Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina
This paper evaluates the impact of a paradigm shift in the monetary system by introducing a model of full reserve banking, focusing on the outcome of separating the generation of money from interest, which can only be achieved by abolishing the system of creating money through debt creation in the b...
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| Format: | Article |
| Language: | Bosnian |
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University of Tuzla, Faculty of Humanities and Social Sciences
2024-12-01
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| Series: | Društvene i Humanističke Studije |
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| Online Access: | http://dhs.ff.untz.ba/index.php/home/article/view/16971 |
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| _version_ | 1849772456375484416 |
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| author | Adisa Omerbegović Arapović |
| author_facet | Adisa Omerbegović Arapović |
| author_sort | Adisa Omerbegović Arapović |
| collection | DOAJ |
| description | This paper evaluates the impact of a paradigm shift in the monetary system by introducing a model of full reserve banking, focusing on the outcome of separating the generation of money from interest, which can only be achieved by abolishing the system of creating money through debt creation in the banking system. The main thesis argues that the current system, in which private commercial banks create money by issuing loans, results in deposits that mix savings achieved through economic activity with newly created money, leading to economic inefficiency and potential instability because debt and interest are always greater than the economic value created. The 100% sovereign money system corrects this by ensuring that only the central bank has the authority to create money, simplifying the financial landscape and restoring money to its rightful status as a public good and stable unit of measure. The study uses a comparative analysis between the current banking system with fractional reserves and the proposed banking system with 100% sovereign money, which is entirely reserve money. Balance sheet modeling demonstrates the impact of segregating investment and deposit accounts on the books of banks and the central bank. The methodology includes a hypothetical presentation of the balance sheet under the new system, emphasizing the accounting separation of “deposit” and “investment” accounts to end the creation of money by private commercial banks. The balance sheet analysis indicates that adopting a 100% sovereign money system requires state intervention through state deposits into the banking system to achieve the desired level of credit activity. |
| format | Article |
| id | doaj-art-ad027cec4aa4457d8d0c71b4a375306f |
| institution | DOAJ |
| issn | 2490-3604 2490-3647 |
| language | Bosnian |
| publishDate | 2024-12-01 |
| publisher | University of Tuzla, Faculty of Humanities and Social Sciences |
| record_format | Article |
| series | Društvene i Humanističke Studije |
| spelling | doaj-art-ad027cec4aa4457d8d0c71b4a375306f2025-08-20T03:02:19ZbosUniversity of Tuzla, Faculty of Humanities and Social SciencesDruštvene i Humanističke Studije2490-36042490-36472024-12-0192(26)1039105610.51558/2490-3647.2024.9.2.1039979Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and HerzegovinaAdisa Omerbegović Arapović0Internacionalni Burch UniverzitetThis paper evaluates the impact of a paradigm shift in the monetary system by introducing a model of full reserve banking, focusing on the outcome of separating the generation of money from interest, which can only be achieved by abolishing the system of creating money through debt creation in the banking system. The main thesis argues that the current system, in which private commercial banks create money by issuing loans, results in deposits that mix savings achieved through economic activity with newly created money, leading to economic inefficiency and potential instability because debt and interest are always greater than the economic value created. The 100% sovereign money system corrects this by ensuring that only the central bank has the authority to create money, simplifying the financial landscape and restoring money to its rightful status as a public good and stable unit of measure. The study uses a comparative analysis between the current banking system with fractional reserves and the proposed banking system with 100% sovereign money, which is entirely reserve money. Balance sheet modeling demonstrates the impact of segregating investment and deposit accounts on the books of banks and the central bank. The methodology includes a hypothetical presentation of the balance sheet under the new system, emphasizing the accounting separation of “deposit” and “investment” accounts to end the creation of money by private commercial banks. The balance sheet analysis indicates that adopting a 100% sovereign money system requires state intervention through state deposits into the banking system to achieve the desired level of credit activity.http://dhs.ff.untz.ba/index.php/home/article/view/16971full reservesbalance sheetcentral bankcommercial banks |
| spellingShingle | Adisa Omerbegović Arapović Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina Društvene i Humanističke Studije full reserves balance sheet central bank commercial banks |
| title | Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina |
| title_full | Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina |
| title_fullStr | Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina |
| title_full_unstemmed | Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina |
| title_short | Creation of Money in a Full Reserve Banking System and the Separation of Money from Interest – Presentation of the Balance Sheets of the Central Bank and Commercial Banks in Bosnia and Herzegovina |
| title_sort | creation of money in a full reserve banking system and the separation of money from interest presentation of the balance sheets of the central bank and commercial banks in bosnia and herzegovina |
| topic | full reserves balance sheet central bank commercial banks |
| url | http://dhs.ff.untz.ba/index.php/home/article/view/16971 |
| work_keys_str_mv | AT adisaomerbegovicarapovic creationofmoneyinafullreservebankingsystemandtheseparationofmoneyfrominterestpresentationofthebalancesheetsofthecentralbankandcommercialbanksinbosniaandherzegovina |