Pop The Bubble Before The Real Fiscal Cliff: The Chicago Plan



Can we really pop our bubble economy before it bursts in the form of negligent suicide?

A 1930′s economic study advocating that we walk away from a debt-based currency has been recently run through advanced computer models at the IMF, and the results suggest it would work marvelously… The Chicago Plan Revisited (pdf).

Any educated person knows that fractional reserve banking is a leading horse in the race to the real “fiscal cliff” — the end point of a self-destructive system that just so happens to feed off of the ground it’s running on. A perpetual growth-based economy relies on the growth of using up resources that keep us eating, drinking, sheltering and moving, and as people race to pay off growing debts created out of thin air, the problem gets exponentially worse, literally eating and burning away the resources they need in the future to continue civilization.

We call it, “negligent suicide.”

The paper argues that fiat currency can be, and has been, powerful and beneficial to the general public if held by the state, not a few zillionaires who developed a system gamed to give them ever more power. It does not need to be backed by gold, but by the government, who would not link its borrowing to its currency’s value.

From a piece in the Daily Telegraph’s Finance section:

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined…

The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on “fractional reserve banking”. If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.

Some readers may already have seen the IMF study, by Jaromir Benes and Michael Kumhof, which came out in August and has begun to acquire a cult following around the world….

The IMF paper says total liabilities of the US financial system – including shadow banking – are about 200pc of GDP. The new reserve rule would create a windfall. This would be used for a “potentially a very large, buy-back of private debt”, perhaps 100pc of GDP.

More study should be done, exploring what this would look like under an already corrupt, overly-stretched US government, currently wholly owned by the banking system, but one thing is clear: as the dude sitting in the horse carriage, if you don’t want your society and you to die a nasty, senseless death akin to negligent suicide, you’ve got to do something to stop the horses from running you over that cliff. Slowing them down or veering them off a degree or two still leads them to the same nearing cliff, and there’s plenty of history indicating that it’ll suck.

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