Food for thought: Should the state reclaim its role in money issuance?
- Jeff Alvares
- 12 de jun.
- 2 min de leitura

Central bank money is now used mainly by banks, while the public transacts in private bank money
Over the past century, money has gradually stopped being a public utility.
In advanced economies, over 90% of the money supply consists of bank deposits—privately issued, and inherently risky. Most of the rest are bank reserves held at the central bank. Physical cash? It plays a vanishingly small role in everyday transactions.
In effect, central bank money is now used mainly by banks, while the public transacts in private bank money. This shift—from government-issued, risk-free money to bank-issued, risk-bearing money—happened so slowly that it now feels natural. But is it inevitable?
I don’t think so. It may be time to rethink the public-private partnership (PPP) in money issuance.
What if the state offered a broader menu of monetary instruments—with different combinations of risk, liquidity, and cost—allowing users to choose what best suits their needs?
Here’s one possible ranking:
1. CBDCs (risk-free, highly liquid, no fees, no interest)
2. Full-reserve bank deposits (near risk-free, high liquidity, account fees, no interest)
3. Fully backed stablecoins (low credit/interest rate risk, high liquidity, no fees, no interest)
4. Money market mutual funds (low risk, high liquidity, no fees, pays interest)
5. Fractional-reserve bank deposits (riskier, lower liquidity, no fees, higher interest)
If users could choose, money would likely migrate away from fractional deposits toward safer options. Banks might have to raise deposit rates to stay competitive—passing some of the cost onto borrowers. Credit would become more expensive, and bank profits could shrink.
But the upside? A more efficient allocation of financial resources in the economy.
🙋🏻 What do you think? Would a more open monetary architecture improve the system—or destabilize it? How would you tweak my ranking of money options?
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