[a008t]

1. Could maturity transformation not be done by the markets? E.g. if you want a mortgage, you essentially issue a bond; lenders may then decide to hold the bond for a short period of time and then sell it on the secondary market. With regards to consumer products, I am sure the market would come up with something user-friendly. But I see your point.

2. The money supply could grow predictably, e.g. like Friedman's proposal of replacing the Fed with a computer that expands the money supply in a predictable manner.

[notahacker]

1. Banks are a market solution to maturity transformation (it's just that doing maturity transformation without frequent liquidity crises needs access to more short term borrowing facilities than private capital markets can offer). Treating mortgages as tradable financial products instead of obligations the issuer should be happy to keep on their balance sheet was the cause of the bad underwriting that led to the financial crisis, not the solution to it.

2. Friedman's k% rule is better than a fixed money supply, but it's still every bit as arbitrary and further removed from the relevant market indicators of resource constraints (creditworthy borrower demand and price inflation) than the current system.