In a recent Working Paper entitled "The Chicago Plan Revisited" (WP/12/202), IMF staff members Jaromir Benes and Michael Kumhof spoil an otherwise interesting paper by giving an account of the monetary ideas of Adam Smith and Jeremy Bentham which conflict directly with Bentham's own writings on the subject matter. In my view, the point at issue is of fundamental importance as the world community searches for answers to the monetary chaos that has evolved in the post-Bretton Woods era of the past forty years: Do we seek answers in resurgent STATISM in monetary matters, as in the United States (Federal Reserve Board) and the European Union (European Central Bank) at present, or should we first seek to UNDERSTAND the flaws in post-Bretton Woods world monetary arrangements for which STATE and PRIVATE sector agencies are jointly responsible? – Yahoo Groups, Gunner
Dominant Social Theme: If we just give government the money power, we will be free.
Free-Market Analysis: Parts of the alternative Internet media are aflame with excitement over an IMF study recently released, entitled, "The Chicago Plan Revisited" (WP/12/202), by IMF staff members Jaromir Benes and Michael Kumhof.
As we can see from the above Yahoo Groups note, there are likely considerable problems with the IMF analysis from a historical perspective. But in this article, we will try to deal mostly with the modern argument and show once again, as we have before, why private sector money competition is the easiest and most effective way to solve the boom-bust money problem.
We never expected that many of those propagating freedom in the alternative media would suggest that the government should control money. But we've watched what we consider to be this dominant social theme build and build.
It began with Stephen Zarlenga and was advanced by Ellen Brown and her Web of Debt and then more recently a number of blogs attacking Austrian-based free-market economics.
Now, we would not maintain that every one of these actors is controlled by Money Power but the power elite is advantaged by anything to do with government dictats. The elites control the Western world and pursue their goal of world government via mercantilism, the use of government to support private interests.
The most powerful among us control government. The idea that "the people" can "take back" government is probably a canard. It is much more sensible to assume Money Power, one way or another, is BEHIND these suggestions.
Money Power does not care whether its control is exercised publicly or privately. It doesn't care whether a "bankster" is in charge of the money supply or a politician. Both can be controlled and bought.
"No one believes more firmly than Comrade Napoleon that all animals are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?" – George Orwell, Animal Farm, Ch. 5
"Government" money is a default position of the powers-that-be. If "they" cannot control the money supply directly through facilities like the quasi-public/quasi-private Federal Reserve, they will control it through public facilities and make arguments via their surrogates for this sort of remedy.
We see this trend building once again with "The Chicago Plan Revisited." These two authors, IMF staffers, have rediscovered a plan by Irving Fisher, a monetarist, to strip banks of lending power.
Basically, Fisher's plan has similarities with Stephen Zarlenga's plan that calls for full reserve banking and for the government to spend money into existence via huge public works programs.
This is pretty much a step back from monetary crank Major Douglas of social credit fame – who at least wanted government to give people currency directly. But neither Douglas nor anyone else has a convincing argument for how much money is enough – and how much is too much.
In truth, ONLY the private market can do this via monetary competition and the free circulation of gold and silver. Only the market can set the price for money. Anything else is price-fixing and causes great booms and busts.
Freedom's enemies – sophists – will argue that every freeman's activity is a transgression against another. They will even argue that there were great booms and busts during gold-circulating societies. But when money is divorced from authoritarian control it just works better. Its booms are less monolithic. Its interest rates are variable.
But it is a logical fallacy to argue that people should be stripped of freedom because their actions might offend another. In such case let individual justice be pursued. If someone feels damaged or offended, let him or her seek personal redress.
Sophists will argue that interest is usury and ought to be banned. But why should the state interfere with freely entered-into agreements? This is authoritarian, indeed, and does not recognize the time-value of money.
Sophists will argue that gold and silver are controlled by the Rothschilds and therefore any economy using gold and silver is de facto controlled by the banksters. Of course, for several hundred years before the Civil War, the US had a gold and silver economy – and it evidently and obviously was not controlled but was in many ways quite free.
People are free to find mines and dig up their own gold and silver. Drives the elites crazy. That's why the elites are constantly trying to ban and confiscate honest money. The elites hate the free circulation of money metals.
No doubt it would please Money Power if the Federal Reserve collapsed and its functions were fully transferred to government. Nothing would change, after all.
This is probably why Silvio Gesell and Major Douglas (backers of a kind of mutual and social credit) were involved directly or tangentially with the horrible Fabian society. It pleased the socialist Fabians to propagate these schemes that depended for broad implementation on government authoritarianism.
It is why the UN backs mutual credit system LETS and why Margrit Kennedy, a patron saint of anti-interest alternative currencies, came out of UN/UNESCO. See more articles here:
Money is really very simple and depends neither on technocratic schemes or authoritarian nostrums. Ron Paul has it right: Let money and currencies compete. Let fractional reserve banking compete with full reserve as Austrians Selgin and White have suggested. (No, Austrian economics is not monolithic, as sophists suggest.)
But within such a competition, gold and silver shall likely find a rightful place as they have throughout history.
Disregard the blandishments of sophists, of technocrats, of the IMF. There is such a thing as freedom. Free markets, to a greater or lesser degree can and do exist. Don't get caught up in schemes.
Black is not white. Up is not down. Government is not freedom.