Chicago Plan Revisited

Jaromir Benes and Michael Kumhof of the IMF have released a working paper called The Chicago Plan Revisited. They advocate government control of the money supply, which is dangerous, but they make a couple of interesting points along the way.

1. They emphasise the benefits of separating the money and credit functions of the banking system. In the modern banking system, these two roles are intertwined. This causes immense problems. I explain a better way to separate the payments process from loan brokerage in the Money System.

2. Benes and Kumhof explain the instability of modern debt-based money system. Bank liabilities are money that can be created and destroyed at a moment’s notice. This allows the banking system to engineer rapid lending booms and contractions. They advocate money that is government equity. In the Community Banks, I advocate money that represents the equity of the people.