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Old Aug 25, 2012, 02:54 PM
Scotland the Brave
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How to achieve 10% increase in economic growth with 0% inflation

...and significantly reduce debt:

According to an IMF Working Paper:

Quote:
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

The Chicago Plan Revisited
Bill Still, author of Money Masters, who competed for this year's Libertarian party presidential nomination, explains further:

SR 67 IMF Paper Supports Monetary Reform???-Bill Still.mov (6 min 6 sec)


What is ''bank created money'' and why does he refer to our money supply systems as ''debt money'' systems? As one economist said: ''the process by which banks create money is so simple that the mind is repelled.''

As clearly explained by the Governor of the National Bank of Canada in 1939:

Quote:
Q. But there is no question about it that banks create the medium of exchange?

Mr. Towers: That is right. That is what they are for... That is the Banking business, just in the same way that a steel plant makes steel. (p. 287)

The manufacturing process consists of making a pen-and-ink or typewriter entry on a card in a book. That is all. (pp. 76 and 238)

Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money. (pp. 113 and 238)

Broadly speaking, all new money comes out of a Bank in the form of loans.

As loans are debts, then under the present system all money is debt. (p. 459)

Read more:

http://www.michaeljournal.org/appenE.htm
Here is the original document, in part:

http://www.scribd.com/doc/38349556/9...ADA-Pg-461-500

Thomas Edison agreed:

Quote:
It is absurd to say that our country can issue $30,000,000 in bonds, but not $30,000,000 in currency. Both are promises to pay, but one promise fattens the userer and the other helps the people.

It is the people who constitute the basis of government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest-bearing currency, instead of bankers receiving the benefit of the people's credit in interest bearing bonds? If the United States government will adopt this policy of increasing it's national wealth without contributing to the interest collector - for the whole national debt is made up of interest charges - then you will see and hear of progress and prosperity in this country such as could never have come otherwise.

http://standingunited.info/wp-conten...bondholder.pdf
Further info:

Quote:
If you organise a loan from a bank, the bank manager increases your account without decreasing any other customer's account. In today's digital world this involves typing a higher bank balance for you and recording a corresponding debt.

There are certain criteria to meet before a bank manager creates new money for a loan. For example banks create money in proportion to their reserve accounts at the Central Bank. They may also look after their solvency and liquidity in certain ways. But the fact still remains that once a loan application is approved the bank creates the money for the loan by typing a new balance for the borrower.

The consequence of this is that every euro created this way has a matching debt. Any new euro will also have an equal debt which is why the debt crisis is so hard to solve.

http://www.sensiblemoney.ie/the-issues/
Also consider that because money created this way comes with interest attached, the only way enough additional money to pay the interest can come to exist is in the form of another bank loan. As this ponzi scheme we call money has been in place for a long time, consider that a ''mature economy'' is one which is now struggling to pay the compound interest on it's money supply, which has built up over the years, while an ''emerging economy'' is one in which a far higher proportion of new money is being created for the first time, so doesn't have the same compound interest problem.

Not only do commercial banks have the privilege of supplying our money at interest, strangling our economies as the interest compounds, but as we can see by comparing total bank deposits (the sum of customers accounts), and total bank reserves, most of the ''money'' they supply, that we all indirectly pay interest on, doesn't even exist.

Dusty
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Old Aug 25, 2012, 03:28 PM
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A far walk from "I'll trade you my milk for your tomatoes."
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Old Aug 25, 2012, 03:35 PM
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Why, this would limit the use of inflation to finance spending by secretly taxing the value of all money! And that in turn would tie the hands of govt spenders. We can't have that. Ask any supporter of the Federal Reserve.
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Old Aug 25, 2012, 04:45 PM
Scotland the Brave
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Originally Posted by MtnGoat View Post
Why, this would limit the use of inflation to finance spending by secretly taxing the value of all money! And that in turn would tie the hands of govt spenders.
Not necessarily, the article said inflation can drop to 0%. Unless laws were put in place to restrict the printing of new money, then governments could print new money as easily as governments of countries with their own central banks can currently issue new bonds.

But when you consider that the main cause of the current state of public finances under the current system is the increase in spending and decline in tax revenue caused by the financial crash, it's quite conceivable that the books could easily be balanced with 10% economic growth, due to the resulting increase in tax revenue and the decline in welfare claims that such growth would entail, savings in interest on the national debt, and of course an end to corporate welfare in the form of bank bailouts.

Also, as economies grow and populations expand, deflation would occur unless new money continually enters the economy. So if growth of 10% per annum means that the money supply has to be increased by the same amount, in order to keep inflation/deflation at 0%, then the government can simply print and spend this money into the economy, and reduce taxes by the equivalent amount, since that's money it will no longer need to raise by tax revenue.

One question that's often asked when full reserve banking is mentioned, is how would people get loans? Banks or other agencies could still arrange loans and charge a fee for doing so, but as the government would print the money, the interest payments would also go back into the public purse. The increase in money supply could be regulated by the government either re-lending the money, or destroying it when it's repaid. Either way, mortgage interest would be another form of revenue for the government, enabling taxes to be cut further.

Dusty
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Old Aug 25, 2012, 07:49 PM
LcJ
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If Banks are reqyured to maintain 100% Reserves on all deposits then they could only be lending their own money. If that was the case, there would be no interest on deposits paid because they could not earn anything off those deposits. Banks would have to charge storage and accounting fees to handle the money. That would make them in essence money protectors instead of bankers.

In essence a banking system as such cannot operate if they are required to have 100% reserves. I could easily be wrong but I doubt it.

Something most people don't know, and it could have changed, but local payday loan and finance companies cannot lend their own money, they have to borrow the money they lend from other financial institutions.

Back in the late 60's Commercial Credit was buying banks so they could lend themselves money. After the acquire banks in about 20 states, the Federal Reserve caught on and they had to sell the banks.

It would be interesting to see how all of this works. I would fear that only one person would be allowed to control the entire wealth of the country.
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Old Aug 28, 2012, 04:11 AM
Scotland the Brave
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Originally Posted by LcJ View Post
If Banks are reqyured to maintain 100% Reserves on all deposits then they could only be lending their own money. If that was the case, there would be no interest on deposits paid because they could not earn anything off those deposits. Banks would have to charge storage and accounting fees to handle the money. That would make them in essence money protectors instead of bankers.
As soon as banks are allowed to lend other people's money, then the money multiplier takes effect, and bank created money can exist as debt. It would surely be preferable to have 10% annual growth, 0% inflation, no national debt, and considerably lower taxes, even if you have to pay a bank a few bucks a year to look after your money, rather than receive 2% interest or whatever. Even the lack of inflation alone, would be likely to outweigh that.

Quote:
In essence a banking system as such cannot operate if they are required to have 100% reserves.
Indeed, that is the point.

Quote:
Something most people don't know, and it could have changed, but local payday loan and finance companies cannot lend their own money, they have to borrow the money they lend from other financial institutions.

Back in the late 60's Commercial Credit was buying banks so they could lend themselves money. After the acquire banks in about 20 states, the Federal Reserve caught on and they had to sell the banks.

It would be interesting to see how all of this works. I would fear that only one person would be allowed to control the entire wealth of the country.
If the idea would be implemented, it would be elected governments that would be in charge of creating money, not unelected banks. And it would be government and public that would benefit, to the detriment of the banks.

Dusty
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Old Aug 28, 2012, 04:43 AM
Scotland the Brave
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Consider this: when you get a bank loan to buy a house or whatever, the bank didn't give you anything, because the money they lent you didn't exist until they typed it into your account. You, OTOH, gave the bank the amount of money they loaned you, when you signed on the dotted line. Your loan is now an asset to the bank, which it can choose to sell, even though it cost the bank nothing to make.

To me that sounds like a form of slavery, although even slave owners had to feed and clothe their slaves. Sure, we can choose not to borrow money from banks, but if nobody borrowed money and outstanding loans were repaid, there would be no money. Banks would have no reserves to give to customers, remembering that your bank statement shows how much the bank owes you, not how much you have in your account.

Here is an ad for a book which spells out how money is created, and a possible reason why so few people seem to accept the concept:

Quote:
The basic analysis of Where Does Money Come From? is neither radical nor new. In fact, central banks around the world support the same description of where new money comes from. And yet many naturally resist the notion that private banks can really create money by simply making an entry in a ledger. Economist J. K. Galbraith suggested why this might be:

The process by which banks create money is so simple that the mind is repelled. When something so important is involved, a deeper mystery seems only decent.



This book aims to firmly establish a common understanding that commercial banks create new money. There is no deeper mystery, and we must not allow our mind to be repelled. Only then can we properly address the much more significant question: Of all the possible alternative ways in which we could create new money and allocate purchasing power, is this really the best?

http://www.neweconomics.org/publicat...oney-come-from
Again, here are the main things that the IMF working group says would happen if this system were to be put in place:

Quote:
(1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money.

(2) Complete elimination of bank runs.

(3) Dramatic reduction of the (net) public debt.

(4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation.

Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
Here are some of the highlights from the history of government versus privately supplied money which begins on page 12, and is particularly interesting:

Quote:
The monetary historian Alexander Del Mar (1895) writes: “As a rule political economists do not take the trouble to study the history of money; it is much easier to imagine it andto deduce the principles of this imaginary knowledge.” Del Mar wrote more than a century ago, but this statement still applies today.

The historical debate concerning the nature and control of money is the subject of Zarlenga (2002), a masterful work that traces this debate back to ancient Mesopotamia,Greece and Rome. Like Graeber (2011), he shows that private issuance of money has repeatedly led to major societal problems throughout recorded history, due to usury associated with private debts.16 Zarlenga does not adopt the common but simplistic definition of usury as the charging of “excessive interest”, but rather as “taking something for nothing” through the calculated misuse of a nation’s money system for private gain.

A discussion of the crises brought on by excessive debt in ancient Mesopotamia is contained in Hudson and van de Mierop (2002). It was this experience, acquired over millennia, that led to the prohibition of usury and/or to periodic debt forgiveness(“wiping the slate clean”) in the sacred texts of the main Middle Eastern religions. The earliest known example of such debt crises in Greek history are the 599 BC reforms of Solon, which were a response to a severe debt crisis of small farmers, brought on by the charging of interest on coinage by a wealthy oligarchy. It is extremely illuminating to realize that Solon’s reforms, at this very early time, already contained many elements of what Henry Simons (1948), a principal proponent of the Chicago Plan...

Solon’s reforms were so successful that, 150 years later, the early Roman republic sent a delegation to Greece to study them. They became the foundation of the Roman monetary system from 454 BC (Lex Aternia) until the time of the Punic wars (Peruzzi(1985)).
Quote:
It was the English Free Coinage Act of 1666, which placed control of the money supply into private hands, and the founding of the privately controlled Bank of England in 1694, that first saw a major sovereign relinquishing monetary control, not only to the central bank but also to the private banking interests behind it. The following centuries would provide ample opportunities to compare the results of government and private control over money issuance.

The results for the United Kingdom are quite clear. Shaw (1896) examined the record of monarchs throughout English history, and found that, with one exception (Henry VIII),the king had used his monetary prerogative responsibly for the benefit of the nation, with no major financial crises. On the other hand, Del Mar (1895) finds that the Free Coinage Act inaugurated a series of commercial panics and disasters which to that time were completely unknown, and that between 1694 and 1890 twenty-five years never passed without a financial crisis in England.
Quote:
The United States monetary experience provides similar lessons to that of the United Kingdom. Colonial paper monies issued by individual states were of the greatest economic advantage to the country (Franklin (1729)), and English suppression of such monies was one of the major reasons for the revolution (Del Mar (1895)). The Continental Currency issued during the revolutionary war was crucial for allowing the Continental Congress to finance the war effort. There was no over-issuance by the colonies, and the only reason why inflation eventually took hold was massive British counterfeiting (Franklin (1786), Schuckers (1874)).17 The government also managed the issuance of paper monies in the periods 1812-1817 and 1837-1857 conservatively and responsibly (Zarlenga (2002)). The Greenbacks issued by Lincoln during the Civil War were again a crucial tool for financing the war effort, and as documented by Randall (1937) and Studenski and Kroos (1952)their issuance was responsibly managed, resulting in comparatively less inflation than the financing of the war effort in World War I
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Old Aug 28, 2012, 05:59 AM
Scotland the Brave
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Here we can see how bank deposits, and thus debt, has increased in the UK:

http://en.wikipedia.org/wiki/Money_s...United_Kingdom

While bank reserves and cash in circulation do not increase by anywhere near the same amount:

http://blogs.telegraph.co.uk/finance...nterest-rates/

...for which the only reasonable explanation is compound interest on our money supply.

It also shows the effects of quantitative easing, which massively increases bank reserves, and that the money does not reach the economy. The only way it could do so would be for the banks to encourage people with savings to withdraw it from their accounts and spend it. But I see little incentive for the banks to want to do that, or for people with savings to want to spend them.

If OTOH the government had control of creating money, it could simply create some and spend it into the economy, rather than having to borrow it by issuing bonds. It would not have to pass through the banking sector at all. The former mostly benefits the people, while the latter mostly benefits the lender.

The very fact that quantitative easing is carried out in the first place, shows the dire state of our economy. Since normally, banks create their own reserves by making loans, the only risk being that loans might not be repaid. Those reserves would of course be transferred around the banking sector, and some withdrawn in cash, rather than remain as reserves with any particular bank. Why take that risk now, in an economy burdened by compound interest on the money that banks create, when they can get free money from the government, in exchange for ''assets'' which are mostly government bonds?

Dusty
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Old Aug 29, 2012, 12:10 PM
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There is a far better solution proposed by USA guy Mike Montagne and it is called Mathematically Perfected Economy

It takes a bit to learn but its fairly simple mostly barter with a special type of currency that can never suffer inflation

Mathematically Perfected Economy 1/5 (10 min 55 sec)


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Old Aug 29, 2012, 12:13 PM
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Originally Posted by dll932 View Post
A far walk from "I'll trade you my milk for your tomatoes."
But better than, "I drink your milkshake!"

i drink your milkshake (0 min 45 sec)
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Old Aug 30, 2012, 06:27 AM
Scotland the Brave
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A 12 year old figures out that this is the biggest problem we face today:

Girl,12 denounces the collusion between banks and government in the Canadian financial system (6 min 44 sec)


Ignore the reference to ''Rothschild'' by the youtube user who posted the video.

12 Year Old Girl Tells The SHEEPLE the Truth about ROTHSCHILD CORRUPT BANKERS and ECONOMY (5 min 13 sec)
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Old Aug 30, 2012, 08:04 AM
Alarm Bells Continuing!
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I saw a comment somewhere that during era of a gold standard in the US there was inflation. Can any of you gold bugs confirm or debunk that? If there was inflation does that mean the gold link was just not managed properly?
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Old Aug 30, 2012, 08:32 AM
LcJ
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Originally Posted by Big Foot 48 View Post
I saw a comment somewhere that during era of a gold standard in the US there was inflation. Can any of you gold bugs confirm or debunk that? If there was inflation does that mean the gold link was just not managed properly?
Inflation's first cause is when you increase the cost of productions without increasing the output of production.

If I show a net profit from my corner store of 10% after expenses and the other 90% os broken downs as 25% labor, 45% inventory/operating epenses, 20% taxes. When minimum wage is increased I can either reduce profit or raise selling price. I could just use the 10% but then what is the point of operating if their is no profit which is pointless. The only way to continue is to raise the selling price which leads to inflation.

Government causes inflation by taxation, unfunded mandates, and forced employee costs. In the long run inflation forces the imagined greater and growing differences between the haves and the have nots. It is all relative but the perception is altered by the larger numbers.
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Old Oct 30, 2012, 04:56 AM
Scotland the Brave
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At last, the Chicago Plan Revisited is being discussed in the press.

Quote:
IMF's epic plan to conjure away debt and dethrone bankers

So there is a magic wand after all. A revolutionary paper by the International Monetary Fund claims that one could eliminate the net public debt of the US at a stroke, and by implication do the same for Britain, Germany, Italy, or Japan.

http://www.telegraph.co.uk/finance/c...e-bankers.html
Quote:
Apart from the original concept of it [the IMF], which had some merit, it’s actually pretty to difficult to think of anything at all done by the IMF that’s ever truly benefited humanity. So when two IMF economists, Jaromir Benes and Michael Kumhof produced a paper in August titled “The Chicago Plan Revisited”1, which has the potential to do exactly that – benefit humanity – the world really ought to sit up and take notice.

http://dissidentvoice.org/2012/10/is...-truly-useful/
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Old Oct 30, 2012, 07:20 AM
In Development Now
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Brilliant. We can get rid of debt that the Government created by only giving all our money in the entire western world to the government. Thus eliminating the idea of private ownership of money. And if the Government owns all the money, it's just lending it to you for the purposes it sees fit and all the stuff you buy... just stuff that the Government bought for you.

Freedom... gone.
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