We should make it more clear why the monetary system needs to be changed and what our plan is. Much attention is being drawn towards the money creation mechanism.
Economic historian Alexander Del Mar is cited prominently by Zarlenga (Lost Science of Money) and Kumhof (Chicago Plan Revisited) on the subject of private money control. It is from Del Mar that we see that the current system of money private creation was instituted, with support of the British East India Company, in 1666 by the English Free Coinage act. This marked the sovereign’s submission of control over the money supply to private institutions. It cannot be overstated how monumental this change to the monetary system was. This is a sleight of hand at the core of the modern politico-economic system. Financial crises did not exist in England until this change and all of a sudden they became standard. Between 1694 and 1890, 25 years never passed without a crisis in England. These crises are attributed by the likes of Zarlenga to overshooting in the creation of money, credit and debt by private banks in a fractional reserve system.
Martin Wolf’s recent book has paved the way for discussion on monetary reform. It is significant that individuals of his stature in economics are now discussing the fact that since the 17th century, power over the money supply has been relegated to private commercial banks and that this is fundamentally the fragile base of the financial system that leads to systemic crises.
“…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.”
“The ideal way to go….at the national level, would be to adopt something closer to the Chicago Plan, or similar radical monetary proposal”
Statements like these and especially the work of Positive Money have led to an upcoming debate on money creation in Parliament, supposedly the first of this kind is 170 years. “This morning we were told that Parliament will hold a three hour debate on the issue of ‘Money Creation and Society’ on Thursday 20th November.”
This is a recent quote from Baker: “I believe that this is a problem that is absolutely at the heart of our society and what is wrong with our economy. The organisation Positive Money has helped me to campaign on this issue… I want it to be on money creation and society to flesh out both the problem and the range of possible solutions.”
Positive Money’s proposals are similar to the Chicago Plan. There are many advantages to this type of monetary systems but there is reason to think that Chicago Plan like monetary reform is perfectly incorporable for the banking cartel. However, alongside other meritocratic reforms and mutual credit clearing, this may not be the case.
It seems monetary reform may become a legitimate political issue in the near future. Adair Turner will likely be discussing this in his next book and he has recently become more outspoken on the subject. The Bank of England’s first quarter 2014 report on money creation has been a major factor. It has been suggested that the nature of this report was influenced by The Chicago Plan Revisited. Michael Kumhof was partly inspired to do that study by his affiliation with the American Monetary Institute (AMI), which is a forerunner to Positive Money.
AMI’s reform proposals claim many planks on our general platform, like funding for university education, enhanced public education, student debt cancellation, other forms of debt cancellation, physical infrastructure, scientific research and development, support for small and medium sized businesses and full employment.