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Re: IMF working paper: The Chicago Plan Revisited

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  • roy_langston
    ... Benese and Kumhof can kiss their careers good-bye.... -- Roy Langston
    Message 1 of 2 , Dec 9, 2012
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      --- 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
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