Christine A. Desan, How to Spend a Trillion Dollars: Our Monetary Hardwiring, Why It Matters, and What to Do About It (Harv. Pub. L., Working Paper No. 22-04, May 9, 2022).
Abstract: Financial crises, twice in so many decades, have exposed our monetary hardwiring as a critical issue of governance. That circuitry starts with a public unit – the dollar – created and backed by the federal government, but it appoints commercial banks to amplify and spread that money at the retail level. The design does more than delegate distribution to banks. By privileging banks as money creators, it also enables them to determine distribution. Operating according to criteria that are privately determined, banks decide which recipients will benefit from the expansion of a medium that is public. The process is clearly discriminatory.The hybrid state at the monetary core of the market has never been justified according to democratic criteria. Retail banks prevailed in their partnership with the state because they had strategic advantages in creating credit money, not because they were experts in allocating that medium fairly or most efficiently. That history, recovered here, was lost to an economic narrative that located banks as intermediaries vetted by the competitive marketplace. Public spending does not dilute the problem; all such spending occurs through the same banked conduits. By contrast, the federal government could follow historical examples and directly issue dollars. Direct-issue dollars would alleviate recessionary conditions without adding to the national debt. They could be targeted directly to populations most in need, enhancing distributive equity, and policed by the Federal Reserve, dividing public authority over money creation in a new way. Most importantly, the strategy would begin to democratize money’s design.