Proposals For Monetary Reform Research Articles

Overcoming Recession and Financial Instability in a Global Financialised Economy? The Contribution of the ‘Crank Heretic’ Robert Eisler

ABSTRACT Recurrent shocks — be it geopolitical instability, pandemics, financial crises or climate change and climate transition effects — pose difficulties to permanently ensure a prosperous economy. The writings of Robert Eisler represent an early attempt to design an economic system to permanently stabilise the price level, to solve unemployment and prevent economic crises. Against the backdrop of the Great Depression of the 1920s, Eisler proposed an extensive reform package including public work programmes financed by debt monetisation, the introduction of a parallel currency to level out price level fluctuations as well as instruments for exchange rate stabilisation. Eisler’s work demonstrates the seminal insights that national economies are embedded in a global financial system and that any attempts to reform financial systems require international cooperation in order to be effective. Notwithstanding, Eisler is largely ignored both by monetary reformers and conservative economists, who, if at all aware of his work, declared him a ‘monetary heretic’. This paper analyses Eisler’s entire set of reform ideas for the first time and positions it within current economic policy discourses on the limits to monetary policies, on effective demand and public work programmes and the need to consider international capital when drafting monetary reform proposals.

Milton Friedman and the Road to Monetarism: A Review Essay

Milton Friedman and the Road to Monetarism: A Review Essay

1930년대 초 남경정부의 금본위제 도입 시도와 그 의미

This paper is a study on the attempts to introduce the gold standard system during the Nanjing Government. From February 1, 1930 to August 19, 1948, the Nanjing Government implemented a system to collect tariffs in gold units. And through this, it was possible to keep the tax revenue relatively stable during the period when the monetary value was unstable. In the previous study, the influence of the Kemmerer Committee was posited by paying attention to the commonalities between “孫” and “海關金單位” in the monetary reform proposal submitted by the Committee. However, the tendency to approach it from a financial perspective was remarkable, and no concrete analysis was conducted on the nature of currency reform.<BR> In 1928, the Nanjing Government set the introduction of the gold standard as the final stage of monetary reform, and decided to implement “廢兩改元” as a preparatory stage. The reform policy decided at the 1928 Conference, despite differences in scope and degree, yielded a certain degree of achievement. However, in matters related to monetary reform, it is recognized that “廢兩改元” could not be initiated until 1933, when certain external conditions were established, while it was not implemented due to an unstable government.<BR> However, in the context of the collapse of the international gold block, “廢兩改元” could not be a preparatory stage for the introduction of the gold standard determined in 1928. Previous studies only mentioned that this could not be carried out in the aftermath of the Great Economic Depression, but there was no specific analysis on the issue of the introduction of the gold standard. This paper attempted to analyze this issue in reviewing the establishment and activities of the Kemmerer Committee.<BR> The monetary reform policy decided at the 1928 Conference led to a contact with Edwin Walter Kemmerer, a global gold standard money reform expert, in August 1928. The Kemmerer Committee, formed in February 1929, submitted proposals for monetary reform, “Project of Law for the Gradual Introduction of a Gold Standard Currency System in China together with a Report in Support thereof” and “Report on Project of Law for Placing Customs Duties on Imports rom abroad upon a Gold Basis”.<BR> This paper analyzed the topical reform of the gold standard through these reform proposals that were not noticed in previous studies. This analysis can explain the process of the Nanjing government

Financial Stability and Money Creation

AbstractShould money issuance be a licensed privilege, and if so, who should issue money? Morgan Ricks argues that free-wheeling money issuance by non-licensed shadow banks was a major factor behind the global financial crisis. Still, the regulatory reform agenda after the crisis has mostly been directed at banks (with a few exceptions). This has led to an enormously complex body of regulations that threatens to bring traditional banking to its knees. Ricks would instead restore money issuance as a privilege and leave other financial institutions with a lighter regulatory regime. He is not, however, in favor of narrow banking – as favored by Irving Fisher – but would leave credit allocation with the private banking sector. In this way his proposals are both radical and conservative. He brings a refreshing look to the regulatory debate, and the book is full of novel insights. His discussion of banks and deposit regulations should be required reading for all bank regulators, although his proposal may fall on barren ground in the current political environment. Nevertheless, the book should serve both as a primer for future monetary reform proposals, but also as a starting point for a pragmatic bipartisan debate about financial reform today.

Money reform and the Eurozone crisis: panacea, utopia or grassroots alternative?

The economic crisis that broke out in 2007–2008 and the ongoing crisis in the Eurozone has given a new urgency to discussions about alternatives to capitalism, and a new salience to proposals for monetary reform and for grassroots economic alternatives. Using Marx and Engel’s concept of Utopianism as an analytical tool to distinguish between what is the work of ‘cranks’, and what of ‘brave heretics’, the paper examines four monetary responses to the crisis: (1) Positive Money’s call for a state monopoly on money issuance; (2) the reintroduction of national currencies, in particular the drachma; (3) proposals for state-issued parallel currencies; and (4) grassroots or subaltern money networks of various types. The paper argues that the dominance of neoliberal ideology at a European Union level means that proposals for monetary reform at the international and national level are unlikely to be taken seriously by elites and consequently seem utopian in Marxian terms. There seems to be little political will to engage with the complexities of and potential opportunities of a more diverse monetary architecture within the Eurozone, and a perceived need to ‘discipline’ potentially ‘irresponsible’ governments like Greece’s SYRIZA, although ‘responsible’ actors in the north of the Eurozone get more leeway. The potential of grassroots alternatives is also too often overstated. While alternative currency networks developed as part of the Greek crisis are not particularly well developed, alternative currency networks could work as sites of innovation, normalising the idea that there are progressive alternatives to Eurozone breakup.

A National Dividend vs. a Basic Income – Similarities and Differences

AbstractThe following article will briefly compare and contrast the Social Credit proposal of a National Dividend, which was one of the three key planks in C.H. Douglas’ monetary reform proposals, with the contemporary call for the introduction of a basic income. In some ways, the National Dividend and the basic income (as typically conceived) are quite similar. One of the basic purposes of each is to eliminate or at least reduce poverty by providing each citizen with a secure income that is independent of employment. However, when it comes to the structural nature of the proposed benefit, its relationship to the existing social structure, and, finally, the methods that have been proposed for financing it, there are significant differences between the National Dividend and a conventional basic income that must not be overlooked.

Polozapomenuté postavy ekonomického myšlení - Silvio Gesell

Silvio Gesell was a German tradesman, self-educated economist, globetrotter and social reformer with a nonconformist worldview. He is known for his proposals for monetary reform. He is famous for his experiments with interest-free currency. Gesell's thought inspired a plenty of political and civil movements, and has a few followers even to this day.

Geldreform als Weg aus der Krise?

Monetary reform proposals can be characterized by their position taking on two fundamental debates within monetary theory: What is the nature of money (credit or asset)? Who should issue money (the state or private entities)? In opting for a radical departure from the hybrid nature of the current monetary system, reform proposals suffer from a gap between far reaching legitimacy claims and neglected functionality problems in monetary governance.

How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking

Thanks to the recent banking crises interest has grown in banks and how they operate. In the past, the empirical and institutional market micro-structure of the operation of banks had not been a primary focus for investigations by researchers, which is why they are not well covered in the literature. One neglected detail is the banks' function as the creators and allocators of about 97% of the money supply (Werner, 1997, 2005), which has recently attracted attention (Bank of England, 2014a,b; Werner, 2014b,c). It is the purpose of this paper to investigate precisely how banks create money, and why or whether companies cannot do the same. Since the implementation of banking operations takes place within a corporate accounting framework, this paper is based upon a comparative accounting analysis perspective. By breaking the accounting treatment of lending into two steps, the difference in the accounting operation by bank and non-bank corporations can be isolated. As a result, it can be established precisely why banks are different and what it is that makes them different: They are exempted from the Client Money Rules and thus, unlike other firms, do not have to segregate client money. This enables banks to classify their accounts payable liabilities arising from bank loan contracts as a different type of liability called ‘customer deposits’. The finding is important for many reasons, including for modelling the banking sector accurately in economic models, bank regulation and also for monetary reform proposals that aim at taking away the privilege of money creation from banks. The paper thus adds to the growing literature on the institutional details and market micro-structure of our financial and monetary system, and in particular offers a new contribution to the literature on ‘what makes banks different’, from an accounting and regulatory perspective, solving the puzzle of why banks combine lending and deposit-taking operations under one roof.

David Hume and Irving Fisher on the quantity theory of money in the long run and the short run

David Hume's classic statement of the quantity theory of money and the specie-flow mechanism of international adjustment in 1752 and Irving Fisher's authoritative restatement of the quantity theory in 1911 shared a concern with simultaneously upholding both the long-run neutrality and the short-run non-neutrality of money. This paper compares their approaches to attempting this reconciliation of the long run and short run, noting their shared emphasis on ‘illusion’ as the basis of short-run non-neutrality, and places their contributions in historical context. I argue that Hume and Fisher shared the same view of how automatic adjustment of the balance of payments worked under the gold standard, with Fisher's monetary reform proposals being an attempt to prevent the working of Hume's automatic adjustment mechanism.

Global Imbalances and the Key Currency Regime: The Case for a Commodity Reserve Currency

This paper considers Kaldor's 1964 proposal for a commodity reserve currency (CRC) as a serious alternative to the current system, which has the US dollar as the world reserve currency. It argues that the reserve-currency status of the US dollar helped to create global imbalances and financial fragility pre-empting the current crisis. The primary goal of the CRC was to resolve the 1960 Triffin dilemma, which remains a problem today. Following a brief history of alternative monetary reform proposals, the CRC is outlined. Backed by a basket of 30 or so commodities, the CRC would fix their price index in terms of the international reserve and reduce the disorderly swings in individual commodity prices. Sovereign governments would be free to fix or float their national currencies to the CRC. With growing fears over global warming and national resource security, particularly in the world's poorest countries, the introduction of a CRC could reduce supply constraints, stabilize costs of production, promote global effective demand from the periphery and balance growth between periphery and core countries.

Mises on Monetary Reform: the Private Alternative

This paper discusses Ludwig von Mises's proposals for monetary reform. We will largely focus on technical aspects—the concrete practical steps he recommended—without detailing how these relate to his general conceptions of money and of a sound monetary order. We will highlight two characteristic features of Mises's proposals. One, he stressed the role of the competitive market process and of private initiative in establishing a monetary order based on gold, effective gold coin circulation, and 100% reserve banking. Two, he presented an original scheme for privatizing the control of the money supply.

A framework for the ex ante analysis of monetary reforms

Proposals for monetary reform based on inflation targeting, in Iraq and elsewhere, face a variety of practical and theoretical difficulties. In evaluating attempted reforms based on inflation targeting, we suggest some propositions broadly consistent with the new institutionalist critique. In particular, we stress the importance of recognizing path‐dependent features of the economic system. An awareness of the reduced generality of theoretical results in light of institutional limitations, combined with an impossibility criterion for economic policy technologies, holds promise for designing a set of readily attainable reforms. We argue that these criteria, far from being esoteric, actually interact in a way that underpins foundational results in monetary theory due to James E. Meade and Robert A. Mundell.

After the Age of inflation: Austrian proposals for monetary reform

After the Age of inflation: Austrian proposals for monetary reform

Free banking and credit creation: Implications for business cycle theory

For the element of Time, which is the center of the chief difficulty of almost every economic problem, is itself absolutely continuous: Nature knows no partition of time into long periods and short; but the two shade into one another by imperceptible gradations, and what is the short period for one problem is a long period for another. (Marshall 1936) W hile the element of time may be the chief difficulty of almost every economic problem, the difficulties are most apparent and most persistently resist generally accepted solutions in the area of monetary theory and macroeconomics. Money, which simultaneously functions as a medium of exchange and a store of value, may be viewed as the quintessential present good or as a future good, the most liquid store of value. This dual nature of money has been the center of macroeconomic controversy since the time of the classical economists. The Austrian business cycle theory is a blend of monetary and capital theory and highlights coordination problems connected to “time and money.” In the framework developed by Ludwig von Mises, banks create money by creating credit. This created credit finances investment in excess of savings, distorts the structure of production, and sets the stage for the boom–bust cycle. But what is created credit and when and how do banks create credit? Different answers to this question yield different implications for business cycle theory, research, and monetary policy, as well as different monetary reform proposals. Section two examines the classical roots of the time, money,

An End to Private Banking: Early New Deal Proposals to Alter the Role of the Federal Government in Credit Allocation

In the 1930s, monetary reform proposals put forward by economists sought to avoid the socialization of lending by facing squarely the problem of distinguishing between money and credit. Had these proposals been fully implemented in place of the New Deal banking legislation, the role of the federal government in credit allocation might have been radically different. In this paper, these proposals will be evaluated and the reasons they were not adopted will be examined. Lessons can then be drawn for policy changes today that would both enhance monetary control and reduce the demands for more federal government credit allocation. Copyright 1994 by Ohio State University Press.

Nominal anchors for monetary policy: a doctrinal analysis

Volatility of the general price level has long been an issue of concern and debate in economics and government policies. Periods of price-level instability have stimulated proposals for monetary reform aimed either at price-level stabilisation or mitigating the adverse effects of price-level instability. The nominal anchor issue refers to the orientation of monetary policy towards the goal of providing a stable price level. JEL Codes: E52

Free Banking and Monetary Reform

The power of the state to issue currency and control the monetary system is so entrenched, and the presumption among economists that money must be supplied monopolistically by a central authority is so widespread, that the notion that money could be supplied competitively has rarely been taken seriously. This book boldly challenges the conventional view that the state must play a dominant role in the monetary system. Part I explores the historical evidence and examines how a well-developed monetary system might have developed without any special role for the state. Part II offers a theory for a competitive supply of money and uses it to shed light on the development of monetary theory and the course of monetary history over the past two centuries. In Part III the author outlines new proposals for monetary reform that will protect the financial system against instability and will ensure macroeconomic stability.

On the economics of private money

The application of laissez-faire to the monetary system is a key ingredient of important proposals for monetary reform, both new and old, that seek to discipline government creation of money through competition. This paper provides an overview of issues to be encountered in the construction of theoretical models of private monetary economies, including consideration of market imperfections that have been hypothesized to arise in these systems. Further, some descriptive history of the less regulated monetary systems of 19th century New York is undertaken, with an emphasis on discussing the nature of market generated banking and monetary institutions in light of these critiques.

AN ESSAY ON THE PURE THEORY OF COMMODITY MONEY *

CLASSICAL authors like J. S. Mill (1848) and early neoclassical authors like W. S. Jevons (1875, 1884), L. Walras (1874, 1886) or A. Marshall (1871, 1887, 1899, 1923) premised monetary theory on an endogenously-supplied commodity money produced under free competition. This essay views their problem in modern dress, eschewing any attempt at exegesis or criticism of their writings. A clearer appreciation of the conceptual issues certainly assists understanding of nineteenth century monetary thought and phenomena. But it also illumines matters of perennial interest for monetary theory and proposals for monetary reform. Commodity money has been involved in several modern discussions, such as Friedman (1949), Buchanan (1962), Burstein (1963, pp. 97-100), Pesek and Saving (1967), Johnson (1967, 1969), Niehans (1969), Chen (1972), Fischer (1972), Luke (1975), all dealing with fundamental monetary issues, and a general treatment seems desirable. The subsequent analysis attempts to establish a framework within which the logical implications of a simple commodity currency can be explored rather than on normative issues as to the practicability, desirability and optimal design of a commodity-currency or commodity-reserve scheme. For fuller consideration of such issues see particularly Friedman (1949), Graham (1962), Johnson (1967) and Barro (1979). The discussion must also be sharply distinguished from recent treatments of the competitive production of bank money by Klein (1974), Gramm (1975) and others. Section I constructs a simple macroeconomic model, incorporating the production of commodity money into an otherwise-orthodox setting, with given factor supplies and demand conditions. The properties of this model are explored in Section Il, while Section III contrasts the use of commodity money with the use of fiat money. It is shown, contrary to common belief, that commodity-money production might lower economic activity and prices for a given money stock, or make them more sensitive to exogeneous disturbance. Section IV develops a limiting partial-equilibrium approach, which is used to explore the implications of previously omitted nonmonetary uses for the monetary commodity and a distributed-lag response of its production. Brief concluding remarks are in Section V. The more involved proofs are relegated to Appendices.