What do these failures have in common? This paper examines the failures, or in some cases near failures, that started the twelve most severe panics, beginning with the panic of 1819 and continuing through the panic of 2008. It turns out that one of the most important characteristics of these firms is that they had outstanding reputations for prudence and competence -- until they failed. This was one of the main reasons these failures undermined confidence in expert opinion and demoralized financial markets. The impact of the failure of Lehman Brothers, in this respect, was portended by similar failures in earlier panics.

Typically, America’s financial panics were precipitated by a sequence of unexpected bank failures. What do these failures have in common? This paper examines the failures, or in some cases near failures, that started the twelve most severe panics, beginning with the panic of 1819 and continuing through the panic of 2008. It turns out that one of the most important characteristics of these firms is that they had outstanding reputations for prudence and competence -- until they failed. This was one of the main reasons these failures undermined confidence in expert opinion and demoralized financial markets. The impact of the failure of Lehman Brothers, in this respect, was portended by similar failures in earlier panics.

Surviving Paper Money: the Transition from Free-Banking to a Modern Central Bank in Colombia (1880-1922)

Andrés Álvarez

Between 1880 and 1905 Colombia underwent deep political and economic transformations and crises. The attempts of the government to transform drastically the radical federal system built between 1863 into a centralized nation mirrored on the monetary regime. The system was abruptly transmuted from a free-banking to a monopolist issuer of paper money, named the National Bank. This paper aims at explaining the reasons this transformation failed and how the private banking system overtook the disbelieve of the public in the central money. I present the first estimation of the monetary aggregates and show the lack of confidence in the National Bank bills did not come from an excessive issuing of paper money but from the absence of confidence of the public. This attitude is explained by the incapacity of the National Government to collect sufficient amounts of metallic reserves and the incapacity to provide complementary and alternative forms of means...

Between 1880 and 1905 Colombia underwent deep political and economic transformations and crises. The attempts of the government to transform drastically the radical federal system built between 1863 into a centralized nation mirrored on the monetary regime. The system was abruptly transmuted from a free-banking to a monopolist issuer of paper money, named the National Bank. This paper aims at explaining the reasons this transformation failed and how the private banking system overtook the disbelieve of the public in the central money. I present the first estimation of the monetary aggregates and show the lack of confidence in the National Bank bills did not come from an excessive issuing of paper money but from the absence of confidence of the public. This attitude is explained by the incapacity of the National Government to collect sufficient amounts of metallic reserves and the incapacity to provide complementary and alternative forms of means of payments, especially for the international trade. We show how the strategy of the private banks to develop those mechanisms allowed them not only to survive but also to create a modern system of payments and monetary instruments. This strategy explains the characteristics of the system between the end of the nineteenth century until the creation of the creation of a modern central bank in 1923 (Banco de la República). In this way, I offer an alternative solution to an unsolved puzzle about the functioning of the system.

Triffin Dilemma and European Monetary Integration (1946-1958)

Pierre-Hernan Rojas

Robert Triffin (1960) was the first to formalize that, under the gold exchange standard, the key currency issuing country faced a dilemma. Either the United States would stop providing more dollar balances for international trade and finance, leading to world stagnation and deflationary bias in the global economy; either the United States would continue to provide more of the international reserve currency, leading ultimately to a loss of confidence in the dollar. This paper shows that the formulation of this dilemma was the consequence of Triffin’s early critics of the Bretton Woods system in the 1940s leading him to advocate a reform of the international monetary system at the regional level, ie. the European one, in the 1950s.

Robert Triffin (1960) was the first to formalize that, under the gold exchange standard, the key currency issuing country faced a dilemma. Either the United States would stop providing more dollar balances for international trade and finance, leading to world stagnation and deflationary bias in the global economy; either the United States would continue to provide more of the international reserve currency, leading ultimately to a loss of confidence in the dollar. This paper shows that the formulation of this dilemma was the consequence of Triffin’s early critics of the Bretton Woods system in the 1940s leading him to advocate a reform of the international monetary system at the regional level, ie. the European one, in the 1950s.

Crises, Money Doctors and Reforms in Sweden from the Deregulation to the EMS Crisis

Anders Ögren

Crises are windows for economic reforms, but reforms have a tendency to lead to unforeseen consequences. The reformation of the banking sector in the 1980s was a result of the stagflation crisis. The Swedish crisis in the early 1990s came as a result of these reforms. The 1990s crisis led to economic reforms as well as an extensive tax funded rescue program to salvage banks. In this paper I study the following questions: 1) Why were the reforms implemented? More precisely – what economic rationale did policy makers refer to? 2) What were the economic consequences of these reforms – anticipated and unanticipated?

Crises are windows for economic reforms, but reforms have a tendency to lead to unforeseen consequences. The reformation of the banking sector in the 1980s was a result of the stagflation crisis. The Swedish crisis in the early 1990s came as a result of these reforms. The 1990s crisis led to economic reforms as well as an extensive tax funded rescue program to salvage banks. In this paper I study the following questions: 1) Why were the reforms implemented? More precisely – what economic rationale did policy makers refer to? 2) What were the economic consequences of these reforms – anticipated and unanticipated?

From Zero to Hero? - Monetary Innovations in Crisis: The Case of Currency Re-domination, 2006 to 2009

Ushehwedu Kufakurinani

2nd half

Small Denomination Banknotes from 1864 to 1878: a Menacing Innovation… to Whom?

Patrice Baubeau

During the 19th century, the Bank of France adhered to a doctrine that made small denomination banknotes the source of many dangers: panic movements; risk of inflation; unwelcome reminder of the “assignats”; counterfeiting. However, the rapid sequence of the 1870 war, the defeat, a record indemnity and a monetary crisis forced the Bank to issue millions of small 25, 20 and 5 francs denominations. But this innovation, the daughter of necessity, in no way inflected the Bank’s orthodox doctrine. As soon as 1873, it undertook to withdraw these small bills for motives that were not all of general interest.

During the 19th century, the Bank of France adhered to a doctrine that made small denomination banknotes the source of many dangers: panic movements; risk of inflation; unwelcome reminder of the “assignats”; counterfeiting. However, the rapid sequence of the 1870 war, the defeat, a record indemnity and a monetary crisis forced the Bank to issue millions of small 25, 20 and 5 francs denominations. But this innovation, the daughter of necessity, in no way inflected the Bank’s orthodox doctrine. As soon as 1873, it undertook to withdraw these small bills for motives that were not all of general interest.

Reintegration of bronze coins during the late 16th and the early 17th century Japan

Hisashi Takagi

This paper explores bronze coin reintegration at the beginning of early-modern Japan, with a particular focus on the late 16th and early 17th centuries. The primary issue during this period of time was the emergence of bita, a subcategory of zeni, or bronze coin, that appeared during the late 16th century and was designated as standard bronze coin by the Edo Shogunate, or Tokugawa shogunate. Published research has described the development process of monetary system in the Tokugawa period separately from the experiences in the preceding century, however, this paper emphasizes the fact that the bronze coin system in the Tokugawa period inherited a system in the 16th century that was autonomously developed in this society.

This paper explores bronze coin reintegration at the beginning of early-modern Japan, with a particular focus on the late 16th and early 17th centuries. The primary issue during this period of time was the emergence of bita, a subcategory of zeni, or bronze coin, that appeared during the late 16th century and was designated as standard bronze coin by the Edo Shogunate, or Tokugawa shogunate. Published research has described the development process of monetary system in the Tokugawa period separately from the experiences in the preceding century, however, this paper emphasizes the fact that the bronze coin system in the Tokugawa period inherited a system in the 16th century that was autonomously developed in this society.

Money Doctors and the Monetary Reform Debate During the late 19th Century in Japan

Masato Shizume

This paper examines the motivations of the “money doctors” who worked for the modernization of the Japanese monetary system and the consequences of the debates among them. The Japanese government initiated monetary reforms after the forced opening of treaty ports in the late 1850s and following the Meiji Restoration in 1868. During the initial stages of establishing the modern monetary system, a debate arose among the reformers. Among them, Hirobumi Ito proposed a system based on multiple issuing banks, modeled after the national banks of the United States. Kiyonari Yoshida opposed Ito and proposed a system based on a single issuing bank, modeled after central banks in the European countries. Eiichi Shibusawa, who had experience issuing paper money under the Tokugawa Shogunate, reconciled the debate and drafted the National Bank Act of 1872. Then, Shibusawa went away to establish the First National Bank. All these men carefully examined the pros...

This paper examines the motivations of the “money doctors” who worked for the modernization of the Japanese monetary system and the consequences of the debates among them. The Japanese government initiated monetary reforms after the forced opening of treaty ports in the late 1850s and following the Meiji Restoration in 1868. During the initial stages of establishing the modern monetary system, a debate arose among the reformers. Among them, Hirobumi Ito proposed a system based on multiple issuing banks, modeled after the national banks of the United States. Kiyonari Yoshida opposed Ito and proposed a system based on a single issuing bank, modeled after central banks in the European countries. Eiichi Shibusawa, who had experience issuing paper money under the Tokugawa Shogunate, reconciled the debate and drafted the National Bank Act of 1872. Then, Shibusawa went away to establish the First National Bank. All these men carefully examined the pros and cons of Western monetary systems and made proposals to apply them in a dynamic environment. The main argument was over whether to prioritize “promoting economic development” or “sustaining sound money,” which followed along the lines of an earlier debate between the banking and currency schools in Britain.

Transformation of Currency Systems and Role of Banknotes: Case Study of the Activities of British Banks in Siam, 1888-1913

Takeshi Nishimura

In 1888, the Hongkong and Shanghai Banking Corporation (hereafter the HSBC) established a branch office at Bangkok. Four years later, the Chartered Bank of India, Australia, and China (hereafter the Chartered Bank) followed suit and in 1897, the Banque de l’Indochine established branch offices at Bangkok and at a city near the Cambodia-Siam border. These three banks played major roles in the foreign trade financing operations of Siam before World War I. In addition, they contributed to modernized local payment and currency systems. This paper aims to show how these banks transformed not only the international, but also local and regional payment-systems. Upon the establishment of these branch offices, the Siamese Government gave the three banks the authority to issue banknotes freely. Until 1902, under the silver standard, the three banks had proactively issued original bank notes, which were circulated around Bangkok and other major Siamese cities. In fact, banknotes...

In 1888, the Hongkong and Shanghai Banking Corporation (hereafter the HSBC) established a branch office at Bangkok. Four years later, the Chartered Bank of India, Australia, and China (hereafter the Chartered Bank) followed suit and in 1897, the Banque de l’Indochine established branch offices at Bangkok and at a city near the Cambodia-Siam border. These three banks played major roles in the foreign trade financing operations of Siam before World War I. In addition, they contributed to modernized local payment and currency systems. This paper aims to show how these banks transformed not only the international, but also local and regional payment-systems. Upon the establishment of these branch offices, the Siamese Government gave the three banks the authority to issue banknotes freely. Until 1902, under the silver standard, the three banks had proactively issued original bank notes, which were circulated around Bangkok and other major Siamese cities. In fact, banknotes issuance and supply were their main business in Siam at that time. In 1902, when the Siamese Government decided to abandon the silver standard in favour of the gold exchange, the banks decided to suspend issuing banknotes on their own initiative without delay. It is useful to consider the types of currencies that were used by the banks and related entities for various financial operations, following this suspension. Accordingly, this paper focuses on the transformation of the currencies in circulation for various payments in Siam. This paper examines archival documents of the HSBC, the Chartered Bank, and the British Colonial Office to clarify the business nature of the foreign banks and the transformation of currencies in circulation for various payments in Siam from 1888 to 1913. The archival documents of the Banque de l’Indochine and other Thai-language materials are yet to be included in this paper and may warrant revisions in the near future. However, given that Siam established much closer economic and political relations with Britain than with France and large quantities of rice, the most important export commodity in Siam, were exported to Singapore and other British colonies in Southeast Asia, analysing these British archival documents, alone, would provide various crucial elements of the monetary and financial developments in Siam. With this in mind, this paper focuses on how the British foreign banks contributed to the monetary and financial developments in Siam.

Regional Credit Money and Banknote Issuance Agency System: Chinese Free Banking in the interwar period Reconsidered

Hiroaki Morota

The purpose of this paper is to verify that the conventional regional promissory notes which were outside the limit of law substantially contributed to the prevalence of banknotes in the interwar period, focusing on China’s unique banknote issuance agency system. And with that result, to cause a stir in the previous argument that only emphasize the role of modern currency institutions such as a bank regulation, legal system, and a central bank for the Chinese currency order in this period.

The purpose of this paper is to verify that the conventional regional promissory notes which were outside the limit of law substantially contributed to the prevalence of banknotes in the interwar period, focusing on China’s unique banknote issuance agency system. And with that result, to cause a stir in the previous argument that only emphasize the role of modern currency institutions such as a bank regulation, legal system, and a central bank for the Chinese currency order in this period.

Official Paper Money vs Local Native Notes in Modern China

Akinobu Kuroda

Native notes privately issued by local merchants, typically called qianpiao, became dominant in transactions at local markets across China in the early 20th century. The popularity of private notes with no actual convertibility suggests that a currency is not accepted simply by official guarantee or by intrinsic value, but by an appropriate supply precisely meeting demand for means of exchange among locals. Central government tried in vain to ban native note. Ironically, after the introduction of unified paper money by four central banks in 1935, the circulation of native notes accelerated in lower-level markets. Archives from the Academia Historica show that a monetary reform by central government clashed with strong demand for devices mediating one-time transactions among ordinary people within a space of walkable distance.

Native notes privately issued by local merchants, typically called qianpiao, became dominant in transactions at local markets across China in the early 20th century. The popularity of private notes with no actual convertibility suggests that a currency is not accepted simply by official guarantee or by intrinsic value, but by an appropriate supply precisely meeting demand for means of exchange among locals. Central government tried in vain to ban native note. Ironically, after the introduction of unified paper money by four central banks in 1935, the circulation of native notes accelerated in lower-level markets. Archives from the Academia Historica show that a monetary reform by central government clashed with strong demand for devices mediating one-time transactions among ordinary people within a space of walkable distance.

Housing finance, the pension system and policy traditions, the case of France and the Netherlands

Tim van der Valk

This paper studies the evolution of the French and Dutch system of housing finance between 1960 and today. Whereas most of the literature considers the effects of regulation on housing finance practices in isolation, this paper takes a historical approach and incorporates the underpinnings of such policy in its analysis. The paper shows that the French and the Dutch state display different policy traditions, which expresses itself through a different appreciation of market-based processes. Moreover, differences in the setup of the French and Dutch pension system exerted a lasting effect on the incentives that drive life-time consumption planning of French and Dutch households. The ensuing composition of the household balance sheet results in a vested interest in policies that supported such financial choices, further contributing to the incremental nature of regulatory change.

This paper studies the evolution of the French and Dutch system of housing finance between 1960 and today. Whereas most of the literature considers the effects of regulation on housing finance practices in isolation, this paper takes a historical approach and incorporates the underpinnings of such policy in its analysis. The paper shows that the French and the Dutch state display different policy traditions, which expresses itself through a different appreciation of market-based processes. Moreover, differences in the setup of the French and Dutch pension system exerted a lasting effect on the incentives that drive life-time consumption planning of French and Dutch households. The ensuing composition of the household balance sheet results in a vested interest in policies that supported such financial choices, further contributing to the incremental nature of regulatory change.

Issuing Money: Theory and History

Stefano Ugolini

This paper surveys both the theoretical arguments and the historical evidence concerning the evolution of money creation mechanisms in the West from the Middle Ages to today. Theoretically, the emergence of money is the result of the presence of frictions. In a “hybrid” economy where both centralized and decentralized transactions coexist, the debt issued by “central” agents can play the role of money for “peripheral” ones. “Peripheral” agents’ demand for some particular types of credit money can actually be increased by government, either through legal restrictions or through market power. Historically, the monetization of public debt has been one important yet not exclusive motivation for government intervention in the field: government-sponsored money creation has also been collateralized by private debt in most instances (e.g. in medieval Venice, in nineteenth-century England, and in the original design of the Federal Reserve). This is also overwhelmingly the case today.

This paper surveys both the theoretical arguments and the historical evidence concerning the evolution of money creation mechanisms in the West from the Middle Ages to today. Theoretically, the emergence of money is the result of the presence of frictions. In a “hybrid” economy where both centralized and decentralized transactions coexist, the debt issued by “central” agents can play the role of money for “peripheral” ones. “Peripheral” agents’ demand for some particular types of credit money can actually be increased by government, either through legal restrictions or through market power. Historically, the monetization of public debt has been one important yet not exclusive motivation for government intervention in the field: government-sponsored money creation has also been collateralized by private debt in most instances (e.g. in medieval Venice, in nineteenth-century England, and in the original design of the Federal Reserve). This is also overwhelmingly the case today.