{"id":5785,"date":"2012-10-21T22:03:19","date_gmt":"2012-10-22T02:03:19","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=5785"},"modified":"2012-10-21T22:03:19","modified_gmt":"2012-10-22T02:03:19","slug":"the-chicago-plan-revisited-imf-working-paper","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/21\/the-chicago-plan-revisited-imf-working-paper\/","title":{"rendered":"The Chicago Plan Revisited &#124; IMF Working Paper"},"content":{"rendered":"<p>There is growing interest in this IMF Working Paper by Jaromir Benes and Michael Kumhof which discusses removing the role of monetary creation from fractional-reserve banks and assigning it to Treasury. Here is a brief abstract:<\/p>\n<blockquote><p>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&#8217;s claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy&#8230;..<\/p><\/blockquote>\n<p>I believe that Fisher is right in targeting fractional-reserve banks as a major cause of instability in capitalist systems, facilitating rapid expansion of credit during booms, inevitably followed by rapid contraction during the bust. To introduce a system such as the Chicago Plan would risk an abrupt shock to the monetary system, but gradual increase of bank capital, leverage and reserve ratios could achieve the same eventual end without any noticeable side-effects.<\/p>\n<p>via <a href=\"http:\/\/www.imf.org\/external\/pubs\/ft\/wp\/2012\/wp12202.pdf\" title=\"IMF: The Chicago Plan Revisited\">The Chicago Plan Revisited (pdf)<\/a><\/p>\n<p>Hat tip to Ambrose Evans-Pritchard at The Telegraph.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There is growing interest in this IMF Working Paper by Jaromir Benes and Michael Kumhof which discusses removing the role of monetary creation from fractional-reserve banks and assigning it to Treasury. Here is a brief abstract: At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/21\/the-chicago-plan-revisited-imf-working-paper\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;The Chicago Plan Revisited &#124; IMF Working Paper&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[656,1452,2343],"class_list":["post-5785","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-chicago-plan","tag-fractional-reserve-banking","tag-monetary-creation"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Chicago Plan Revisited &#124; IMF Working Paper - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Chicago Plan Revisited &#124; IMF Working Paper - the patient investor\" \/>\n<meta property=\"og:description\" content=\"There is growing interest in this IMF Working Paper by Jaromir Benes and Michael Kumhof which discusses removing the role of monetary creation from fractional-reserve banks and assigning it to Treasury. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\\\/2009 and 2020 bear markets well ahead of actual events. 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He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.","sameAs":["https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/","https:\/\/www.instagram.com\/colin_thepatientinvestor","https:\/\/au.linkedin.com\/in\/colintwiggs"],"url":"https:\/\/thepatientinvestor.com\/index.php\/author\/investor\/"}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9tQ4n-1vj","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":5791,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/22\/the-chicago-plan-1939\/","url_meta":{"origin":5785,"position":0},"title":"The Chicago Plan (1939)","author":"Colin Twiggs","date":"October 22, 2012","format":false,"excerpt":"The 1939 proposal -- A PROGRAM FOR MONETARY REFORM -- by a group of eminent economists, including Irving Fisher, became known as the \"Chicago Plan\" after its chief proponent, professor Henry Simons from the University of Chicago. The core proposal is to require banks to hold 100% reserves against demand\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":9738,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/04\/26\/fractional-reserve-banking-the-chief-loose-screw-house-of-debt\/","url_meta":{"origin":5785,"position":1},"title":"Fractional reserve banking: &#8216;the chief loose screw&#8217; | House of Debt","author":"ColinTwiggs","date":"April 26, 2014","format":false,"excerpt":"By Atif Mian and Amir Sufi quote from The Chicago Plan (1933-1939) of which Irving Fisher was a strong supporter: \u201cA chief loose screw in our present American money and banking system is the requirement of only fractional reserves behind demand deposits. Fractional reserves give our thousands of commercial banks\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":10833,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/09\/07\/a-prominent-financial-columnist-is-calling-for-radical-reforms-to-the-global-economy-business-insider\/","url_meta":{"origin":5785,"position":2},"title":"A Prominent Financial Columnist Is Calling For Radical Reforms To The Global Economy | Business Insider","author":"ColinTwiggs","date":"September 7, 2014","format":false,"excerpt":"From The Economist review of Martin Wolf's new book \u201cThe Shifts and the Shocks: What We\u2019ve Learned\u2013and Have Still to Learn\u2013from the Financial Crisis\u201d: To make finance safer, Mr Wolf suggests replacing a fractional reserve banking system, which takes in deposits and lends most of them out in longer-term loans,\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5828,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/24\/the-chicago-plan-criticism-by-marshall-auerback\/","url_meta":{"origin":5785,"position":3},"title":"&#039;The Chicago Plan&#039; criticism by Marshall Auerback","author":"Colin Twiggs","date":"October 24, 2012","format":false,"excerpt":"Marshall Auerback wrote a short piece criticizing the recent IMF study of the \"Chicago Plan\" first put forward by professors Henry Simons and Irving Fisher in 1936. \"Now there are some good things about\u00a0a 100% reserve backed banking system.\u00a0 To the extent that we\u00a0require all institutions to hold liquid reserves\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":7326,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/27\/forget-too-big-to-fail-kill-the-fractional-reserve-banking-system\/","url_meta":{"origin":5785,"position":4},"title":"Forget too-big-to-fail: Kill the fractional reserve banking system","author":"ColinTwiggs","date":"March 27, 2013","format":false,"excerpt":"Interesting discussion on Bloomberg about currency-backed deposits and equity-funded loans. The fractional reserve banking system is the primary cause of instability and asset bubbles in the global economy, allowing banks to create money out of thin air. Credit expansion above the rate of real GDP growth has only two possible\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6626,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/02\/05\/why-qe-is-not-working\/","url_meta":{"origin":5785,"position":5},"title":"Why QE is not working","author":"Colin Twiggs","date":"February 5, 2013","format":false,"excerpt":"Lars Christensen, Chief Analyst at Danske Bank, quotes David Beckworth in this lengthy but excellent 2011 paper on Market Monetarism -- The Second Monetarist Counter-\u00adrevolution: \".....Declines in the money multiplier and velocity have both been pulling down nominal GDP. The decline in the money multiplier reflects: (1) the problems in\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/5785","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=5785"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/5785\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=5785"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=5785"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=5785"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}