Monetary Sovereignty. Bank Money as Para-Sovereign Fiat Money

Modern money as easily creatable paper money, book money and now also digital money has given rise to an ongoing struggle between central-bank money, partly treasury money, seeking to maintain their sovereign position, and banks as well as other issuers of private money surrogates, trying to dethrone the incumbent and seize the monetary power themselves. If most of the money denominated in a national currency is circulated by private issuers rather than the national central bank, monetary sovereignty is but an empty shell. Money and finance are determined by those private money issuers to a considerable degree, while they can hardly be held accountable when things go wrong. Instead, central banks have to act as anytime lenders of last resort, and governments guarantee bank deposits on a massive scale. Bank money has thus acquired para-sovereign status and the monetary prerogatives have largely been ceded to the respective national banking sector. In constitutional terms as well as in the interest of effectual monetary policy, it is about time to put the checks and balances in the monetary system right again.