An IMF Proposal To Ban Banks From Issuing Money
A Last Ditch Effort to Save Global Capitalism?
Veterans Today
By Dr Stuart Jeanne Bramhall
For the past 18 months ago, IMF economists Michael Kumhof and Jaromir Benes have been circulating a proposal to end the ability of banks to create money.
As Kumhof explains in the Nov 2013 video below, the perception that governments create money is totally false. In the current global economic system, only about 3% of money (mainly coinage) is created by government. The other 97% is created by private banks out of thin air when they generate new loans. See The Real Vampires: an Insider’s View of Banks.
For various reasons, which Kumhof explains in the video, he and Benes believe that unlimited and unregulated private money creation by banks is responsible for the current economic crisis. And that full recovery is only possible if the privilege of creating and controlling the money supply is restored as a government function.
In addition to assuming sovereign control over the money supply, national governments would also require banks to hold 100 percent reserves for the loans they initiate. This effectively terminates the ability of private banks to create money out of thin air. And this, in turn, massively reduces their political power.
Ironically, the proposal isn’t new. Entitled the Chicago Plan, it was first put forward by University of Chicago professors Henry Simons and Irving Fisher during the Great Depression.
The History of Private vs Sovereign Money
During the Q&A at the end, Kumhof briefly discusses previous experiments with government-issued sovereign money, which have mainly occurred in the US. Sovereign money funded the original 13 colonies, the American War of Independence and the Civil War.
In their paper The Chicago Plan Revisited, he and Benes trace the history of sovereign money back to the ancient Greeks and Romans. During the Middle Ages and Renaissance, all currencies were publicly controlled (by kings and the Pope). Until 1666, when Charles II transferred control of money creation to private banks with the English Free Coinage Act.
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