2015/04/15 by Cyril Pitrou, Pitrou, Cyril
Economics, Econometrics and Finance · #Economic Theory and Policy #FOS: Economics and business #General Economics (econ.GN) #General Finance (q-fin.GN)
paper · pdf · doi:10.48550/arxiv.1504.03895
openalex publication_date 2015/04/15 · openalex created_date 2022/10/04 · openalex updated_date 2026/07/28
The nature of monetary arrangements is often discussed without any reference\nto its detailed construction. We present a graph representation that allows for\na clear understanding of modern monetary systems. First, we show that systems\nbased on commodity money are incompatible with credit. We then study the\ncurrent chartalist systems based on pure fiat money, and we discuss the\nconsolidation of the central bank with the Treasury. We obtain a visual\nexplanation about how commercial banks are responsible for endogenous money\ncreation whereas the Treasury and the central bank are in charge of the total\namount of net money. Finally we draw an analogy between systems based on gold\nconvertibility and currency pegs to show that fixed exchange rates can never be\nmaintained.\n