[P2P-F] Fw: Re: [gang8] Must money be debt? - "The Chicago Plan Revisited"

Mon Sep 24 11:40:32 CEST 2012

----- Forwarded Message -----
From: Prof. Richard Werner <werner at profitfund.com>
To: gang8 at yahoogroups.com 
Sent: Monday, 24 September 2012, 9:54
Subject: RE: Re: [gang8] Must money be debt? - "The Chicago Plan Revisited"

Dear Gunnar, 

So that’s clearly too much power in the
hands of too few unelected people, and hence a non-starter. 

Just see what the excessively powerful ECB
has been doing. I have a chapter in my 2003 book Princes of the Yen (M. E. Sharpe)
on the ECB, and in this I predicted that the ECB would create massive boom-bust
cycles and banking crises. It has lost no time proving me right, in Ireland,
Portugal, Spain and Greece. All in order to further its goals, revealed by
Trichet in his Aachen 
speech: the creation of a United States of Europe. As a co-author of the
Maastricht Treaty he knew (I was told by another co-author) that a ‘crisis’ was
needed to get the missing piece of their final aim, fiscal unification.  

Regards, 
Richard 

________________________________

From:gang8 at yahoogroups.com [mailto: gang8 at yahoogroups.com ] On Behalf Of Gunnar Tómasson
Sent: 24 September 2012 00:14
To: gang8 at yahoogroups.com
Cc: gang8 at yahoogroups.com ;
Asgeir.Torfason at handels.gu.se
Subject: Re: Re: [gang8] Must
money be debt? - "The Chicago 
Plan Revisited"  

Conclusion.  

The problems of the euro and the U.S. dollar have been building up for
years and decades, respectively.  

If insanity is doing the same thing over and over again and expecting
different results, the time has come for a fundamental re-thinking of world
monetary arrangements.  

First to go is the idea that stable world monetary arrangements can be
based on a national world reserve currency - the temptation is too great, and
the lobbying pressures too hard to resist, to engage in what the U.S. and the
Euro-zone have done, namely, to flood the rest of the world with money created
out of thin air.  

Next comes the question of what to do?  

1.   Restructure world monetary arrangements through the
transformation of the IMF's Special Drawing Rights into the modern equivalent
of Keynes's BANCOR.  

2.   Make the BANCOR a "reserve settlement asset"
between national central banks.  

3.   Provide national central banks with BANCOR overdraft
facilities at a reorganized IMF.  

4.  Make access to such overdraft facilities subject to
macro-economic and financial criteria analogous to what the EU is attempting to
put together to make the euro viable.  

But that would mean the IMF cast in the role of a World Central Bank!  

Exactly.  

Gunnar  

Sep 23, 2012 03:58:12 PM, gang8 at yahoogroups.com 
wrote:  

>   
>Another problem occurs to me:   
>   
> Under the Chicago Plan, would Allocator-banks still be deposit
taking institutions?  
>   
>If they are, there is nothing to stop banks from doing what they do now
- make a loan denominated in the currency of gvt-issued money, but which is not
'backed' by reserves, accept the resulting deposit, and put that on the
liabiltiy side of their balance sheet. Then make the next loan. No one can tell
the difference between state created and bank-created money. In fact, my guess
is that bank created money would soon crowd out state-created money.  
>   
>There is no way the state could restrict the money growth rate.   
>    
>As Minsky said, the problem is not to create money, but to get it
accepted. If bank liabilities are accepted as money, 'reserve backing' becomes
irrelevant to money creation.  
>   
>Alternatively, Allocators (banks-new-style) may NOT accept
deposits. But the public must bank somewhere. Presumably the state then accepts
deposits which it passes on to banks. If it does this automatically, the same
result ensues. If it 'hoards' deposits (claims on its balance sheet), where are
the matching assets? Those are the claims on banks. At some point banks want
those claims redeemed. The state is now subject to a bank run - by banks!  
>   
>Dirk   
>   
>On 23-09-12, Geoffrey Gardiner  wrote:  
>I am amazed that the level of understanding of bank bookkeeping is so low, or should one say non-existent?  
>   
>I have printed out the paper in the hope that by careful study I can see some sense in it, but my first impression of the early paras is that it is total nonsense. How can a bank make a loan if there is 100 per cent cover for deposits? Every bank loan creates a new deposit. Was Fisher stuck in the far distant past when a bank might have lent out gold coins? To get rid of them, of course, for as Aristotle said, they have no offspring. Same with Bank of England notes.   
>   
>When will accounting principles become a compulsory requisite for the study of economics? I despair.  
>   
>Geoff  
>   
>From:D.J.Bezemer   
>Sent:Saturday, September 15, 2012 3:40 PM  
>To:gang8 at yahoogroups.com   
>Subject:Re: [gang8] Must money be debt? - "The Chicago  Plan Revisited"    
>    
>   
>Gunnar, and all,  
>   
>You should read the thoughtful paper "The Chicago Plan Revisited" by Jaromir Benes and Michael Kumhof. It is an IMF working paper ( WP/12/202) and can be found at   
> www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf   
>   
>The paper is a model analysis of the proposal to let the government issue debt-free money, as proposed by several scholars (among them Fischer) in the 1930s. Richard and others made a similar proposal recently (100% reserve money).   
>   
>The model can be ignored for the moment, the first 10 or 15 pages are a very careful discussion of the issues and the technicalities of money issuing without debt growth.  
>   
>I am still reading this and reserving judgment until I am done. Given the level of the discussion and of institutional realism, and given the fact that it comes form the IMF, this paper merits our attention and discussion.  
>   
>Either the IMF is coming round to creditary principles, or Benes and Kumhof (who already did, apparently) will soon leave.   
>   
>Dirk   
>   
>   
>   
>   
>On 15-09-12, Gunnar Tómasson  wrote:  
>Stephen A. Zarlenga, author of The Lost Science of Money and founder of the American Monetary Institute, sought an answer to this question "by examining the results evident in historical examples” in the first 23 chapters of his book. On the basis of that examination, Zarlenga challenges the view of A. Mitchell Innes that "money must be debt".
>
>Must money be debt?
>
>In the context of modern entrepreneurial market economies, money derives
    from and encapsulates a creditary relationship between entrepreneurs and
    owners/suppliers of factor inputs. This relationship arises at Alpha and
    concludes at Omega of the production process, with intrinsically worthless
    IOUs/money received as Factor Income at Alpha being redeemed in Final
    Output at Omega.
>
>In other words, money is a token of debt by entrepreneurs to suppliers of
    factor inputs - of credit extended in the form of factor inputs for later
    redemption in final output.        
>             
>           
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