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The Chicago Plan Revisited
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The Chicago Plan Revisited

Jaromir Benes and Michael Kumhof
IMF, 2012
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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Scientific

Recommendation

International Monetary Fund economists Jaromir Benes and Michael Kumhof dust off a 1930s economic idea and update it with 21st-century analytical tools. During the Great Depression, leading economists proposed “the Chicago Plan” to abolish fractional reserve banking. The goal: to get banks out of the money-creating business and to restore that function to government, thus eliminating bank runs, cutting government debt and smoothing economic cycles. Today, in the aftermath of financial circumstances eerily reminiscent of those of the Great Depression era, Benes and Kumhof provide compelling new evidence that the Chicago Plan could hold the answer to monetary and economic reform. Unlikely as it may be that the plan could be enacted, though it is a topic of inside conversation, getAbstract recommends this treatise to economists, policy makers and academics for its alternative take on the US’s financial infrastructure.

Take-Aways

  • In the 1930s, a leading group of economists proposed reform of the US financial sector.
  • “The Chicago Plan” envisaged “the separation of the monetary and credit functions of the banking system.”
  • The plan, as economist Irving Fisher described it, had four major advantages:

About the Authors

Jaromir Benes and Michael Kumhof are senior economists at the IMF.

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