The institutional combination of illiquid assets and demand deposit banking is regarded as vulnerable to collapse because of the impatience of depositors. We suggest that the mechanism of fully backed central bank money is a means of redress.

Two agendas of the heterodox economics programme; the stock-flow consistent models pioneered by Wynne Godley, and the monetary circuit approach researched in France and Italy are discussed. The objective is to present a coherent account of two innovations in payments mechanisms: deposit-creating...