Oct 22, 2012
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?
This article was posted: Monday, October 22, 2012 at 8:16 am