In the October 21stGuardian, Ambrose Evans-Pritchard reports on a “revolutionary” paper by the International Monetary Fund (IMF) to end the current global monetary system, in which banks create money by issuing loans. The paper’s authors, Jaromir Benes and Michael Kumhof, propose to reinstate government-issued and controlled money (in the West this ended in 1666). They claim that this would instantaneously eliminate the multi-trillion public debt owed by the US and other industrialized countries, while simultaneously creating jobs, stabilizing boom and bust cycles, leveling income inequality and reducing the monopolistic control international bankers exert over the global economy.
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, as well as massively reducing their political power. To quote Mayer Rothschild, founder of the Rothschild dynasty, “Give me control over a nation’s money, and I care not who makes its laws.”
The Historic Link Between Money Creation and Inequality
Entitled The Chicago Plan Revisited, the IMF paper revives a proposal first put forward by professors Henry Simons and Irving Fisher in 1936 during the Great Depression. Fisher, like many modern economic thinkers, was extremely concerned about the extreme concentration of wealth created by credit cycles.
In my opinion, the economic history Benes and Kumhof relate is the most interesting section of The Chicago Plan Revisited. They explode the myth that money developed to replace precious metals as a means of exchange. Anthropological studies show that “fiat” (fiat currency = currency de-linked from precious metals or other commodities) currencies are as old as civilization. The Spartans banned gold coins, replacing them with virtually worthless iron disks. The early Romans used bronze tablets. Their worth was entirely determined by law – a doctrine made explicit by Aristotle in Ethics – like today’s dollar, euro and pound.
Benes and Kumhof also trace the link between control of the money supply and wealth concentration to prehistoric times, where it was the basis of debt jubilees found in early Judaism and other ancient religions. They assert that the Athenian leader Solon implemented the first known Chicago Plan/New Deal in 599 BC to help farmers who were in debt to the oligarchs who minted the private coinage they used as currency. He cancelled debts, returned lands seized by creditors, set floor-prices for commodities (much like Franklin Roosevelt), and consciously flooded the money supply with state-issued “debt-free” coinage.
One hundred fifty years later, the Romans copied Solon’s reforms, setting up their own fiat money system under Lex Aternia in 454 BC.
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 of 1666.
How the IMF Proposal Would Be Implemented
Under Benes and Kumhof’s proposal, the US treasury would issue sufficient currency to repurchase all outstanding sovereign debt from private banks and other parties. This buyback would make up a substantial portion of the reserves banks would be required to hold to generate new loans. They would build up the balance of their reserves by borrowing at low or negligible interest from the US and other government treasuries (as banks do now when they are “bailed out” by the Federal Reserve).
The growing movement to end debt-based money is still considered pretty radical, despite the grassroots “social credit” movement started by Ellen Brown, the late Richard Douthwaite and members of Positive Money and the New Economic Foundation more than a decade ago. For the Mainstream International Monetary Fund to take up the call is significant for two reasons:
1) It suggests that the global economic crisis is far more serious and intractable than our governments and the mainstream media are willing to let on, and
2) People in high places know damned well policy makers have run out of other options.
Read more here
For more background on how private banks issue and control the money we all require to live on, I highly recommend the films Money as Debt and 97% owned. Both are free downloads at http://topdocumentaryfilms.com/money-as-debt/ and http://topdocumentaryfilms.com/97-owned/