100 percent reserve banking: A critical review of green perspectives

- Three types of green arguments for the reform proposal are identified and criticized.
- The case for the reform is problematic and requires further substantiation.
- This is especially true if the purpose is to achieve a steady-state economy.

100 percent reserve banking (C-PeRB) is an enduring proposal for monetary reform that has been taken up by some ecological economists. This paper identifies three groups of green arguments in favor of C-PeRB, and offers some criticism. First, the proposal could serve to constrain new investments by the availability of savings, thereby checking economic growth. However, this would strongly increase interest rate volatility. Second, it could potentially elevate environmental considerations in decisions about resource allocation by increasing the role of the democratic state as an economic actor. This line of argument faces problems that require further detailed exploration and historical perspective. Third, a transition to C-PeRB would allow debt levels to be drastically cut. This is technically possible, but politically a tall order. Whether the existing system of 'debt-based' bank money generates a significant growth imperative is unclear, and the importance of other driving forces behind perennial economic growth in modern societies - which C-PeRB does not address - remains an issue of contention. In general, the adoption of C-PeRB presupposes a tremendous reconfiguration of power relations between states and finance capital.