In The Shifts and the Shocks, Martin Wolf – one of the world’s most influential economic commentators – presents his analysis of the economic course of the last seven years.
Wolf refers to the Chicago Plan about 10 times throughout the Solutions part of the book, and features it in two different sections in the concluding chapter.
“The thrust of the plan, which was first proposed in 1933 at the trough of the Great Depression, was to give government the exclusive right to create money, thereby taking it altogether away from private businesses (that is, banks). All versions of the plan required 100 per cent reserve backing of deposits.”
The book ‘Modernising Money‘ is mentioned too:
“More recently, Andrew Jackson and Ben Dyson have endorsed a similar approach for Positive Money, a UK campaigning organization. The crucial point is that these proposals for replacing private debt-created money with government-created money are perfectly feasible and would bring substantial benefits: far less private debt and far less private indebtedness.”
- Banks creating money is destined to lead to instability and crisis.
- The idea of transferring the power to create money to the state is very appealing.
- It’s politically way too challenging right now.
- But it’d be amazing if smaller countries e.g. Iceland were to experiment
- And state-created money is the alternative to relying on a dangerous leveraging of private debt.
“Our big problem is the addiction to ever-rising debt, and the most worrying debt is not the public debt with which policy makers are obsessed but private debt, whose collapse, as we have seen, creates huge public-sector debt problems. It is extremely disturbing however that the policies being pursued in the big high-income economies amount to an attempt to get the credit machine going again.”
“The people who have developed the critical perspectives differ on political values and so on whether the aim should be less state and more private or less private and more state intervention. They differ on whether policy should be guided by rules or discretion. They differ on whether the state should have an active role in managing the economy. They differ on whether money and credit are the sole source of instability in the economy. But, on one point, they agree: the balance between the role of the state as ultimate supplier of money, and that of the private sector as actual creator of almost all of the credit and money we use, is highly destabilizing. We have made a pact with the devil. It is not a new bargain. On the contrary, it goes back many centuries. But we have recently been reminded that the dangers are huge. Moreover, the liberalization of finance seems to lead to crises almost automatically. Surely this strongly suggests a need for a new kind of system.”