By Gabriel Rauterberg & Joshua Younger.
Money is a motley. While the state typically enjoys a monopoly on issuing new physical currency, a variety of instruments serve money-like roles in the financial system. Most familiarly, the United States relies heavily on its commercial banking system to augment the money supply through issuing deposits. Alongside, and on top of the commercial banking system, the shadow banking system has developed, offering a range of deposit substitutes.
This Article seeks to cast new light on the U.S. financial system by exploring how, over the course of the twentieth century, federal policymakers engaged in a series of distinct and largely uncoordinated monetary experiments. These policymakers found that money-like instruments could be directed in service of economic and other national ambitions. As we show through historical case studies, federal authorities designed, promoted, and repurposed financial instruments, endowing them with money-like characteristics by providing these instruments with some measure of liquidity support, credit support, or both. The result of each intervention was an instrument, almost always some kind of debt, with monetary properties. Full Article