Chicago plan
The Chicago Plan was a proposal bunch of economists at the University of Chicago from 1933, by which a currency reform amid the global economic crisis , the Great Depression should be prepared. According to the plan, banks should be forced to hold 100% reserve against their deposits at the central bank . The aim was to decouple typical banking credit transactions from the possibility of creating and destroying money. The banks should not be allowed to draw more money through lending. This plan was handed over to US President Franklin Roosevelt , who dealt with it extensively, but met with vehement opposition from the academic world and the banks, as lending was a major source of income. The Chicago Plan was ultimately not implemented.
prehistory
After Herbert Hoover passed the Glass-Steagall Act in April 1932, there were two other proposals to stimulate the economy. Wright Patman wanted to direct $ 2.4 billion in veterans . And the Goldsborough Bill envisaged by the Fed , the price level to increase. In mid-April, twelve University of Chicago economists replied to fund federal spending through deficit funding until the gold standard could be abandoned and the currency issued directly. The document also raised concerns about the role of credit and price inflexibility within the economy .
A group of eleven Chicago economists signed a memorandum in January 1933 to use deficit finance to escape the Depression .
construction
The six-page proposal of March 16, 1933 provided for the abolition of the minimum reserve system and the introduction of a full reserve system . It should all demand deposits a full backup , which is a reserve of 100% must be deposited.
The 40 people who signed included a. Frank Knight , Henry Schultz , Henry Calvert Simons and Paul Howard Douglas . They stressed the need for drastic measures in banking , currency and tax policy . So they beat
- a federal guarantee of bank balances ,
- the guarantee only as part of a drastic banking reform to rule out such a crisis, and
- propose a moderate increase in the price level , not aiming for and maintaining it above 15%.
In addition, the Federal Reserve banks are to become completely owned in order to guarantee the balances of all member banks. Here are Federal Reserve Notes as a means of payment are declared and be provided to any extent.
The Federal Reserve banks are to liquidate the remaining assets of the member banks , repay debts and liquidate all existing banks in order to establish new ones that accept bank balances only if they are tied to a 100% minimum legal reserve or Federal Reserve bank balances.
Saving bank balances for investments would expire through investment trusts . Existing banking institutions would continue to perform lending and credit functions under the supervision of the Federal Reserve until the new institutions took their place. From then on, the government should take steps to raise the price level by 15%, but not above.
Finally, the free minting of gold should be lifted, an embargo on gold imports should be imposed, a prohibition on the private export of gold should be introduced, all gold coins should be confiscated in exchange for Federal Reserve banknotes , gold clauses should be lifted in all debt contracts and a substantial gold sale should be carried out and export initiated by the government.
influence
The influence of the Chicago Plan on the New Deal is said to have been ignored by the extensive historiography. Henry A. Wallace forwarded the letter to Franklin D. Roosevelt within less than a week of its publication , hoping it would be given a lot of thought. The bundle of proposals is said to have been known to Roosevelt in the run-up to the Banking Act of 1933. Roosevelt's assessment of the plan remained unknown, but his concerns should have been incorporated into his concerns before Irving Fisher's unfortunate attempts to get Roosevelt's support for his 100% reserve plan .
The plan has also been incorporated into the legislature of Senator Bronson Cutting and other progressives .
When a recession broke out again in the US in the late 1930s , contents of the Chicago Plan were revisited in A Program for Monetary Reform , but did not make it into the legislature .
In 2012, the IMF published a study that takes up the Chicago Plan. The study, The Chicago Plan Revisited , does not explicitly reflect the position of the IMF, but represents a contribution to the discussion of individual IMF employees. Working papers are subject to strict internal quality control before they are published.
Individual evidence
- ↑ The "Chicago Plan" taken up again
- ↑ a b c d e f g h i j k Ronnie J. Phillips : The 'Chicago Plan' and New Deal Banking Reform, Working Paper No. 76 (PDF; 283 kB), Levy Economics Institute from June 1992
- ↑ Jaromir Benes , Michael Kumhof : The Chicago Plan Revisited (PDF; 1.1 MB), International Monetary Fund from August 2012
- ↑ IMF researchers play through radical banking reform , Handelsblatt Online from August 16, 2012