the activities of hedge funds you were regarded as paranoid and you received a sermon on the dangers of shooting the messenger, etc. now, no one has got a good word to say for them, and they are likely to soon be brought into either : • • the disclosure net, or some form of supervision via their connections with banks. second, i see a clear improvement in future crisis management in the way the imf is talking with brazil. unlike the asian crises, i don ’ t see any country in future putting itself in the hands of the imf without knowing pretty clearly beforehand what the imf conditions will be. if it doesn ’ t like the conditions, for example, because they are too wide - ranging, it will not go to the fund. if it is comfortable with the conditions, it will be able to sign up from day one. this way, we should be able to avoid the long periods of semi - public haggling over conditions that characterised the asian crises and did so much to frighten the markets into pushing exchange rates down excessively.

is that money creation is not a privilege through which commercial banks can feather their own nests. a bank can grant loans when there is customer demand and it has central bank money at its disposal. to this end it is important that other customers are prepared to hold sight deposits at the bank. here the bank is in competition with other banks. if the bank is not competitive, customers will be unwilling to apply for loans or hold sight deposits there. in granting loans, the bank also takes a business risk. thus, banks do not ‘ create money out of thin air ’. rather, their money creation is the product of intermediation between savers and borrowers, and is made possible by the fact that customer sight deposits do not have to be fully covered by central bank money. 1 sovereign money would radically change our current system. in a sovereign money system, a bank is no longer permitted to use its customers ’ sight deposits to finance loans. instead, it is obliged to call solely on investors who provide it with money for loans on a more long - term basis. these may be customers with savings deposits, investors on the capital market, other commercial banks, or even the snb, which can grant the bank a loan. because sovereign money impairs the useful intermediary function played by banks in the monetary system today, lending would become more difficult and complicated – to the detriment of customers, be they savers or borrowers. for more on maturity transformation as a traditional bank function and its importance to the economy, cf. jordan, thomas j., how money is created by the central bank and the banking system, speech held at the zurcher volkswirtschaftlichen gesellschaft, zurich, 16 january 2018. page 3 / 8 the initiative ’ s undeliverable promises financial stability so, what benefits do the initiative ’ s authors see in sovereign money? they want to separate the creation of money from the granting of loans because they believe this will enhance financial stability. to achieve this goal, they call for customers ’ sight deposits to be held in so - called sovereign money accounts as off - balance sheet items, just like securities custody accounts are today. this offers security in as far as this money is not at risk should the bank fail. however, barring the banking system from creating money is the wrong approach to take. in financial crises, savers and investors lose money for two reasons : first and foremost, because their pension funds and direct investments such