‘Full Money’ (Vollgeld in German) is similar to the 100% Money proposal, in that the direct link between money and credit is broken and the power to create new money is invested solely in the central bank. Assuming “the monetary system is unmistakably part of the common legal order” and not just “the operation of private business interests” (Huber 1998: 14), private money creation should be stopped. There is one difference, in that Full Money proposes no mandatory reserves, because Full Money itself represents central bank money and is not created as commercial bank money backed by 100% reserves. In the 100% Money system, customers at commercial banks can still demand central bank money in certain cases, whereas Full Money created directly by the central bank is already fully valid as money. Thus for Huber the Full Money proposal represents a restoration of the ‘seigniorage’ power of government to create its own money without borrowing from private banks. Bank deposit money is treated the same as cash:
Full Money means full value legal tender currency that may be used and accepted as the generally accepted means of exchange. Full Money is issued by the independent state central bank or a similar public body. (Huber 2012: 39)
Essentially the promoters of Full Money argue the system of monetary controls instituted by central banks is no longer working because of rapid technical developments in the creation of bank credit. They demand a readjustment to today’s realities. “In order to effectively be able to control the creation of money, the central bank must be able to control money creation from the start.” (Binswanger 2012: 24). In particular, a form of non-cash money, in other words current accounts at banks, should be treated the same as cash. The goal is to “bring an end to commercial bank money in favour of central bank money, along the same lines as the 19th century reforms, when private banknotes were replaced by central bank notes.“ (Huber 2012: 37).
Full Money is part of a tradition of currency theory that demands total state control of money as a common public asset. (Huber 2004: 15). In the Full Money system, money is supplied by a state institution as a general means of payment, so that bank business then consists exclusively in financing economic activities on the basis of already circulating money. The political independence of the central bank takes a central place in these considerations. An inflationary financial politics driven by political interests should however be avoided. Thus the concept depends on control of monetary policy at a constitutional level. The central bank should either be promoted to a totally independent ‘Monetative‘ or replaced by such a body. The Monetative branch of the body politic would have equal status to the legislative, executive and judicial branches. Full Money should contribute substantially more than 100% Money to the financing of the state budget. It would be interest-free and given over to the state in perpetuity. This can be used, for example, to reduce the national debt, reduce taxes or to pay for other expenses. If a reduction of the money supply was necessary, the state would have to deliver its tax income to the Monetative. By giving Full Money over to the state, the supporters of this reform see a chance of solving the problem of national debts: because ‘seigniorage’ (at first to a high degree) would result from the gradual replacement of commercial bank money with Full Money. Finally, the newly created money would be given over freely to the state budget. The advantage of state money creation or seigniorage is that not only does newly created money make a difference but the necessary costs of creating it are also covered. Huber calculates the size of this one-off seigniorage for Germany at over 1.3 trillion Euros, which, spread over several years of a continuing reform process, would flow into the state coffers and would, for example, contribute to a significant reduction of the national debt to the tune of more than 2 trillion Euros. After completion of a systemic reform, there would result a continuing yearly seigniorage profit through the growth of the money supply, which Huber calculates at 40-90 billion Euros (for the years 2007-2010) (Huber 2011: 133-139). Full Money fulfils the main functions of money, according to its promoters, better than existing money. It would be created exogenously by a central bank, which would take over control of the money supply as an independent Monetative. The main goals are an effective control of money creation in order to stabilize the system and to avoid inflation and speculative financial bubbles. Beyond this, Full Money can be called on to finance state budgets. Mouatt fundamentally criticizes the concept because it does not call for monetary discipline, which is inherent in the debt money system, in which loans must continually be paid back. Instead, it introduces increased centralized state control, which would in any case be very difficult to achieve (Mouatt 2010: 20). In a system of centralized control of the money supply without commercial banks to create demand, there would be an ‘information deficit’, because the central bank would not receive any direct signals from the market (Creutz 2011: 24). Apart from this, several positively inclined critics point out the Full Money proposal lacks a mechanism against money hoarding. Actually, Huber rejects the idea of a circulation incentive because he believes that the hoarding of money (both cash and bank money) is insignificant in a modern economy (Huber 2011: 120; vgl. Löhr 2011b: 43). On the other hand, Creutz (2011) sees a danger in the possible hoarding of bank money (also Mouatt 2010; Löhr 2011b), because Full Money can be withdrawn from circulation in the economy. Thus he recommends a circulation incentive.
(Freely quoted from the German article Philipp Degens (2013): Alternative Geldkonzepte, MPIfG Discussion Paper 1/13, with permission of the author – please see the paper for recommended literature.)