Editing Monetary reform (section)

==Common targets for reform==
Of all the aspects of [[monetary policy]], certain topics reoccur as targets for reform:

===Reserve requirements===
{{Main|Fractional-reserve banking}}

Banks typically make loans to customers by crediting new demand deposits to the account of the customer. This practice, which is known as [[fractional reserve banking]], permits the total supply of credit to exceed the liquid legal reserves of the bank. The amount of this excess is expressed as the "[[reserve ratio]]" and is limited by government regulators not to exceed a level which they deem adequate to ensure the ability of banks to meet their payment obligations.  Under this system, which is currently practiced throughout the world, the money supply varies with the quantity of legal reserves and the amount of credit issuance by banks.{{citation needed|date=April 2021}}

Several major historical examples of financial regulatory reform occurred in the 20th century relating to fractional-reserve banking, made in response to the [[Great Depression]] and the many [[bank run]]s following the [[crash of 1929]]. These reforms included the creation of [[deposit insurance]] (such as the [[Federal Deposit Insurance Corporation]]) to mitigate against the danger of bank runs.<ref name="mankiw3"/> Countries have also implemented legal [[reserve requirements]] which impose minimum reserve requirements on banks.<ref name="mankiw4">{{Cite book|title=Macroeconomics|last=Mankiw|first=N. Gregory|author-link=Gregory Mankiw|year=2002|edition=5th|publisher=Worth Publishers|location=New York|isbn=0-7167-5237-9|page=[https://archive.org/details/macroeconomics00mank_0/page/487 487]|url=https://archive.org/details/macroeconomics00mank_0/page/487}}</ref> Mainstream economists believe<ref name="mankiw3">{{Cite book|title=Macroeconomics|last=Mankiw|first=N. Gregory|author-link=Gregory Mankiw|year=2002|edition=5th|publisher=Worth Publishers|location=New York|isbn=0-7167-5237-9|page=[https://archive.org/details/macroeconomics00mank_0/page/489 489]|url=https://archive.org/details/macroeconomics00mank_0/page/489}}</ref> that these monetary reforms have made sudden disruptions in the banking system less frequent.

[[Walter Block]] argued fractional reserve banking inherently artificially lowers real [[interest rates]] and leads to business cycles propagated by excessive capital investment and subsequent contraction.<ref>{{cite book |last1=Block |first1=Walter E. |url=https://books.google.com/books?id=htOaEAAAQBAJ&dq=fractional+reserve+artificially+lowers+real+interest+rates&pg=PA95 |title=Action and Choice: An Introduction to Economics |last2=Jankovic |first2=Ivan |date=7 November 2022 |publisher=Springer Nature |isbn=978-981-19-3751-4 |pages=88 |language=en}}</ref><ref>[https://www.mises.org/Books/mysteryofbanking.pdf Murray Rothbard, ''The Mystery of Banking'']</ref> A small number of critics, such as [[Michael Rowbotham]], equate the practice to [[counterfeiting]], because banks are granted the legal right to issue new loans while charging interest on the money thus created. Rowbotham argues that this concentrates wealth in the banking sector with various pernicious effects.<ref name="Rowbotham 1998"/>


===Money creation by the central bank===
[[Wright Patman]] objected to governments paying interest for the use of money which the [[central bank]] creates "out of nothing".<ref>For an example of the public criticism of the current monetary system, see the speech of the [[Earl of Caithness]] in the British [[House of Lords]] on 5 March 1997 [{{cite web | title=The Economy - Wednesday 5 March 1997 - UK Parliament | website=Hansard | date=1997-03-05 | url=https://hansard.parliament.uk/Lords/1997-03-05/debates/0d51a926-949b-4df3-bc93-caf0176c6d02/TheEconomy | access-date=2021-04-20}}]</ref><ref>{{Cite book |last=Jeffries |first=Donald |url=https://books.google.com/books?id=n5iSDwAAQBAJ&dq=money+out+of+nothing+%22Wright+Patman%22&pg=PT203 |title=Crimes and Cover-ups in American Politics: 1776-1963 |date=2019-06-18 |publisher=Simon and Schuster |isbn=978-1-5107-4148-5 |language=en}}</ref> These critics claim that this system causes economic activity to depend on the actions of privately owned banks, which are motivated by self-interest rather than by any explicit social purpose or obligation.

===International organizations and developing nations===
[[Michael Hudson (economist)|Michael Hudson]] criticised existing global financial institutions such as the [[World Bank]] and [[International Monetary Fund]] for reinforcing debt dependency.<ref>{{cite book |last1=Marsden |first1=Lee |title=The Ashgate Research Companion to Religion and Conflict Resolution |date=23 March 2016 |publisher=Routledge |isbn=978-1-317-04183-2 |url=https://www.google.com/books/edition/The_Ashgate_Research_Companion_to_Religi/6fvOCwAAQBAJ?hl=en&gbpv=1&dq=Michael+Hudson+IMF+debt+dependency&pg=PA216&printsec=frontcover |language=en}}</ref>  The attempt by weak [[Third World]] governments to service external debt with the sale of valuable hard and soft commodities on world markets is seen by some to be destructive of local cultures, destroying local communities and their environment.<ref name="books.google.com"/><ref name="Rowbotham 1998"/><ref>As an example of groups critical of the World Bank, see the [[Whirled Bank]] website.</ref>