From "Modern Money Theory" by Wray, pg 85: pg 86: So basically, other institutions can issue their form of money, but it all leads back to the government/central bank. He then goes on to talk about the different layers of the pyramid like nonbank IOUs, Bank IOUs, then says:Private financial liabilities are not only denominated in the government's money of account, but they also are, ultimately, convertible into the government's currency.
We can think of a pyramid of liabilities, with different layers according to the degrees of separation from the central bank.
Finally, the government is highest in the pyramid - with no liabilities higher than its inconvertible IOUs.
The shape of the pyramid is instructive for two reasons. First, there is a hierarchical arrangement whereby liabilities issued by those higher in the pyramid are generally more acceptable...Second, the liabilities at each level typically leverage the liabilities at the higher levels.