It's a hard sell: people would resist the elimination of cash. It is threats like this that goad the masses out of their slumbers and open their eyes to monetary reality. And awaken macroeconomists to the necessity of monetary system reform.
I'm going to end this Great Unbinding series here. So let the following be a footnote that brings the shadow banking system into the picture.
Radical monetary reform that converts bonds to money could cause catastrophic collapse of the present financial system which is built upon bonds as the foundational "interest-bearing risk free asset". The foundational risk-free asset could be changed to "money". But that unmoors the whole system of pricing risk credit via interest rates.
In his 2009 paper, The Global Credit Crisis, and Policy Response, Perry Mehrling describes the inextricable intertwinings between what he calls the legacy banking system (the central bank and commercial banks: money issuance; primary credit creation and lending) and the newer capital markets financial system (shadow banks: securitization) that has rapidly grown since the 1970s.
Mehrling opens with the warning, "This thing has a lot of moving parts." Which might be the Guinness Record for understatement.
In a nutshell: credit creation by shadow banks is backstopped by lines of credit with legacy banks, whose credit creation is backstopped by money issuance by central banks and by taxpayer-backed deposit insurance. Central banks issue money against bonds. Bonds are the cornerstone of the whole financial edifice.
The shadow bank house of dominoes is perched atop the legacy bank house of cards; with the whole Rube Goldberg contraption leveraged upon a single "risk-free asset": US Treasury debt.
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