From CMKX land about this:The Chicago Plan......FULL RESERVE BANKING!!!!!
« Thread Started Today at 10:39am »
Here it is folks....plain as DAY!!!!
Full-reserve banking is a theoretically conceivable banking practice in
which all currency circulating in a financial system would be backed up
by an asset that is generally considered to be a stable store of value,
such as gold. This implies the existence of a government body (such as a
central bank) that would convert currency to a more stable type of
asset if requested to do so. It also implies that the resources
available to the central bank (and commercial banks) would be sufficient
to convert all currency if so required.
IMF Paper Backs Full Reserve Banking!
Mon, 13th Aug 2012
by Mira Tekelova (Positive
Money)
We’ve been in a state of mild shock since Saturday. We discovered one
of the strongest advocates of full reserve banking in the institution
where we would expect it least.
The International Monetary Fund has released a paper “The Chicago Plan
Revisited†that supports the proposals of Irving Fisher – those
which are the basis for Positive Money’s proposals - using state of
the art economic modelling.
In their summary the authors Jaromir Benes and Michael Kumhof write:
At the height of the Great Depression a number of leading U.S.
economists advanced a proposal for monetary reform that became known as
the Chicago Plan. It envisaged the separation of the monetary and credit
functions of the
banking system, by requiring 100% reserve backing for deposits.
Irving Fisher (1936) claimed the following advantages for this plan:
(1) Much better control of a major source of business cycle
fluctuations, sudden increases and contractions of bank credit and of
the supply of bank-created money.
(2) Complete elimination of bank runs.
(3) Dramatic reduction of the (net) public debt.
(4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation.
We study these claims by embedding a comprehensive and carefully
calibrated model of the banking system in a DSGE model of the U.S.
economy. We find support for all four of Fisher’s claims.
Here are few extracts from the paper:
We therefore conclude that Fisher’s (1936) claims regarding the
Chicago Plan, as listed in the abstract of this paper, are validated by
our model.
The effectiveness of countercyclical policy would be further enhanced
under the Chicago Plan relative to present monetary arrangements. ank
runs can obviously be completely eliminated… It would lead to an
instantaneous and large reduction in the levels of both government and
private debt, because money creation no longer requires simultaneous
debt creation…
By validating these claims in a rigorous, microfounded model, we were
able to establish that the advantages of the Chicago Plan go even beyond
those identified by Fisher (1936)…
One additional advantage is large steady state output gains due to the
removal or reduction of multiple distortions, including interest rate
risk spreads, distortionary taxes, and costly monitoring of
macroeconomically unnecessary credit risks.
Another advantage is the ability to drive steady state inflation to zero
in an environment where liquidity traps do not exist… This ability to
generate and live with zero steady state inflation is an important
result, because it answers the somewhat confused claim of opponents of
an exclusive government monopoly on money issuance, namely that such a
monetary system would be highly inflationary. There is nothing in our
theoretical framework to support this claim. And as discussed in Section
II, there is very little in the monetary history of ancient societies
and Western nations to support it either.
The History of Monetary Thought in Section II is very interesting and
certainly worth reading is the analysis of Government versus Private
Control over Money Issuance (p 12).
On the other hand, the historically and anthropologically correct
state/institutional story for the origins of money is one of the
arguments supporting the government issuance and control of money under
the rule of law. In practice this has mainly taken the form of
interest-free issuance of notes or coins, although it could equally take
the form of
electronic deposits.
The historical debate concerning the nature and control of money is the
subject of Zarlenga (2002), a masterful work that traces this debate
back to ancient Mesopotamia, Greece and Rome. Like Graeber (2011), he
shows that private issuance of money has repeatedly led to major
societal problems throughout recorded history, due to usury associated
with private debts. Zarlenga does not adopt the common but simplistic
deï¬nition of usury as the charging of “excessive interestâ€, but
rather as “taking something for nothing†through the calculated
misuse of a nation’s money system for private gain.
To summarize, the Great Depression was just the latest historical
episode to suggest that privately controlled money creation has much
more problematic consequences than government money creation. Many
leading economists of the time were aware of this historical fact. They
also clearly understood the speciï¬c problems of bank-based money
creation, including the fact that high and potentially destabilizing
debt levels become necessary just to create a sufficient money supply,
and the fact that banks and their ï¬ckle optimism about business
conditions effectively control broad monetary aggregates. The
formulation of the Chicago Plan was the logical consequence of these
insights.
---------------------------------------------------------------------------
Full PDF ......alot of reading but well worth it......
http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf[b]mhanzali
Question: Has it changed over yet? BTW thanks for bringing that over THANKS Mark
mojobean
You are welcome.....
According to many, the new banking system is in place, and has been for a
while,,,this is media confirmation that YES,,,,we are going to have a
new system.
All we are waiting for is the Announcements...