It's gosbankification, plain and simple. Those old enough will remember the Soviet Union and their Gosbank. Their Central Bank decided how the money was allocated to production and lending. Let me tell you it was not an ideal or efficient system.
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The first and foremost which comes to mind is that of the Gosbank system of the Soviet Union. To wit, here are a few extracts from Patrick Conway’s 1995 Princeton research paper
entitled “
Currency Proliferation: The monetary legacy of the Soviet Union”:
The Gosbank was the monetary authority for the Soviet Union. Its policy of ruble-banknote emission was essentially passive. If the demand for currency to meet necessary wage and pension payments exceeded the stock of currency available through the financial system, the Gosbank issued additional currency against the liabilities of the central government.
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… the Gosbank was the only bank for the entire economy; even after 1987, when it was broken into pieces, the activities of the pieces remained under the control of Gosbank leadership. Second, the use of currency and credit for making payments occurred in two largely separate channels. Third, government liabilities were the chief assets for the entire financial system.
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This monobank system of accounts produced a dichotomy between banknote and accounting transactions in the flow of funds. Households received wages from enterprises and transfers from the government. They then used these to purchase goods and to save through deposits at the Gosbank. These flows took place in banknotes or “cash rubles,” using the Soviet terminology. Financial flows among enterprises and between enterprises and the government occurred through accounting entires at the Gosbank and were thus in non-cash rubles. The cash and non-cash circuits were not completely self-contained or self-balancing, however, because the enterprise and banking sector received and made paymetns in both cash and non-cash rubles. The convertibility of cash and non-cash flows was ensured by the Gosbank, which exchanged banknotes and accounting rubles at par.
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The Soviet government had large fiscal responsibilities. Most notably, it was directly responsible for numerous vast industrial operations, including those in the defense and aerospace sectors. In the absence of adequate tax revenues, the government sought to sustain these operations by deficit spending through credit creation by the Gosbank. The outcome of these activities was a large buildup of inflationary pressure in the final years of the Soviet Union.
Now, we’ll admit it’s not an absolute equivalent situation. With Gosbank came Gosplan, a people’s political authority and a helluva lot of welfare.
But you can see where we’re going with this. Once you centralise the money-creation function you inadvertently create a captured market for a single type of monetary instrument. This removes the checks and balances associated with a competitive monetary system and leads directly to the second problematic issue we’ve identified: a single monetary authority’s ability to competently manage and re-invest the monetary float in a way which will defend its par value.
https://ftalphaville.ft.com/2016/07...-currencies-and-the-path-to-gosbankification/
https://www.ft.com/content/7947ea4c-a21a-45bb-973c-8df54566746a
