(This is the fourth of a series of posts about ending the ability of private banks to issue money.)

For the past 18 months ago, IMF economists Michael Kumhof and Jaromir Benes have been circulating a proposal to end the ability of banks to create money.

As Kumhof explains in the Nov 2013 video below, the perception that governments create money is totally false. In the current global economic system, only about 3% of money (mainly coinage) is created by government. The other 97% is created by private banks out of thin air when they generate new loans. See Economic Justice: the Rolling Stone Version

For various reasons, which Kumhof explains in the video, he and Benes believe that unlimited and unregulated private money creation by banks is responsible for the current economic crisis. And that full recovery is only possible if the privilege of creating and controlling the money supply is restored as a government function.

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. And this, in turn, massively reduces their political power.

Ironically, the proposal isn’t new. Entitled the Chicago Plan, it was first put forward by University of Chicago professors Henry Simons and Irving Fisher during the Great Depression.

The History of Private vs Sovereign Money

During the Q&A at the end, Kumhof briefly discusses previous experiments with government-issued sovereign money, which have mainly occurred in the US. Sovereign money funded the original 13 colonies, the American War of Independence and the Civil War.

In their paper The Chicago Plan Revisited, he and Benes trace the history of sovereign money back to the ancient Greeks and Romans. 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.

The slides, which are difficult to see in the video, are available here

For me the high point of the video is Kumhof’s disclaimer that he doesn’t represent the IMF – that he’s only doing research. Yeah right. I sure wish I had an understanding boss who let me run around making radical proposals to strip investment banks of their power and wealth.

It seems more likely that people in high places know the ship of capitalism is going down – that this is a last ditch effort to save it.

Comments
  1. […] Ever since Nixon removed the US dollar from the gold and silver standard in the 1970s, the US dollar has no intrinsic worth because it can’t be redeemed for precious metals. The US dollar, like all global currencies, is simply invented out of thin air by private banks as they issue new loans (see A Proposal to Strip Banks of Their Power to Issue Money). […]

  2. […] Ever since Nixon removed the US dollar from the gold and silver standard in the 1970s, the US dollar has no intrinsic worth because it can’t be redeemed for precious metals. The US dollar, like all global currencies, is simply invented out of thin air by private banks as they issue new loans (see A Proposal to Strip Banks of Their Power to Issue Money). […]

  3. […] Ever since Nixon removed the US dollar from the gold and silver standard in the 1970s, the US dollar has no intrinsic worth because it can’t be redeemed for precious metals. The US dollar, like all global currencies, is simply invented out of thin air by private banks as they issue new loans (see A Proposal to Strip Banks of Their Power to Issue Money). […]

  4. […] The IMF Proposal to Ban Banks from Issuing Money **** A financial transaction tax is a levy placed on financial institution for specific types of […]

  5. […] *Most analysts predict oil prices will return to $100+ a barrel in June 2015, once the US surplus is used up. **Some other EROEI’s (for the sake of comparison): • Coal 8:1 • Solar PVC panels 8:1 • Solar concentrating power: 17:1 • Large hydro generation: 22:1 • Small hydrogenation 32:1 • Landfill/sewage gas cogeneration 40:1 • Onshore wind 20:1 *** Quantitative easing (QE) is an unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds. This differs from conventional money creation in which private banks create money out of thin air as new loans (see An IMF Proposal to Ban Banks from Issuing Money). […]

  6. […] *See An IMF Proposal to Ban Banks from Creating Money […]

  7. […] An IMF Proposal to Ban Banks from Creating Money **Eliot Spitzer was one of the few government prosecutors willing to go after Wall Street banks for […]

  8. […] *In a sovereign money system, the public (as opposed to private banks) maintains the sole right of issuing and regulating money. See An IMF Proposal to Ban Banks from Creating Money […]

  9. […] The film implies that more market regulation is needed to prevent this type of market volatility. I disagree. In my mind, the best way to strip Wall Street of this vested interest is to strip banks of the power to create money out of thin air and restore money creation to public control (as Andrew Johnson and Abraham Lincoln attempted to do.) See An IMF Proposal to Ban Banks from Creating Money […]

  10. […] The film implies that more market regulation is needed to prevent this type of market volatility. I disagree. In my mind, the best way to strip Wall Street of this vested interest is to strip banks of the power to create money out of thin air and restore money creation to public control (as Andrew Johnson and Abraham Lincoln attempted to do.) See An IMF Proposal to Ban Banks from Creating Money […]

  11. […] The corporate media glosses over these details because they don’t really want Americans to understand where US dollars come from – that 97% of the dollars in circulation are created by banks out of thin air and loaned to us at interest. Or that depending on private banks to create and control our money supply is a big reason for our current economic crisis. See Stripping Banks of Their Power to Issue Money […]

  12. […] The corporate media glosses over these details because they don’t really want Americans to understand where US dollars come from – that 97% of the dollars in circulation are created by banks out of thin air and loaned to us at interest. Or that depending on private banks to create and control our money supply is a big reason for our current economic crisis. See Stripping Banks of Their Power to Issue Money […]

  13. […] *In a sovereign money system, the public (as opposed to private banks) maintains the sole right of issuing and regulating money. See An IMF Proposal to Ban Banks from Creating Money […]

  14. […] Ver Una propuesta del FMI para la Prohibición de Bancos de creación de dinero . ** Eliot Spitzer fue uno de los pocos fiscales del gobierno dispuestos a ir detrás de los bancos […]

  15. […] cause recessions and expanding it to cause inflation. See How Banks Invent Money Out of Thin Air , Stripping Banks of Their Power to Issue Money and 97% […]

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