This chapter illustrates how decarbonisation is likely to have implications for the business cycle. In this context, it discusses how decarbonisation can change the effectiveness of monetary policy. It also discusses what is the scope for monetary policy to be more actively engaged in the decarbonisation effort, both from an economic but also from an institutional perspective.

This introductory chapter describes salient features of the Bank of Amsterdam and proposes that these were sufficiently advanced to qualify the Bank as a modern central bank. Sophisticated central banking, however, was not the Bank’s original mission, which instead was to apply contemporaneous information technology (double-entry accounting) within a limited-purpose institution to facilitate the movement of safe assets (trade coins) through Amsterdam. By the eighteenth century, the Bank had moved well beyond its original design and evolved into a de facto fusion of two banks, active and passive, linked by a common liability — fiat ledger money. This chapter outlines this evolution, which is explored in greater detail in subsequent chapters.

Established at the behest of the League of Nations to help the country secure an new international loan, the Bank of Greece was regarded with a mixture of suspicion and hostility from its very foundation. The onset of the Great Depression tested its commitment to defending the exchange rate against domestic pressure to reflate the economy. Its policy response has been criticized as being ineffectual and even detrimental: the bank is said to have been unduly orthodox and restrictive, not only during but also after the country’s eventual exit from the gold exchange standard. This chapter combines qualitative and quantitative sources to revisit the Bank of Greece’s decisions during the Great Depression. It argues that monetary policy was neither as ineffective nor as restrictive as its critics suggest, thanks to a continued trickle of foreign lending but also to the Bank’s own decision to sterilize foreign exchange outflows. It reappraises Greece’s attempt to maintain the gold standard after sterling’s devaluation, a decision routinely denounced as a policy mistake. Finally, it challenges the notion that Greece constitutes an exception to the rule that countries that shed their ‘golden fetters’ faster recovered earlier.

Like other developing countries, Poland based its interwar monetary policy on the gold exchange standard. Following a bout of hyperinflation , Władysław Grabski’s 1924 reform led to the establishment of the Bank of Poland. Early efforts to return to the gold standard, however, were not entirely successful. In 1925, an economic crisis weakened the zloty dramatically, before futher monterary reforms were introduced in 1927. Post-war monetary instability made Poland reluctant to abandon the gold standard after 1929 and foreign exchange controls were first introduced as late as 1936. The central banks reluctance to abandon the gold standard contributed to the depth and persistence of the Great Depression in Poland. The chapter thus reveals the challenges faced by a newly-formed country lacking adequate reserves and a financial track record to stabilise its currency; it also points to the path dependent nature of interwar monetary policy: the hyperinflation of 1919-23 and the crisis of 1925 created the belief that any easing of monetary policy would trigger an inflationary spiral. When the Great Depression struck, exchange rate stability trumped all other macroeconomic and financial policy objectives.

This chapter analyses macroeconomic policy, with a focus on monetary policy, relating it to the performance of the economy in Turkey in the Great Depression. The Depression was transmitted to Turkey primarily through a sharp decline in agricultural commodity prices. In response, the government adopted strongly protectionist measures starting in 1929 and pursued import-substituting industrialization. In contrast, Turkey’s macroeconomic policy was cautious. Fiscal policy adhered to the principle of balanced budgets. The policies of the new central bank, established in 1930, were similarly restrained: as a result, the monetary base increased very little before 1938. While this restraint resulted in some appreciation of the currency, Turkey’s economy did better than most others around the Eastern Mediterranean. The chapter argues this performance was primarily due to strong protectionism, which paid benefits in the short run, and recovery in the agricultural sector.

Describes the rationale for, and approach to, regulation of payments systems. Considers the interchange fee regulation, and scope for competition between card and interbank systems

Chapter 4. In a fiat standard, the money is not useful for any non-monetary purpose, or redeemable for any commodity with a non-monetary use. Fiat monies historically emerged not from market forces but from default on gold-redeemable central-bank or Treasury liabilities. The quantity and purchasing power of fiat money obeys the logic of supply and demand in the special form of the Quantity Theory of Money. Central banks control the growth rate of the quantity of money and thereby the rate of inflation. In principle fiat standards could produce lower inflation, but in practice have produced higher inflation than silver or gold standards. Higher inflation imposes real burdens on the public. These burdens, especially when we include the expenditure of labor and capital to produce hedges against inflation, has exceeded the resource burden of a gold standard.

The culmination of an ambitious and unique campaign to make humanitarianism self-sufficient, comprehensive reconstruction work became the focus of and heir to all previous international Jewish social welfare work. This chapter considers this humanitarian response to Jewish impoverishment as a result of war. Superimposing American wealth and Progressivism onto long-standing Jewish self-help ideology, prewar vocational training, housing construction, and agricultural colonization were revived and expanded, especially in the Soviet Union. Crucially, this involved the creation of two American-Western European foundations to foster Jewish microlending and cooperative systems in Eastern Europe and Palestine. Jewish reconstruction sat somewhere between state social welfare and international development. The crash of 1929 made economic relief the primary form of Jewish relief and serves as an endpoint to the narrative.

Chapter 1 starts with a brief overview of the facts about the advanced economy central bank balance sheet explosion since the Great Financial Crisis. The increase in profit remittances by the Fed to the US Treasury during the post-GFC years of extraordinarily low policy rates stands out. The Chapter then delves into the analytics of seigniorage arithmetic and how seigniorage revenues can boost fiscal space. Away from the ELB, the real value of the seigniorage (as a share of GDP) that can be extracted at a target rate of inflation of, say, 2 percent is rather small – typically well under 0.5% of GDP for most advanced economies. At the ELB, however, seigniorage can be truly massive.

This chapter introduces the central questions broached in the book. How does law distribute authority over public finance between constitutional institutions? How did that law develop? What role do economic, financial and administrative conditions have on the distribution of financial authority between parliaments and executive governments? Do judiciaries play a meaningful role in supervising public finance? Does it make sense to understand parliaments to 'control' public finance in the parliamentary tradition of government? The chapter opens by explaining AV Dicey's understanding of parliamentary control of public finance and his influence on later academic and practical engagements with the financial aspect of constitutionalism. Critical financial concepts are then explained, particularly the different functions performed by fiscal activities (taxing and spending), debt finance and monetary finance. The dominant position of 'central' government finance to the modern constitutional state is introduced and the distinction between 'parliamentary' and 'congressional' constitutional systems is clarified. The chapter closes by summarising the book's major claims.

This chapter provides a case study analysis of the operation of public finance law concerning sovereign debt and monetary finance in the UK and Australia between 2005 and 2016. The legal and financial mechanics of sovereign borrowing and monetary finance are closely examined by reference to the authority of central banks and treasuries to finance the state beyond the point of fiscal deficit. The very broad powers delegated to treasuries over sovereign debt are scrutinised in the context of vastly different economic conditions, and their capacity to shrink the financial authority held by parliaments is observed. Special attention is then given to the monetary financing powers of central banks, particularly the Bank of England. The emergency monetary finance provided by the Bank of England during the financial crisis is surveyed, and the public financing aspect of 'unconventional' monetary policy, particularly quantitative easing, is examined. The chapter closes by observing the absence of meaningful legislative governance of debt and monetary finance in the context of financial or economic emergencies.

Drawing together the book's analyses of public finance law and parliamentary constitutionalism, this chapter argues against the descriptive validity of the idea of parliamentary control of public money and observes the implications of that argument for democratic control of public finance. It begins by settling on an analytical framework for assessing whether parliament does indeed 'control' public finance built upon an idea of 'financial self-rule'. That framework is then applied to the legal and institutional practices which were observed in earlier chapters: concluding that parliaments cannot be said to have control of public finance in any studied jurisdiction. After discussing how broadly that conclusion can be generalised, the chapter evaluates different descriptive models of public finance in parliamentary constitutions: executive control, financial interdependence and parliamentary ratification. The chapter concludes that the latter 'ratification' model is most compelling and explains why that model secures a low level of financial self-rule.

Speaking before the Senate Banking Committee on July 15, 2008, US Treasury Secretary Henry Paulson petitioned Congress for the authority to use taxpayer funds to prevent America’s mortgage giants Fannie Mae and Freddie Mac from collapsing. The hearing addressed widespread homeowner mortgage defaults that had sent stock prices plummeting and investors fleeing. Paulson argued that if investors came to understand that the government would not allow Fannie and Freddie to go under, stock prices would stabilize and a larger crisis could be averted. In a statement that would be repeated in news stories for years to come, Paulson speculated, “If you have a bazooka in your pocket and people know it, you probably won’t have to use it.” In this instance, the “bazooka theory” failed: Paulson not only had to fire his bazooka shortly after acquiring it, but its blast proved grossly inadequate to calm market uncertainty and forestall what became the worst financial crisis to hit the United States since the Great Depression. In spite of Paulson’s newly acquired money and authority, investors dumped Fannie and Freddie shares, both organizations fell into government conservatorship, political criticisms of bailouts grew louder and the whirlpool of uncertainty swirled ever faster.