Structural reforms in payment systems to avoid another systemic crisis

Abstract

This paper shows how a defective architecture for domestic and international payments has made it possible for banks to exploit the endogenous nature of money in a variety of purely speculative financial-market transactions that have led to the eruption of a global systemic crisis. I elaborate on a monetary-structural reform, which should make sure that no bank will any longer be in a position to blur the distinction between money and credit, as this confusion in the banks' books originates various asset bubbles as well as systemically important financial institutions, both of which are major contributors to making the system increasingly fragile as time goes by. This reform of domestic payment systems will not be enough to avoid so-called global imbalances at an international level. I therefore propose, in the spirit of Keynes, a structural reform of the international monetary system, arguing for the emission of a supranational money in settlement of every individual transaction between any two monetary spaces.

The relationship between inflation and unemployment: a critique of Friedman and Phelps

“…If so, then any emission of money that banks carry out independently of production has an inflationary outcome, since it increases the amount of bank deposits without making an equivalent, simultaneous contribution to produced output. The fact that this inflation is not revealed by changes in the price level on the goods market (such as the consumer price index)because banks' credit lines are used to carry out financial transactionsis not enough to ignore these operations and the inflationary pressures they give rise to in the economic system as a whole (see Rossi 2015). This is so because the volume of bank deposits resulting from what Werner (2012, p. 29) labels 'non-GDP-based transactions' induces a deflationary pressure on the market for produced goods and services: deposit-holders are led to spend on financial marketsin light of the observed increasing prices on this marketwhat they would otherwise have spent on the product market.…”

Monetary Policy and Income Distribution in the Covid-19 Pandemic Crisis. A European Perspective

“…those credit lines that banks grant without having enough pre-existent bank deposits cannot be used to finance "non-gdp-based transactions" (Werner, 2012, p. 29) -thereby contributing to guarantee the financial stability of the economy as a whole (Rossi, 2015 expands on this reform). ◀…”

Dysfonctionnement du système des paiements intra-européens

“…Ces déséquilibres font partie des preuves empiriques de la "non-viabilité" d'une monnaie unique dans un espace monétaire multinational qui manque d'un certain nombre de caractéristiques et d'institutions clés pour en faire un moteur de croissance économique et de prospérité plutôt qu'un facteur de déséquilibres et de crise financière, qu'aucune mesure d'austérité ne pourra jamais résoudre. Rossi (2015) explique que la crise systémique qui dévaste les économies occidentales depuis la disparition de Lehman Brothers en 2008 est due à des défaillances structurelles des systèmes de paiement aux niveaux national et international. Elle ne peut résulter d'une série de mauvaises décisions prises par quelque agent que ce soit, à moins que le système de paiement lui-même ne soit structurellement défectueux.…”

“…Considérons à cet égard la comptabilité de l'ISR dans les tableaux 5. + 100 DM Dépôt du DF + 100 DM TABLEAU 5.4 -Paiement supranational intra-européen après la réforme (2) Source : Elaboration personnelle à partir de Schmitt (1975b) et Rossi (2007Rossi ( , 2015. Les pays doivent s'adresser à l'ISR pour que leurs transactions commerciales et financières autonomes soient réglées.…”