A critical legal analysis of commercial bank money

Abstract

Because of the role that commercial banks play in today’s financial and banking system, this article discusses the activity of commercial banks with regards to how money (commercial bank money) is created. By exploring the nature of the fractional reserve banking system, this article establishes that commercial banks are not mere financial intermediaries, but rather exclusive money creator. A critical legal analysis of this money creation process concludes, with solid supporting arguments, that commercial bank money is riddled with legal violations and harmful socioeconomic effects, which are inevitably borne by the individual and society in the form of ‘privatizing the profits of money creation’ and ‘socializing the losses and its outrageous financial burden’.