ABSTRACT
This chapter explains Monetary operations and the dominance of bank IOUs. A Bank could transfer reserves - currency - to W Bank to settle the payment, but it can also simply issue debt - bonds - to W Bank. These bonds are then W Bank's assets, which back its liabilities that are the workers deposits. Banks issued their own paper money in the wild frontier period of the United States, as well as in the United Kingdom before the Bank Charter Act of 1844 and in other countries at similar stages in the development of the monetary system. People would pay with notes of their own bank and deposit into their own bank notes they received from clients of other banks. As a result, banks would build up reserves of other banks notes and would have to arrange to swap the notes back. This was an expensive and risky process, and the expense was passed on to the banks customers.
