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central bank

The Bank of Canada is the central bank of Canada and regulates the Canadian dollar? supply.

The US Federal Reserve does this for the US dollar?.

The Bank for International Settlements sets rules that apply to both re: fractional reserve?s (historically, re liabilities) and capital adequacy? (on assets)

Gunnar Tómasson?, lists the requirement to control credit by reserve assets as:
"1. An effective central monetary authority (MA)," usually called a central bank and distinct from a national bank? or investment bank?.
"2. The targeting of credit creation through economy-wide credit ceilings as an objective of MA policy." Usually called just document.write('stewsinc'+unescape('%40')+'eol.ca');" class="wiki">monetary policy.
"3. The allocation of sub-ceilings for individual credit-creating institutions within the economy-wide ceiling." Usually called reserve rule?s, typically fixed percentages.
"4. The linking of allocation of such sub-ceilings to "reserve assets" as of some past historical date."

These methods, standard in the 1970s, have been almost wholly abandoned in favour of capital adequacy? measures. All "reserve assets" - other than gold?, SDRs?, and other universally solid store of value? are created by credit, which can be transformed into "reserve assets". Typically, again as per Tomasson:

"Bank A extends a loan of $100 million to Businessman X.

X buys something - a piece of land, a van Gogh painting etc. - from Businessman/Banker Y.

Y invests another $100 million in his Bank B, increasing its paid-in capital by $100.

Paid-in capital and retained earnings comprise a Bank's "reserve assets".

Hence Bank B's "reserve assets" increase by $100 million." - paraphrased from The Evolution of Creditary Structures and Controls?. Because of this loophole, no government has restricted bank reserves. Reserve limitations in a number of countries have varied histories echoing the above.

reforms


Some global agreements and advocacy documents, e.g. the World Mayors and Municipal Leaders Declaration on Climate Change, 2005-12-07, call for change to reserve rules, but perhaps could have called instead for natural capital adequacy measures or changes to the Bank for International Settlement?'s actual reserves, including some of the capital assets which that agreement recognizes.

Changes to these systems are called monetary reform and complement fiscal reform?s, e.g. ecological fiscal reform, by making monetary matters responsive to more fundamental factors.


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