Welcome to New Currency Theory and Sovereign Money 

What is Sovereign Money?

Sovereign money is legal tender issued by a monetary authority, in most cases by a nation-state's independent central bank, or the ECB. The counterpart to sovereign money is commercial bankmoney, i.e. demand deposits on current bank account.
Bankmoney is created whenever a bank grants a loan, or overdraft, or buys stocks and bonds or real estate from nonbanks, and pays for this by crediting the customers' or sellers' accounts. These credits need to be backed by sovereign central-bank money, but just to a very small percentage of 1.5% in the UK, 2.5% in the eurozone, and less than 8.5% in the US...
Continue >     

Japanischer steingarten.JPG

Monetary Workarounds.
Central bank digital currency and sovereign money accounts

Since about 2013/14 scholars have been looking for an intermediate or gradual approach to monetary reform. If a 'big bang' transition from bankmoney to sovereign central-bank money could not be achieved anytime soon, something less radical might be attainable. The two approaches in the spotlight are
central bank issued digital currency (CBDC) based on blockchain technology, and
sovereign money accounts as an alternative option to bank giro accounts.  

Sovereign Money in Critical Context

As sovereign-money reform has been gaining attention, more economists from various schools of thought have felt called upon to comment on it - mainstream commentators, Neoaustrians, demand-side Keynesians, and others. This provides an opportunity for clearing up misrepresentations of sovereign money. Continue > 

The Chicago Plan and a Single-Circuit Sovereign-Money System

In dealing with monetary reform, a recollection of older concepts is quite natural. Most prominent are approaches to a 100%-reserve of the 1930s, among them the original Chicago Plan. There is now a tendency to identify this plan with the up-to-date approach to a single-circuit sovereign money system as championed by most contemporary reform initiatives. Is the Chicago Plan and '100% money' (Fisher) the same as plain sovereign money? Or is this about two different systems?
Continue >

water surface.jpg

Neo-Austrians between Gold Standard, 100% Reserve, and Free Banking

The Neo-Austrian School and New Currency Theory share a similar criticism of fractional reserve banking. Strangely enough, Neo-Austrians blame the problem on government and central banks rather than the banking industry.
The Neo-Austrian idea of money and banking reform then is free banking, i.e. a system without legal-tender laws and central banks, on the basis of a return to a 100% gold reserve. This appears to be quixotic, but is a revelation to others.
Here are > Notes on the occasion of reading Huerta de Soto, a main proponent of the Neo-Austrian School.

colorful-stones-pavement quotcalcadaquot.jpg

How the present money system actually works:
Split-Circuit Reserve Banking

Here is a paper providing an up-to-date outline of the functioning of the present money system. This then serves as a backdrop to discuss a number of orthodox fallacies and heterodox flaws in money theory, followed by a summary of the dysfunctions of split-circuit reserve banking and a brief outlook on the perspective of a single-circuit sovereign money system. 
Continue >

Treppen Schlossteich Charlottbg 1.JPG

Monetary Puzzlement
Why central banks perform worse than they could

Central banks are nowadays portrayed as the most mighty and powerful institutions, controlling the banking industry and exerting tremendous influence on financial markets and the economy beyond. Central banks themselves are keen to leave no doubt about their being in control of the situation. In actual fact, the decisive monetary power is with the banks. Here is an article that tries to sketch out what central banks actually can do and what they cannot.  

Steine Wannseeterrassen.JPG

The euro - Whence it came, where it goes

The euro was expected to catalyse 'ever deeper union' among its member states. Instead, the euro has been captured by bad financial habits of old and has put the euro north and south in fierce neonationalist confrontation with each other. The currency union is now at the crossroads between either getting stuck in the mud of an ever deeper joint liability community bound to continual decline, or a reset of the euro and realignment of the Eurosystem based on a return to the no-bailout rule, national responsibility for national debt, and a number of rule changes in the Eurosystem (TARGET payment balances, voting rights).  

Currency and Banking Teachings

Currency versus banking teachings represent a frame of reference of lasting relevance to modern money systems.
The expression New Currency Theory (NCT) makes reference to the historical Currency School of the first half of the 19th century. It was opposed by the Banking School of the time.
Most economists seem to have forgotten about this controversy. At the same time, most monetary reform initiatives today in fact stand for new currency teachings...
Continue >

bunte rundstein-pflaster.jpg

Modern Money Theory and Circuitism in comparison with New Currency Theory

New Currency Theory NCT and Modern Money Theory MMT as well as Circuitism share a number of views on how the present regime of bank money (fractional reserve banking) actually works.

It turns out, however, that MMT - in spite of its claim to stand for a sovereign-currency system - is closer to representing new banking doctrine rather than currency teaching.  > Continue

Something similar must be said on the monetary theory and circuit model of Circuitism, another offspring of Postkeynesianism, even though Circuitism is more critical about the 'power of banks'.  > Continue 

Out Now ! 
< < < < < < < < <
A comprehensive analysis of the monetary system and layout of monetary reform.

E-book and print edition available from

Mackenzie King 1945. Photo: National Archives of Canada

Mackenzie King 1945. Photo: National Archives of Canada

Greenspan's amazing testimony. Better late than never. The key passage starts at about min. 5.