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Global Debt Repudiation? IMF’s Paper On The Chicago Plan Continues To Stir Opinions

Tyler Durden's picture


From Goldcore Gold Bullion

IMF’s Paper on The Chicago Plan Continues to Stir Opinions

Today’s AM fix was USD 1,725.00, EUR 1,321.03, and GBP 1,075.10 per ounce. 
Friday’s AM fix was USD 1,732.75, EUR 1,327.27, and GBP 1,078.86 per ounce.

Silver is trading at $32.23/oz, €24.76/oz and £20.18/oz. Platinum is trading at $1,625.00/oz, palladium at $625.40/oz and rhodium at $1,160/oz.

Gold fell $18.90 or 1.09% in New York on Friday and closed at $1,722.10. Silver hit a low of $31.92 and rallied back higher in the afternoon but still finished with a loss of 2.02%.

Cross  Currency Table – (Bloomberg)

Gold edged down on Monday, as pressure from speculators exiting long positions and continued concern about the health of the global economy dampened interest.

When equities fall market players often have to cash in their long gold positions to cover losses. Since the current pullback lacklustre interest in the yellow metal may force investor to retreat into the US dollar. Friday’s US existing home sales figure for September came in at 4.75M which was a bit higher than the 4.7M that was expected.

All eyes will be concentrated on the US Fed’s policy meeting on Tuesday and the FOMC rate decision on Wednesday. In addition, on Wednesday economic data released include Initial Jobless Claims & Durable Goods Orders, on Thursday are Pending Home Sales and following on Friday are GDP & Michigan Sentiment.

US Commodities long bets have decreased to their lowest levels since the end of August. Bloomberg said Gold holdings increased 7.7% to 178,426 contracts, the fifth straight advance and the most since Feb. 28, CFTC data show. 

XAU/USD Currency 5 Year – (Bloomberg)

In Africa, over 8,000 workers involved in an illegal strike at Gold Fields' KDC East mine will be fired if they fail to return to work on Monday night and Tuesday morning, said the company today. 

Edel Tully, UBS analyst said in a report yesterday that, “India should be a better buyer over the next two weeks from a seasonal perspective, but this remains highly contingent on the behaviour of the rupee gold price,  Indian imports are already 40 percent less than they were last year, and we understand inventories are generally light. Therefore, if the rupee behaves, fresh demand will also prompt restocking.”   

The International Monetary Fund’s paper, “The Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof highlighted a means to wipe out debt by legislation by using state created money to replace the private banking system and was commented on in The Telegraph by journalist Ambrose Evans-Prichard. The full paper can be read here.

In sum, the paper illuminates on a plan created in 1936 by professors Henry Simons and Irving Fisher during the aftermath of the US Depression. It examines how money created by credit cycles leads to a damaging creation of wealth.  

Authors, Benes and Kumhof argue that credit-cycle trauma - caused by private money creation – has been around forever and lies at the root of debt catastrophes as far back as ancient Mesopotia and the Middle East.

They claim that not only harvest cycles lead to defaults but rather the concentration of wealth in the hands of lenders would have augmented the outcome.

Solon, the Athenian leader implemented the original Chicago Plan/New Deal in 599 BC to relieve farmers in hock to oligarchs enjoying private coinage. He forgave debts, returned lands seized by creditors, and set floor-prices for commodities (like Franklin Roosevelt), and fuelled the money supply with state-issued "debt-free" coinage.

The ancient Romans studied Solon’s reforms and 150 years later copied his ideas and created their own fiat money system under Lex Aternia in 454 BC.

Fiat currencies have been around since man began trading.  The Spartans banned gold coins and replaced them with iron disks with little intrinsic value.  In early Rome bronze tablets were favoured.  Their worth was determined by law, much like the dollar, euro or pound today.

The 1936 Chicago Plan was created to somehow prevent the large boom and bust cycles seen during the Great Depression.

The debate initiated by Benes and Kumhof and continued by Evans-Prichard examines many issues that question Western Capitalist values and encourages us to examine whether we are so far removed from a Leviathan state?

For breaking news and commentary on financial markets and gold, follow us on Twitter.

GoldCore Special Offer - Perth Mint Gold Bars (1 oz) At Just 3.8% 
We are offering increasingly popular Perth Mint gold bars (1 ounce) at an extremely low 3.8% premium until next Friday the 26th of October. The bars are LBMA approved and each bar is individually sealed in a tamper proof assay card featuring a unique serial number. The minimum order is 5 ounces and terms and conditions apply. 
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Gold rebounds from 1-month low; jewellers set to buy - Reuters

Gold Imports by India Seen Climbing First Time in Six Quarters - Bloomberg

10 nations that control the world’s gold – Market Watch


Ambrose Evans-Pritchard: IMF's epic plan to conjure away debt and dethrone bankers – The Telegraph

Gold ETFs vs equities, Goldman Sachs surveys the battleground – Mineweb

Hedge Funds Cut Bets to 12-Week Low as Prices Drop: Commodities -


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Mon, 10/22/2012 - 08:30 | 2909102 GetZeeGold
GetZeeGold's picture



Every time the IMF opens it's damn costs me money.


I should have a better attitude about it I suppose.....a third world dictator does get a billion dollars in his offshore retirement fund...and a brown kid somewhere gets half a Poptart....but that's on a good day.

Mon, 10/22/2012 - 08:32 | 2909133 Popo
Popo's picture

Debt repudiation = one giant money printing explosion.

If they do it, it will destroy central banking forever. The entire premise that the Fed and Treasury have been resting on is that "It's not printing because it's debt".

Well, if they "repudiate" they admit they've been printing all along. And they'll never be able to lie about "debt" ever again. Which means fiat currencies are dead and buried forever.

Mon, 10/22/2012 - 08:39 | 2909149 spentCartridge
spentCartridge's picture

21/12 2012

Mon, 10/22/2012 - 08:54 | 2909181 SWRichmond
SWRichmond's picture

I just read the AEP piece.  Yes, by all means, let's shift control of "money" from the completely corrupt banksters to the completely corrupt government.

JHFC.  There seems to be no shortage of slaveowner-wannabees.

WHY NOT LET PEOPLE USE WHATEVER THEY WANT FOR "MONEY"?  Answer: because then the governments and the banks couldn't skim their "share."

Mon, 10/22/2012 - 09:00 | 2909188 BKbroiler
BKbroiler's picture

let's shift control of "money" from the completely corrupt banksters to the completely corrupt government.

Well, let's be practical here.  A government run treasury would be incompetent but well-meaning.  A bank run treasury would be skilled and self serving (evil).  I think we're better off with the idiots we elect, as the constitution stated.

Mon, 10/22/2012 - 09:17 | 2909223 anarchitect
anarchitect's picture

"A government run treasury would be incompetent but well-meaning. A bank run treasury would be skilled and self serving (evil)."

If you think government is any less self-serving than business, you're naive--and that's putting it kindly.

Mon, 10/22/2012 - 10:29 | 2909386 john39
john39's picture

the scum that own the banks would infilitrate and control government anyway... always has...  so, this would just be another illusion to control the masses.

Mon, 10/22/2012 - 10:18 | 2909249 TruthInSunshine
TruthInSunshine's picture

If nothing else, by wiping out only that debt/credit (they're the same thing in a system of full fractional fiat reserve banking) held by full fractional reserve central banks, and thus, destroying the notion of the fiction that is those entities along with the ability of those entities to accrue/soak up even more such sovereign debt/credit, there would be an interest rate set on further sovereign borrowing that would conform much more closely with the level free markets would set them at (i.e. full fractional fiat reserve banks that are, in reality, fig leafs for politicians promising money for nothing and chicks for free, would no longer be able to artificially lower interest rates on sovereign borrowing-- transfer inflation from reckless borrowers-- especially of the government backstopped, too-big-to-fail gambling/speculating variety-- to prudent savers).

In other words, schemes such as quantitative easing, as just one example, which subsidizes the financial and banking sector by not only artificially lowering their cost of borrowing, but which actually pays them to borrow fiat (e.g. interest on excess reserves), at the expense of suppressing the yield upon sovereign debt held by entities and individuals other than the very central, full fractional reserve banks helping to do effectuate much of the artificial suppression of yields on soveriegn debt instruments (i.e. interfere with free market interest rates), and incentivize fiat printing, which causes the price of real goods and services to spike to levels far higher than they ordinarily would if true supply & demand set prices absent such radical interference, would no longer be possible...

...the emperor would be fully naked to even the most poor of vision sheeple, and rage for ramped taxation in the form of reduced purchasing power would then be directed at those who control the budget process (i.e. the politicians).



**p.s. - It's interesting that gasoline at the retail level has dropped 50 cents per gallon in certain "battle ground" states the last week alone, which is more than it's dropped in such a short time frame during the preceding 3 years & 11 months, as it's just prior to the election, but as interesting as this is, I'm sure that it's purely coincidental, and that even a mention of this in relation to the upcoming election is borderline conspiracy whackiness.

Mon, 10/22/2012 - 10:46 | 2909418 Benjamin Glutton
Benjamin Glutton's picture

Did you read the so called International Monetary Fund’s paper, “The Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof?


Was it my imagination or did the authors clearly state that their paper does NOT represent the views of the IMF?


This comment is NOT directed at Truth In Sunshine.

Mon, 10/22/2012 - 11:01 | 2909474 SWRichmond
SWRichmond's picture

...the emperor would be fully naked to even the most poor of vision sheeple, and rage for ramped taxation in the form of reduced purchasing power would then be directed at those who control the budget process (i.e. the politicians).

Would that such were true.  The dot gov would simply trot out another boogeyman and blame it for inflation.  Have you watched Nixon's explanation for closing the gold window?  Did he get away with it?

Mon, 10/22/2012 - 11:12 | 2909506 TruthInSunshine
TruthInSunshine's picture

We have had a fully functioning, fiat diluting, full fractional reserve central "bank" since 1913, including during the Nixon "Shock," which has helped facilitate all such heists.

Mon, 10/22/2012 - 17:25 | 2910849 Earth Ling
Earth Ling's picture

We've got some seriously confused (and I'm sure many conflicted) folks here if they're defending the current "money as debt so the banks can get slice after slice of every bubble loan they key into existence until the whole thing crashes and then we bail them out so they can own everything on the cheap while the rest of us get fucked AGAIN" system. 

Unbelievable really.  I hope Tyler will get a guest post here that directly addresses the question of whether money supply should be controlled by private crooks or transparently by elected officials. 

The problems caused by incompetent or even corrupt government officials pale in comparison to what the private banks do. 

Control of the money supply is the single most important thing the government is responsible for.  When the government cedes that, it has effectively ceded everything. 

Mon, 10/22/2012 - 12:39 | 2909844 hoos bin pharteen
hoos bin pharteen's picture

"A government run treasury would be incompetent but well-meaning.  A bank run treasury would be skilled and self serving (evil)."

Correction: A government run treasury would be incompetent AND self-serving (evil).  A bank run treasury would be skilled and self serving (evil).


Mon, 10/22/2012 - 09:03 | 2909192 CH1
CH1's picture

A shot across the central bankers' bow?

By the various states? Politicians wanting to push the bankers out? A distraction? Tossing a bone to the greenbackers?

Mon, 10/22/2012 - 09:04 | 2909200 Shigure
Shigure's picture

The IMF Working Paper is numbered WP12202


Mon, 10/22/2012 - 08:09 | 2909105 evolutionx
evolutionx's picture

where is the German Gold???


Bundesbank Refuses Gold Control

The Bundesbank, has refused to allow the German members of parliament Philipp Mißfelder and Marco Wanderwitz to view the German gold reserves stored in Paris and London. Reason: The central banks in Paris and London do not have suitable rooms for visits.

Mon, 10/22/2012 - 08:17 | 2909115 magpie
magpie's picture

The's next reserve currency backed by gold marked to market...did i get something wrong there.

Mon, 10/22/2012 - 08:24 | 2909126 negative rates
negative rates's picture

You might have, but my weed is sellin for $1500 an ounce. Who needs a printing press with that kind of quality stuff.

Mon, 10/22/2012 - 08:54 | 2909177 magpie
magpie's picture

Kind of funny that this is not getting more coverage. Far from being only a publicity stunt by Mißfelder, whose prior notoriety rested on threatening to cut grannies health insurance, or this being some kind of revanchist neo-Nazi conspiracy, the lack of an appropriate tungsten viewing room is a European problem now.

Mon, 10/22/2012 - 09:04 | 2909197 CH1
CH1's picture

my weed is sellin for $1500 an ounce.

Is that really what it goes for now? (Been a long time.)

Mon, 10/22/2012 - 09:38 | 2909234 Orly
Orly's picture

Not even close...

An ounce of the very, very best (THC content above 30%...) will still fetch around five hundred.  Of course, this is the real world and not the inner city of depraved yuppies.


Mon, 10/22/2012 - 10:04 | 2909319 spentCartridge
spentCartridge's picture

Mine retails @ £220.00 per oz

Very good shit, made by rain Sol & lots of good lovin'.

Mon, 10/22/2012 - 10:56 | 2909446 Orly
Orly's picture

That's about right for here, too, though I thought it would be more expensive in Britain.  Did you hear about the big bust in an old factory in Notts a couple of weeks ago?

Canadian seed-stock.  Blue Rhino and SuperBud mix.  Colas like DDs.

My thing would be where to hide the cash...

Mon, 10/22/2012 - 11:47 | 2909645 falak pema
falak pema's picture

how much did they pay u to star in "weeds"?

Mon, 10/22/2012 - 12:48 | 2909826 Orly
Orly's picture

Falak!  Hey, I've found the best recipe for the rub on a roast chicken.  It was stolen by Todd Wilbur from a recipe by K. Paul Prudhomme.  It is very good on chicken but it also works well on other things...whatever needs some spicing up.

I've found I've had to make this stuff by the boatlaod, as it is everyone's favourite...

I replaced the comino with nutmeg because the cumin was the culprit in giving some of us a headache.  Makes it even more tasty!

You should try it.  I imagine it goes well with a butter sauce for asparagus, as well.

I'm cooking my chickens at a higher temp than I used to, in an oven bag, with the rub on the inside, outside and a bit under the skin.  220 degrees C (425 degrees F...) for about an hour does the trick.  Use the thermometer, of course.  The key is to make sure to truss the chicken as tightly as possible to get the inside breast meat steamed in its own juices.  The remaining juice in the bag can be made into a wonderful sauce that is not too salty or too spicy.

I love this recipe!


Mon, 10/22/2012 - 08:39 | 2909148 Cypher_73
Cypher_73's picture

Noob question, I know but I thought the lion's share of Germany's gold was held at the NY FED?

Mon, 10/22/2012 - 13:41 | 2910055 TPTB_r_TBTF
TPTB_r_TBTF's picture

the Germans thought that too...

Mon, 10/22/2012 - 08:43 | 2909158 spentCartridge
spentCartridge's picture

The central banks in Paris and London do not have suitable rooms for visits.


Dependent upon ones apparel, I assume?

Some scuba gear might be handy.

Mon, 10/22/2012 - 08:10 | 2909106 Neethgie
Neethgie's picture

By using QE the us and uk have already defaulted on obligations.

Mon, 10/22/2012 - 08:18 | 2909117 GetZeeGold
GetZeeGold's picture



Molly just can't come out and say that!

Mon, 10/22/2012 - 08:25 | 2909125 Sandmann
Sandmann's picture

Yes but internally by buying out foreigners and loading domestic pension funds with Gilts. Then the Corporations have to keep liquid to pay the shortfalls in the pension funds before the PBGC seizes the corporate assets and puts the operating business into bankruptcy

Mon, 10/22/2012 - 08:32 | 2909135 CPL
CPL's picture

I know, it's HI-larious.


All central and federal systems are about to puke up their toes after 40 years of being complete and total retards.  I wonder which week the govie cheques start to bounce in a tidal wave?

Mon, 10/22/2012 - 08:40 | 2909152 falak pema
falak pema's picture

the solution is not QE to help the bankers, its cutting the root power of the bankers by destroying their debt slavery machine of derivative plays. Close down the City shenanigans and tear apart the Walmart bankstas. Legislate, Gl-st, stop fractional reserve and all naked when required to stem banksta exuberance from going systemic.

Mon, 10/22/2012 - 10:24 | 2909379 paulie
paulie's picture

Maybe but they don't get attacked by speculators and don't see their interest skyrocket only because rating mafia agencies presume they won't be solvent.

Mon, 10/22/2012 - 08:24 | 2909118 Ghordius
Ghordius's picture

excellent reminder about how Solon solved a similar situation by debt forgiveness (actually it was a Babylonian habit that was adopted by all Asian's kingdoms and so appears on the Bible, too).

"The Spartans banned gold coins and replaced them with iron disks with little intrinsic value." This is nowadays a given under historians, but several serious students of history doubt it. the first super-charged hyper-valuable metallic trading good was probably meteoritic iron. without the technology for iron smelting, a few kilograms of iron where the stuff of legendary weapons and armours (read: Achilles and his black-clad troops). Following iron's technological devaluation the Spartan might just have just rejected the new metals, i.e. the Asian's gold and the Athenian's silver. Accepting them would have meant binding their trade to those currencies and their currency zones. So they might just have kept their iron-now-"fiat"-disks for trading-political and internal reasons.

Mon, 10/22/2012 - 08:22 | 2909123 Sandmann
Sandmann's picture

Probably because the Old Lady of Threadneedle Street has "loaned " the gold and there is double-counting between Paris and London

Mon, 10/22/2012 - 08:34 | 2909138 hedgelessWhoresMan
hedgelessWhoresMan's picture

Jubilee Bitchez

Mon, 10/22/2012 - 08:36 | 2909140 topspinslicer
topspinslicer's picture

Debt Repudiation? Give me about a week's heads-up so I can buy me a few corvettes and such....

Mon, 10/22/2012 - 08:35 | 2909141 falak pema
falak pema's picture

There u go, Solon the legislator and honest government to shut the dirty mouths of debt slavery Oligarchs bleeding the peasant.

Economia is simple when a true honest man can tell the chaff from the wheat, the real value system from the fake capitalist sleight of oligarchy hand; all we have to remember is what is the aim of society and what are the means.

If the aim is betterment of Man then means are freedom from debt slavery, if the aim is accumulation of Friedmanian supply side Oligarchy wealth, even if it means tilting the democracy and rule of law table,  then Reaganomics becomes the fraudulent means! 

Now that the economic world has found an Appian way laid out for it by past history; that good government can use to legislate upon against bad oligarchy play, lets see if these political shills have the cojones to do it.

Viva Solon and Greek wisdom of tha ages! 


Mon, 10/22/2012 - 09:07 | 2909205 CH1
CH1's picture

good government

LOL... wait, I see a unicorn!  No, no, it's a leprechaun! No, it's a pink elephant!!

Fantasies ALL.

Mon, 10/22/2012 - 11:51 | 2909660 falak pema
falak pema's picture

zeus was a one man government; best solution.

Mon, 10/22/2012 - 08:38 | 2909142 Tidewater
Tidewater's picture

The plan calls for banks to grow their balance sheets by taking on (wait for it) additional government backing, which the Treasury would account for on its own balance sheet as a financial asset, and for "the full buy-back of household debt by the government."

And I suspect the post-modern implementation would find the final transition phase, away from banks taking certain kinds of lending risk, passe.

But what do I know; "Economics Is Hard."

Mon, 10/22/2012 - 09:33 | 2909250 Vince Clortho
Vince Clortho's picture

So those who are deepest in debt, managed their finances the worst would benefit the most; those who have worked hard to keep afloat would receive nothing.

Sounds like the Great Society program in its logical conclusion.  You have to have politicians and PHD Economists to come up with this flavor of crap.

How's about if we are going to start giving a way free cash, we give some to everybody (instead of govt picking losers and turning them into winners).

Mon, 10/22/2012 - 17:34 | 2910871 Earth Ling
Earth Ling's picture

"Deepest in debt, managed their finances the worst, would benefit the most"

Obviously you're talking about the banks right?  Because there is NO ONE who has fucked up shit like the banks have and has been rewarded insanely for it.

Read the introduction, at least the first page and see if it starts to make sense to you.

Related to this there is no fucking way I am going to accept the mortgage interest rate deduction being taken away UNLESS the portion of my mortgage ABOVE the historical house price trendline is ALSO taken away since it was that bankster inpsired deduction that FUELED the fucking bubble in the first place.


Mon, 10/22/2012 - 10:14 | 2909348 spentCartridge
spentCartridge's picture



Well, that didn't work too well & I figured I knew a thing or two 'bout HTML?


Never mind ... ~

Mon, 10/22/2012 - 08:40 | 2909147 max2205
max2205's picture

Good. I have a tablet.

Mon, 10/22/2012 - 08:41 | 2909155 the 300000000th...
the 300000000th percent's picture

Only if MY personal debt can be repudiated as well

Mon, 10/22/2012 - 08:43 | 2909159 AnAnonymous
AnAnonymous's picture

Money is not unsuspended. Money and the circulation of money leads to consumption of the environment.

'Americans' keep waving false flags in order to turn people away from the very basic fact that money circulation is linked to the consumption of the environment.

This is an 'american' world and it is global. The USD is the world reserve currency. The world is awashed with it and the USD is circulated massively.

The repudiation of the debt in monetary terms will no erase the environmental debt.

Ancient people could claim jubilees because their consumption of the environment was so small compared to 'americans' and none of them has reached a global reach.

Small losses, that could be pretended as being substituted when defaulting.

The 'american' story has an additional dimension: the debt to the environment can not be wiped off, but as it is global, it can not be minimized or marginized.

If ever, 'americans' have to return to the environment, 'americans' who dismissed the environment, claiming they were able to overcome it.

'Americans' can write off every account book they can, it wont write off the debt to the environment, that can not be neglected.

Mon, 10/22/2012 - 09:44 | 2909278 Vince Clortho
Vince Clortho's picture



'Americans' , 'american' , USD, .

'americans' ,.

'american' , 'americans', 'americans'



Cliff Notes Version


Mon, 10/22/2012 - 08:47 | 2909160 PUD
PUD's picture

The fundamental problem has always been the private banking cartel. There is no need for private banking. The state should run banks as utilities to process transactions and the state should be the sole creator of money that it spends into the economy as needed. The money should be backed by a basket of commodities and services. The financialization of everything is the product of private banking whereby the first users of money become the landlords of money and the masses simply renters of it.

Mon, 10/22/2012 - 09:07 | 2909202 Turin Turambar
Turin Turambar's picture

You couldn't be more incorrect.  Fiat currency and fractional reserve banking are to blame.  Theft and fraud are theft and fraud, regardless of whether performed by a private individual or a government entity.  The banking cartel is the priveleged defrauder of the moment.  You don't think the government can do as well defrauding the public via money printing?  LOL


Make fractional reserve banking illegal, and I'm fine with somebody starting a bank in their garage (unlike Romney) with sound currency.  If you don't want to bank there, then don't.  It's called a FREE market.  Steve Jobs and Bill Gates didn't do so bad starting a business in their garage.  Why not a bank?  :-P

Mon, 10/22/2012 - 09:10 | 2909206 CH1
CH1's picture

Well said, Turin.


Mon, 10/22/2012 - 09:42 | 2909277 sumo
sumo's picture

"...starting a business in their garage.  Why not a bank?"

Chris Whalen has said for many years that two guys with a server and a garage could start a bank. He was being serious, and keep in mind he's one of the best bank analysts around. Whalen believes banking is a commodity business, nothing inherently special about it.

Mon, 10/22/2012 - 10:58 | 2909464 cxl9
cxl9's picture

A banking license is essentially an exemption from the laws against fraud. This is the reason that the banks have grown so wealthy. If your friend Joe asks you for a $50 loan, you either have to dig into your pocket and pull out the money, or you cannot lend it to him. You do not have the option to create the money out of nothing if you don't already have it. The banks are under no such restraint. They simply create - ex nihilo - the product that they sell. People go to jail every day for selling something they do not own, because it is stealing and a shortcut to acquiring wealth at the expense of the victim. The banks, with their exemption from the laws against fraud, are able to amass great wealth by selling that which they do not own. In the current commercial environment you can open your own bank, but as an honest lender without benefit of a bank charter and the exemption from fraud that it provides, you will find it very difficult to compete with the traditional banks.

Mon, 10/22/2012 - 11:12 | 2909498 walküre
walküre's picture

What next? National oil & gas industries to control the resources, it's marketing and the cost of the fuel supply to public and private consumers? Is that why a liter of gasoline is only 26 cents in Venezuela?

Wait! Look over there! A squirrel! Don't mind Putin who just completed building the largest oil & gas conglomerate in existence. Oh frigg! Putin is not a CEO of a hedge fund or private bank! He's the President of Russia!

Mon, 10/22/2012 - 13:40 | 2910042 Freewheelin Franklin
Freewheelin Franklin's picture

Make fractional reserve banking illegal

 I don't think you need to go that far. Some level of frac-res might be OK. But the 10% that has been backed by the FRB is not workable. Let the banks issue notes backed by whatever specie the public demands, to whatever level the banks want to. But as soon as the bank can't not honor it's own notes and must suspend specie on demand, then bank should be immediately taken into receivership and liquidated. No reorganization, no purchase and assumption, immediate liquidation. And if they want to buy their own damned deposit insurance to lure customers in, then so be it.

Sun, 10/28/2012 - 22:39 | 2910083 Turin Turambar
Turin Turambar's picture

I agree with you that a free market will weed out the bad banks, BUT, since I consider fractional reserve banking inherently fraudulent, I prefer not to legalize fraud.  An additional upside to outlawing fractional reserve banking is that there is no political wiggle room.  If it were legal, then the % would only be an arbitrary number subject to the whims of the political class.  Sound familiar?  JUST SAY NO!

Mon, 10/22/2012 - 17:54 | 2910930 Earth Ling
Earth Ling's picture

Yes make fractional reserve banking illegal.  100% agreed. 

BUT recognize that another huge benefit of running the banks AS UTILITIES is that the Government then spends money into existence NOT as Debt. 

How are you going to create money or expand the money supply to keep up with a growing economy if it doesn't come from the government?  It has to come from somewhere and the absolute truth of the matter is that we are far better off having the government expand the money supply than allowing private banks to do it.

The government will certainly fuck things up in various ways, but nowhere near as badly as the private banking cartel does. 

What few seem to realize is that when the private banks control money supply, it is in their interest to cause a financial collapse because at the end of the collapse they own everything AND all the poor tax mules are their bitches paying off untold new debt that was used to save the "incompetent" (corrupt as hell) banks.  We give the money (issued as our debt) to the banks an near zero interest and they turn around and buy the debt (US Treasuries) that pay real interest (compared to what we gave the money to the banks at). The banks fuck us at every turn 15 different ways.

The government will NEVER be as competent at fucking the people as banksters are.  And the government will not be able to hide nefarious activities the way the banks do.

Mon, 10/22/2012 - 08:59 | 2909163 xray vision
xray vision's picture

So I was reading Mossler's book 7 Deadly Innosent Frauds and he says the debt is no bid deal.  It's all just numbers in a spread sheet.  It doesn't mean anything more than the score at a football game.

He says the only function of taxes is to stimulate people to work for dollars to pay taxes.

Sorry if this is old stuff, but it was new to me.  Am I missing something?  He sounds like the tooth fairy.


Mon, 10/22/2012 - 09:12 | 2909210 CH1
CH1's picture

Translation: Taxes are a whip to your back, making you work harder for the state.

Sounds about right.

Mon, 10/22/2012 - 08:48 | 2909164 3rivers
3rivers's picture

Have you read the Bloomberg article on Greece/1929 that says the IMF admits it goofed on how bad austerity affects consolidation, and ordinary everyday folks..... so does that mean their estimate of a 1/2 pct gain in offocial unemployment for Non-Greek countries, but including the US as a "developed country".. for every 1pct of GDP clearance of a fiscal deficit as a really rough but perhaps useful estimate.. needs to be revised?  Isn't what we really need to be talking, and debating about, is how to resturcture our own economy away from public sector debt dependence?  Not just "entitlements". Social Security and Defense Spending ..... and NOT how China must restructure... but how the USA needs to restructure the economy overall when the Fat Lady Finally Sings.  If the Greexit is pulled off and the EU does what it needs to but without taking each country completely off the hook.... we get to find out why the Euro is above 1.30.

Mon, 10/22/2012 - 11:26 | 2909563 catacl1sm
catacl1sm's picture

The end of the "Growth Economy" paradigm, bitchez.

Mon, 10/22/2012 - 09:03 | 2909195 swabeyjw
swabeyjw's picture

So if the state replaces the bank where is the line between welfare and a loan?

Mon, 10/22/2012 - 09:04 | 2909198 jvetter713
jvetter713's picture

Its about time people start maxing out their credit cards on gold and then file bankruptcy.  All that money that was given to the banks is owed to us.

Mon, 10/22/2012 - 09:16 | 2909220 dcb
dcb's picture

good img papaer debunks so many of the myths of why we need private central banks, deals with the myths of money creation, and many ofther myths to justify the current monetary establishment

Mon, 10/22/2012 - 09:17 | 2909224 Seasmoke
Seasmoke's picture

One for you , two for me.... One for you , three for me for you , etc...

Mon, 10/22/2012 - 09:20 | 2909231 yogibear
yogibear's picture

It's already become a printing party. Adding more more people to it just helps the booze disappear faster.

When the booze disappears everyone will have nasty hangovers.  

Mon, 10/22/2012 - 09:24 | 2909237 luckylongshot
luckylongshot's picture

I don't get it. Employees of the IMF, one of the Rothschild zionists flagships, write a paper advocating dealing with the debt crisis by allowing governments to issue their own money. As this would potentially allow us to break free of the stranglehold of the Rothschild zionists why are they being allowed to suggest it?

Mon, 10/22/2012 - 09:40 | 2909266 Harriet Wanger
Harriet Wanger's picture

I didn't know that the Chicago Plan was about debt repudiation, but thought it was about debt redemption and ending fractional reserve banking

Mon, 10/22/2012 - 09:44 | 2909279 viator
viator's picture

Does "The Chicago Plan" have a whiff of fascism about it?

Mon, 10/22/2012 - 10:05 | 2909320 steve from virginia
steve from virginia's picture


From one extreme to the other: from slavish knavery re- gold standards on one day to MMT the very next ... makes the head spin, it really does!


C'mon, dudes, make up yr mind(s)!


 - It's too late for MMT to 'work' as desired (in the Eurozone). There are already a run out of the the currency. (See 'Swiss franc').


 - MMT (or 'Green-backing') will destroy the current banking system: it is a form of repudiation. Credit is needed to support industrialization, banks are needed to create credit. Once credit is exhausted ... it is exhausted: that means that state credit (MMT) is also gone. 'We have to destroy (this credit regime) in order to save it!'. Think USSR (which was an MMT state).


 - MMT is a tactic intended to recover extinguished capital. FAIL: call me when MMT can conjure crude oil and pump it back into the ground. We need a trillion barrels of easily recoverable West-Texas Intermediate ... yesterday (please ... pretty please ... hand-wring, hand-wring, hand-wring).


 - A working strategy is STRINGENT (CAPITAL) CONSERVATION STARTING NOW.  Otherwise, it is conservation by other means ... nobody is going to like the 'other means'. We haven't even gotten to the 'famine' part ... yet.


1st step: Get rid of the goddamned cars, all of them, NOW!


Uh .. nothing else has a prayer of working. Sorry.

Mon, 10/22/2012 - 10:14 | 2909359 mac_daddy
mac_daddy's picture

Didn't the founders of the US warn us about bankers and that only the gov. should issue debt free money?

Mon, 10/22/2012 - 10:49 | 2909425 Bugsquasher
Bugsquasher's picture

Don't expect to see this covered anywhere in your local paper or on CNBC etc. Hamilton rises from the grave.

Mon, 10/22/2012 - 11:43 | 2909624 rosethorn
rosethorn's picture

Great job bringing up this (the Fisher plan) and a great discussion ensues.

Mon, 10/22/2012 - 13:33 | 2910008 Freewheelin Franklin
Freewheelin Franklin's picture

It's official. The US is a Banana Republic. Next stop, hyperinflation like the world has never seen.

ZHers  +1

Mon, 10/22/2012 - 16:03 | 2910525 Cheduba
Cheduba's picture

Sounds like a method for TPTB to bring in "change" and still remain in control.  Like they do away with the idea of central banks, but remain in control because now it's corrupt governments in control of printing money.

Mon, 10/22/2012 - 20:40 | 2911281 Amagnonx
Amagnonx's picture

Well - that is an idea I thought about a long while ago - and it would certainly clear the debt - however there are problems.  It concentrates power into the hands of the state, and that power is 100% likely to be abused.  It may work if you totally decentralized and allowed very small community banks to issue currency.  Those banks would have to run as non profit and somehow return any proceeds to society - which would likely lead to corruption.


For myself, I'd like fractional reserve banking legally identified as fraud.


The following two items are things that I consider completely neccessary for a stable society over the long term.


1.  Make it illegal to charge interest of debt, or pay interest on deposits for purpose of profit.


2.  Make it illegal to charge rent on real estate.


THe justifications for these propositions are both moral and practical.  A very short justification follows, there are many solid arguments, I am just presenting the most compelling and simplest.  There are some particularly high value added real estate like farms and skyscrapers, where the real estate value is only a portion of the capital value - in this case I would err on the side of consistency and say they cannot be rented out.  For hotels though, I would make an exception based on the fact they are short term and primarily provide a service.


The moral argument - rent seeking from either real estate or money lending is getting something for nothing, because money and real estate are not depreciated with use.  Rent seeking generates drag on the production process, decreasing the overall wealth of society.  I understand time preference, but that is a rationalization, not a moral argument - use of non depreciating capital has no direct cost, only opportunity cost - but if there is no fallback position, then they must use the opportunity and employ the capital productively, which will create wealth for society.


In practice - charging rent or interest will always concentrate wealth, this will always lead to social stratification that is not merit based but rather inheritance based - this leads to an aristocracy, or oligarchy which will eventually lead to social unrest and ultimately revolution.


The problem is that many people will see the above two propositions as totally destructive to capitalism and believe if implemented that society would be impoverished.  I don't believe that is the case, but for those minds entrenched in the current paradigm, they will feel an emotional response to this suggestion - no doubt finding it irrational, before conducting any analysis.


If rent seeking is illegal - then capital must be employed productively or it will be stagnant.  The other benefit of this is the price of residential real estate will fall, and this unproductive capital will then form a far smaller component of the total capital pool, also making it more affordable.


Credit in such a society could be provided by a community bank, which might raise funds by issuing loans at interest.  Banks of this sort would no doubt suffer from corruption, but with good charters and vigilance to not allow excess capitlization they could be kept under control.

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