Loading ...
Sorry, an error occurred while loading the content.

IMF working paper: The Chicago Plan Revisited

Expand Messages
  • Ed
    The authors of this paper, Jaromir Benese and Michael Kumhof write: At the height of the Great Depression a number of leading U.S. economists advanced a
    Message 1 of 2 , Dec 9, 2012
    • 0 Attachment

      The authors of this paper, Jaromir Benese 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. Furthermore, output gains approach 10 percent, and steady state

      inflation can drop to zero without posing problems for the conduct of monetary policy.”

       

       

    • roy_langston
      ... Benese and Kumhof can kiss their careers good-bye.... -- Roy Langston
      Message 2 of 2 , Dec 9, 2012
      • 0 Attachment
        --- In LandCafe@yahoogroups.com, "Ed" <ejdodson@...> wrote:
        >
        > The authors of this paper, Jaromir Benese 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. Furthermore, output gains approach 10
        > percent, and steady state
        > inflation can drop to zero without posing problems for the conduct of monetary policy."

        Benese and Kumhof can kiss their careers good-bye....

        -- Roy Langston
      Your message has been successfully submitted and would be delivered to recipients shortly.