In order to become effective, central banks must be enabled to be true masters of the money system. They need to gain full control of the money by way of monetary quantity policy. No quantity policy is possible, however, as long as the banking industry dominates the monetary system and determines the entire stock of money, while money and capital markets inherently fail to reach some ‘equilibrium’ and self-limitation. In conclusion, banks must stop acting as monetary quasi-authorities and become purely financial institutions, meaning that the banking industry must be stripped of its monetary power to create and delete money-on-account by creating or deleting primary credit. Banks ought to be free lending and investment enterprises, but just money intermediaries in this without the illegitimate privilege of conducting business on the basis of self-created money.
In the nineteenth century, and for much the same reasons, banks were stripped of their power to issue private banknotes. The monopoly of banknotes was given over to the central banks, many of which were set up in the process. Now the time is ripe for the same to be applied to money-on-account. Bank money should be phased out and central-bank money in public circulation in the form of money-on-account and e-cash phased in, resulting in a sovereign money system with full control of the stock of money. In this way, a state’s, or a community of states’, monetary prerogatives of the currency (unit of account), the money (means of payments) and the seigniorage (gain from creating money) would be fully completed. Independent public central banks – acting on a well-defined legal mandate, but not taking directives from the government – are the obvious candidates for being entrusted with the functions related to the monetary prerogatives.