ABSTRACT
Daly became interested in money when he visited Northeast Brazil in the 1960s, where he observed the shortage of coins and notes of low denomination. He also wrote about the proliferation of banks in Uruguay during a time in the late 1950s and early 1960s of economic contraction. But it was not until his serendipitous discovery of some obscure publications by Frederick Soddy that Daly’s views on money and banking really began to take shape. In the 1920s Soddy turned his attention to economics after winning the Nobel prize in chemistry. He was concerned with problems that could arise in an economic system in which money could grow without limit while the physical economy could not. Soddy’s appeal to the laws of thermodynamics anticipated by several decades the work of Georgescu-Roegen, Boulding and Daly.
Inspired by Soddy, Daly favoured the introduction of full reserve banking in which commercial banks would be legally required to maintain 100% reserves preventing them from lending demand deposits and only lending from time deposits. Daly’s proposals for reforming money and banking reform, for full reserve banking in particular, have not attracted much attention even among ecological economists though there is considerable interest in monetary reform.
