What if there was a financial system that would eliminate the need for the central government to issue government of India bonds through RBI to fund the fiscal deficit or that would end the practice of fractional reserve banking through a CRR of 4.25%? A surprising new IMF research paper entitled ‘The Chicago Plan Revisited’ by Jaromir Benes and Michael Kumhof is making waves in economic circles, especially with monetarists. The paper suggests that the world would be much better off if we adopted a system where the banks did not create our money. So, instead of a system where more money is only created when more debt is created through the money-multiplier effect, we would have a system of debt-free money that is created directly by the central government. There have been others that have suggested such a system before, but to have an IMF research paper actually recommend that such a system be adopted is a big deal...........
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1 comment:
Pray God, our FM doesn't read this. Hopefully he may not. After all, he took a few days to read the last few paragraphs of RBI's October 2012 Monetary Policy Statement!
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