A primer
Over time, however, a requirement that only the central bank can create demand deposits (either directly or through a segregated commercial bank account) would have pushed the Swiss financial system in two somewhat divergent directions. One would be a further increase in the size of central bank’s balance sheet, and the other would be to drive intermediation into quasi-bank intermediaries (or shadow banks).
Banks and Money, Or Watch out What You Wish For
By: Stephen G. Cecchetti, Kermit L. Schoenholtz – Brandeis University, New York University
The trade-off
Central banks, in short, are more likely to make mistakes in a sovereign money regime than in the current system. Whether that means the wrong monetary policy or turning the central bank into a too-big-to-fail institution, the temptation will be great to paper over such mistakes with higher inflation. If so, society will have traded private bank run risk for central bank run (i.e. velocity) risk.
The Sovereign Money Blues
By: David Beckworth – George Mason University
The welfare loss
Philippe Bacchetta argues that the Swiss reform increases the opportunity cost of holding money and therefore unambiguously lowers welfare.
Sovereign Money Reforms and Welfare
Authors: Philippe Bacchetta, Elena Perazzi
From: University of Lausanne
How useful are referenda?
John Matsusaka finds that under the assumption that special interests’ power arises from their ability to influence legislators and regulators, referenda that enable citizens to make policy decisions themselves by direct vote, without intermediation of representatives weaken the special interests’ power. But he adds that in the event business groups are able to influence legislators by informing them about unexpected consequences of policies and allowing for better design of public policy, in that case reliance on ballot propositions could be harmful to the general public.
Special Interest Influence under Direct versus Representative Democracy
Author: John Matsusaka
From: University of Southern California
