How does shadow banking affect the monetary system? The FSB definition treats it as a ‘non-monetary phenomenon’. However, if we acknowledge that traditional banking involves autonomous money creation by banks (Werner 2016) and if we apply this insight on money to shadow banking, we may say that shadow banking also involves money creation. This has been the starting point for thinking about various forms of private debt as ‘shadow bank money’ or ‘shadow money’.
Steffen Murau is a postdoctoral fellow at the Global Development Policy (GDP) Center of Boston University, City Political Economy Research Centre (CITYPERC) of City, University of London, and institute for Advanced Sustainability Studies (IASS) in Potsdam. His research interests include monetary theory, shadow banking, the international monetary system, and the European Monetary Union. Among others, he has published in the Journal of Institutional Economics, the Review of International Political Economy, and the Journal of Common Market Studies.
Tobias Pforr is a postdoctoral fellow at the University of Reading and a Visiting Fellow at the University of Warwick. His research interests include monetary theory, development finance, and climate change adaptation. He has previous professional experience in banking and financial markets and has worked with a number of international organizations such as the UN World Food Program, the Red Cross Red CrescentSocieties, the German Red Cross, and the Overseas Development Institute.
An excerpt from The Next Economic Disaster: Why It's Coming and How to Avoid It.
A World Economic Roundtable report on private debt and the American middle class.
How institutional design and austerity is destroying the European economy