Telematic currency and market strategy (mtemuk.pdf). - Centre d ...

the total of deposits held by its customers (whether through previous deposits in cash, or through a credit), is
called cash coefficient, and we have already said that it was fundamental to insure at any time convertibility of
these deposits. Therefore, the granting of deposits cannot jeopardize this relationship.
Since cash coefficient is fundamental to insure liquidity of the bank, that is its ability to transform deposits
into cash, the national bank has two main instruments to insure it:
• The compulsory reserve imposition: the national bank can compel banks to deposit in it a part of
their deposits, immobilizing them.
• The increase of the rediscount ratio: by this means banks are compelled to increase also their interest
rates and therefore requests of credit are discouraged, especially if they are as discounts.
From what has been previously said, it appears that the national bank has a fundamental controlling role in
the process of creating scriptural bank money: in the first place for its initiative as an inventor of paper
money, and in the second place because of the instruments of monetary policy it has to supervise and control
the action of private banks.
But this idea of reality, which is currently accepted and defined by most of the experts, can be discussed and
questioned in its main aspects. In the following paragraphs we follow the article of Francisco Vergara «Les
faux-fuyants du monétarisme 2 ».
The first thing to be said is that the national bank itself cannot control its money emission. We have already
said that the national bank creates money every time it produces bank notes for credit. Now the national bank
cannot refuse the banks to rediscount paper signed by solvent companies, without jeopardizing the whole
pyramid of credit, and it has no means to avoid the increase of nominal value of such paper; the increase of
course elevates the value of the money mass.
In the second place, the instrument which has always been considered the best means for limiting bank credit,
that is the increase of the re-discount applied by the national bank, apparently obtains results opposite to
what was expected, that is a higher rise of the money mass, because the high interest rates atract capital.
Finally, it is necessary to point out that nowadays there are many other forms of liquidity, besides paper
money and scriptural bank instruments, as they cannot be controlled by the national bank. The confusion of
this situation can be easily observed simply by considering the difficulty existing to define what is meant by
paying means. F. Vergara mentions Lord Kaldor: «There is no clear-cut separation in the interest of the total
liquidity, of what is money and what is not. Whichever the definition chosen for money, it will be surrounded
by a myriad of more or less liquid instruments which can act as substitutes».
Therefore, besides these legal instruments, theoretically controlled by the national bank, there are new
instruments that the public accepts and uses. These instruments are born not only within the banks, but also
within the companies.
It is easy to deduct from the previous considerations that at present there cannot be an effective control of
creation of money.
The immediate result of this situation is that every bank, within the more or less severe conditions imposed
by the national bank, acts according to its own interests. And there is no effective legal instrument in the
geopolitical society to allow to study global strategies for all the market.
It is not that the market needs, sectorial excesses or shortages of liquidity are completely overlooked: proof of
this is the fact that banking at present is more than ever a good business. But means to meet these needs are
focused empirically, partially and not with a view to the common wellbeing, mainly in favour of higher
sectors of society.
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