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

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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.

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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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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

CH1's picture

Well said, Turin.


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.

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.

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!

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.

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!

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.

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.


CH1's picture

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

Sounds about right.

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.

catacl1sm's picture

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

swabeyjw's picture

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

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.

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

Seasmoke's picture

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

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.  

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?

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

viator's picture

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

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.

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?

Bugsquasher's picture

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

rosethorn's picture

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

Freewheelin Franklin's picture

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

ZHers  +1

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.

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.