reply to post by ChaoticOrder
Yes, completely changing the way lending is now. Which isn't necessarily a bad thing. What's interesting is the recent market changes which made
gold go up so high in value. How did the IMF fair in all that?
The IMF held 90.5 million ounces (2,814.1 metric tons) of gold at designated depositories at mid-August 2012. The IMF’s total gold holdings are
valued on its balance sheet at SDR 3.2 billion (about $4.8 billion) on the basis of historical cost. As of August 17, 2012, the IMF's holdings
amounted to $146.1 billion at current market prices.
5 billion into 150 aint bad.
The IMF acquired its current gold holdings prior to the Second Amendment through four main types of transactions.
First, when the IMF was founded in 1944 it was decided that 25 percent of initial quota subscriptions and subsequent quota increases were to be paid
in gold. This represents the largest source of the IMF's gold.
Second, all payments of charges (interest on member countries' use of IMF credit) were normally made in gold.
Third, a member wishing to acquire the currency of another member could do so by selling gold to the IMF. The major use of this provision was sales of
gold to the IMF by South Africa in 1970–71.
And finally, member countries could use gold to repay the IMF for credit previously extended.
The IMF has been lending out their money to poor nations and let them pay the interest back in gold.
September 18, 2009, the IMF Executive Board approved gold sales strictly limited to 403.3 metric tons, representing one eighth of the Fund's
total holdings of gold at that time.
From the paper outlined in the OP:
I read what it says for households a couple times but I don't really get it:
Upon the announcement of the transition, due to the full buy-back of household debt by
the government, all households become unconstrained. We model previously distinct
households as identical post-transition by setting the population share parameter to
ωt = 1 from the transition period onwards. The new overall budget constraint correctly
reflects the inherited assets and liabilities of both household groups. In the transition
period households only pay the net interest charges on past debts incurred by constrained
households to the banking sector. The principal is instantaneously cancelled against
banks’ new borrowing from the treasury, after part of the latter has been transferred to
the above-mentioned restricted private accounts and then applied to loan repayments.
From that moment onwards the household sector has zero net bank debt30, while their
financial assets consist of government bonds and deposits, the latter now being 100%
So household debt is wiped out, but why does it say their financial assets would now be government bonds and deposits?
What it says about the banks, is that their business model would shift to only giving out investment loans?
The critical feature of this model is that the economy’s money
supply is created by banks, through debt, rather than being created debt-free by the
Our analytical and simulation results fully validate Fisher’s (1936) claims. The Chicago
Plan could significantly reduce business cycle volatility caused by rapid changes in banks’
attitudes towards credit risk, it would eliminate bank runs, and it would lead to an
instantaneous and large reduction in the levels of both government and private debt. It
would accomplish the latter by making government-issued money, which represents equity
in the commonwealth rather than debt, the central liquid asset of the economy, while
banks concentrate on their strength, the extension of credit to investment projects that
require monitoring and risk management expertise. We find that the advantages of the
Chicago Plan go even beyond those claimed by Fisher. One additional advantage is large
steady state output gains due to the removal or reduction of multiple distortions,
including interest rate risk spreads, distortionary taxes, and costly monitoring of
macroeconomically unnecessary credit risks. Another advantage is the ability to drive
steady state inflation to zero in an environment where liquidity traps do not exist, and
where monetarism becomes feasible and desirable because the government does in fact
control broad monetary aggregates. This ability to generate and live with zero steady
state inflation is an important result, because it answers the somewhat confused claim of
opponents of an exclusive government monopoly on money issuance, namely that such a
monetary system would be highly inflationary.