IMF's latest working paper shows that debt creation is the main source of money creation - commercial banks (not central banks) create and inflate the money supply through loan issuance based on market demand. The paper goes on to establish the possibility of Central Bank Digital Currencies (CBDC) echoing a the IMF's wish for a Revised Chicago Plan.

"This is a starting point to explain the systemic flaw of our monetary system, and recurring economic crises pattern." - Vincentius Arnold

Community Inclusion Currencies built on Central Bank Digital Currency reserves would de-risk and decentralization the commercial banking system. If Central Banks were required to hold 100% reserve in CDBC and issue their own inter-operable credits and not issue / inflate National Currency like they do now - they might use something similar to Community Inclusion Currencies.

Some highlights of the IMF working paper include:

• "the fact that the money stock is endogenously and elastically driven by demand and constrained loosely by regulation.
• "we highlight that liquid funds are required to back the transfer of newlycreated, initially illiquid loans and deposits in a multi-bank system. Liquid funding needs do not negate the fact that banks create money "out of nothing."
• "how Central Bank Digital Currency (CBDC) systems would be designed in terms of credit provision,which, if backed 100 percent by the new digital currency, would resemble the Chicago plan of the 1930s

For a primer on where the IMF is going with this, they released a Revised Chicago Plan in 2012:

For a primer on where the IMF is going with this, they Revised Chicago Plan in 2012:

"The basic idea is that banks should be required to have full coverage for money they lend; this is called 100% reserve banking, which would replace the fractional reserve banking system and reduce inflation."

How does this relate to Community Inclusion Currencies (CICs)?

CICs are 100% backed by reserve - (ala the Revised Chicago Plan via a synthetic National Currency ala DAI via Maker DAO and AMA). The reserve is leveraged into a credit supply (CICs) with a variable value based on bonding curves originally created by Eyal Hertzog which he calls the Bancor Protocol.

If banks were to create credit in the same manner of CICs it would mean that they would lock 100% reserves into a verified on-chain collateral (no more loose regulation). A bank with 1 Million USD of reserves would be able to issue 4 Million Tokens. These tokens would have a variable rate depending on the reserve behind them. We would not call them US Dollars or Kenyan Shillings - they would be the Banks credit (Wells Fargo Cash, Barclays Bucks, etc) and only have a one-to-one value with National currency IF they have sufficient reserve.

What is important about this concept is that it de-risks credit issuance and can be done ala secure and transparent blockchain contracts. What is revolutionary about it is that women's groups in Kenya are already doing this. They are locking Kenyan shillings (donor supported) and creating their own credit systems (unique to their village) - without inflation. $100 USD locked into such a CIC reserve creates 400 tokens that are used as a local medium of exchange and being valued locally as a social credit 1:1 with the National Currency. This provides a substitute for lacking Kenyan Shillings - while still allowing exchange into Kenyan Shillings and market stabilization. If a CIC's reserves are depleted and the issuer (a group of women or even a bank) is offering services, market forces will rebuild that reserve in order to mint CICs and purchase those services. CICs are essentially a share of the common's economy using them.

Current banking policies are not working to enrich or support marginalized communities - rather they are extractive. Could the IMF and Commercial banks learn from women in rural Kenya how to create a decentralized and de-risked (transparently 100% backed) credit system? - I think so.