The full paper is well worth reading.
Introduction:
“[Full reserve banking, i.e. preventing banks from creating money] has been proposed and even implemented as a solution to financial instability a number of times in the past. Thus, the idea of monetary reform should be seen as a historical continuum. In the UK the Bank Charter Act of 1844 prohibited private money creation through fractional-reserve banking by requiring that bank notes (which were the prevailing means of payment) should be fully-backed by government money. The National Acts of 1863 and 1864 achieved the same goal in the US.
“The prohibitions, however, did not include bank deposits, which slowly became the dominant means of payment. In the 1930s, the Chicago Plan was almost adopted in the US, but the FRB idea was watered down in the Banking Acts of 1933 (better known as the Glass- Steagall Act) and 1935. Instead of preventing private money creation in the form of bank deposits, the Banking Acts separated commercial and investment banking, provided deposit insurance and improved government’s control over monetary policy and money supply. Currently there are no examples of economies where the majority of money does not come into existence as a consequence of bank lending.
“Now, in the aftermath of the Global Financial Crisis (GFC), preventing private money creation in order to ensure financial stability has once again become a topical issue.”
Source: http://positivemoney.org/2015/10/a-history-of-sovereign-money-proposals-from-patrizio-laina/
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