Monetary Order Policy

Money is defined primarily by its function as a medium of exchange and payment. All its other functions and properties build on this.

What changes repeatedly over the course of history is the material used as money. A number of monetary materials are often used within one and the same period. The historical trend is towards standardization.

The material used as money must be manageable, including across great distances. At the same time, it must be generally accepted—something that ultimately only the state can guarantee. With the development of suitable technologies, these requirements led to the dematerialization of money and, ultimately, to digital, chartal book money.

Money must exist in a certain quantity and be put into circulation in a particular way. The creation of money is an act in its own right.

There is also a normative case for money to be sovereign: the privilege of creating symbolic money—paper or book money—without corresponding production costs belongs to the sovereign. In the present two-tier monetary system, the sovereign creates only a small share of the money in circulation, while commercial banks create the greater part as bank deposit money. This system has serious weaknesses and encourages the hypertrophy of the financial system.

Sovereign-money reform seeks to make electronic book money a fully fledged public means of payment as well.