| Story Views | |
| Now: | |
| Last Hour: | |
| Last 24 Hours: | |
| Total: | |
What If We Adopted A System Where The Banks Did Not Create Our Money?
Follow TIS on Twitter: @Truth_is_Scary & Like TIS of Facebook- facebook.com/TruthisScary
What if there was a financial system that would eliminate the need for the federal government to go into debt, that would eliminate the need for the Federal Reserve, that would end the practice of fractional reserve banking and that would dethrone the big banks? Would you be in favor of such a system? A surprising new IMF research paper entitled “The Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof is making waves in economic circles all over the globe.
The paper suggests that the world would be much better off if we adopted a system where the banks did not create our money. So instead of a system where more money is only created when more debt is created, we would have a system of debt-free money that is created directly by national governments.
There have been others that have suggested such a system before, but to have an IMF research paper actually recommend that such a system be adopted is a very big deal. At the moment, the world is experiencing the biggest debt crisis in human history, and this proposal is being described as a “radical solution” that could potentially remedy some of our largest financial problems.
Unfortunately, apologists for the current system are already viciously attacking this new IMF paper, and of course the big banks would throw a major fit if such a system was ever to be seriously contemplated. That is why it is imperative that we educate people about how money really works.
Our current system is in the process of collapsing and we desperately need to transition to a new one.
One of the fundamental problems with our current financial system is that it is based on debt. Just take a look at the United States. The way our system works today, the vast majority of all money is “created” either when we borrow money or the government borrows money. Therefore, the creation of more moneycreates more debt. Under such a system, it should not be surprising that the total amount of debt in the United States is more than 30 times larger than it was just 40 years ago.
We don’t have to do things this way. There is a better alternative. National governments can directly issue debt-free currency into circulation. The following is a brief excerpt from the IMF report…
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.
Why should banks be allowed to create money?
That is a very good question.
Why should sovereign governments ever have to borrow money from anyone?
That is another very good question.
Our current system is designed to enrich the bankers and get everyone else into debt.
And is that not exactly what has happened?
Taking the creation of money away from the bankers would have some tremendous advantages. A recent article by renowned financial journalist Ambrose Evans-Pritchard described some of these benefits…
One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.
The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.
Specifically, it means an assault on “fractional reserve banking”. If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.
The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles.
So why don’t we go to such a system immediately?
Source: http://truthisscary.com/2013/06/what-if-we-adopted-a-system-where-the-banks-did-not-create-our-money-2/
