IMF's epic plan to conjure away debt and dethrone bankers

IMF's epic plan to conjure away debt and dethrone bankers

www.telegraph.co.uk

So there is a magic wand after all. A revolutionary paper by the International Monetary Fund claims that one could eliminate the net public debt of the US at a stroke, and by implication do the same for Britain, Germany, Italy, or Japan...

...Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

(visit the link for the full news article)

Another very interesting piece coming out of the mainstream British media. Like the author, however, i am undecided on wether this would be a viable solution; as badly as the private banks have run our economy into the ground i have little hope that turning the reigns over to just-as-corrupt governments would prove any better.

None the less it is refreshing to see the bankers being called out on exactly what their 'fractional reserve system' equates to: money "ex nihilo".

www.telegraph.co.uk
(visit the link for the full news article)

So what is the outcome for somebody who has a house mortage that they will repay over the next 20 years?

Will assets be revalued to suit the plan?

I somehow doubt the evils of this world are out to help the little guy. Maybe they can wipe the debt of these prosperous nations, meaning stronger economy's and higher debts for third world nations to pay back or have all their crops seized by the imf causing mass famine.

Seems like an easy way to keep undeveloped nations as undeveloped nations imo.

reply to post by soulshn

Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

People have been saying this for ages. I highly doubt they are going to implement this so called "assault". Bankers love fractional reserve banking too much.

Originally posted by magma
So what is the outcome for somebody who has a house mortage that they will repay over the next 20 years?

Will assets be revalued to suit the plan?

I think that's a very good question. What happens to real estate and other hard asset values. And most importantly, why is this coming out of the IMF? If it's not favourable to them, why bother publishing the study results. We are talking about a private corporation after all, not a public one.

And, with the latest downturn, there has been a massive redistribution of wealth (which made the downturn seem manufactured in my opinion). How does that fit into this whole thing?

The IMF will not support anything unless it and it's stockholders are coming out on top. Very interesting indeed.

Originally posted by lewman
I somehow doubt the evils of this world are out to help the little guy. Maybe they can wipe the debt of these prosperous nations, meaning stronger economy's and higher debts for third world nations to pay back or have all their crops seized by the imf causing mass famine.

Seems like an easy way to keep undeveloped nations as undeveloped nations imo.

As pessimistic we all may be about banks, bankers and the monetary system. Sometimes helping the little guy, or creating a more stable/successful economy which in turn helps the little guy, helps the people on top as well.

Food for thought:

If I steal all the worlds wealth so everyone is in poverty but myself (7 billion plus), I would have nowhere to go to enjoy all my money as everywhere would be a ghetto except my palatial estate. What would be the point?

I'm not saying the IMF is out to make everyone's lives better, but at the same time, I'm not saying we should immediately dismiss something either just because of the source.

reply to post by boncho

why is this coming out of the IMF?

That was my first thought too... it seems all very strange to me.

On the topic of mortgages... think about what fractional reserve banking is. The bank can loan out a lot more than what it actually holds in its reserves. If they were forced to have reserves equal to their deposits and balances, then wouldn't that mean they would have to back all those mortgages with real reserves instead of money they have created out of thin air through fractional reserve banking?

It would be a strange world if this happened. The construction industry I’d suggest would nose dive as finance would be much much harder to come by. Property values would probably take a significant tumble too, though house prices in Australia are beyond ridiculous at the moment. Poor people with a $400k mortgage on a house they paid $450-500k for could then be worth say $200k or less, about three to four times that of the average yearly wage (the way it was way back when you could buy a three bedroom house a few km from the city for $12 - 20k and not $1.2m nowadays). I know how bad fractional banking is in practise and how rife it is for unimaginable exploitation, but what would a world without it be like? We all know how many industries suffer when banks tighten up on lending, particularly in construction. The economy needs finance to get things done. To have projects developed. When that finance ceases, so does development. I think it’s a reasonable concept strictly in theory as finance creates developments which creates construction jobs which in turn creates housing or retail jobs or whatever else when the project is finished but I think in practise it’s been shown to be full of folly. That has probably been brought upon largely by greed though.

The part that caught my attention was the acknowledgment of the dollar auctions held during the depression:

The farmers found a way of defending themselves in the end. They muscled together at "one dollar auctions", buying each other's property back for almost nothing. Any carpet-bagger who tried to bid higher was beaten to a pulp.

In this case it was not taking the power from the banks and giving it to government that effected a change, it was the people banding together and simply saying that they had had enough. They would no longer sit by and watch as years of their blood, sweat, and tears were ripped out from under them using debt that was never lent, but merely created from thin air.

Maybe some day...

reply to post by ChaoticOrder


So the reality is it could never work unless asset values were inflated to cover the shortfalls in losses in the absorbtion.

Smells like severe hyperinflation to me.

Imagine the bad debt contingency

Remember the bull# ass austerity bull# from the greek default? Aka, omg you have to pay the fake debt to the evil banker cartel that runs the world before you take care of your citizens?

Yeah, didnt the imf say that crap? So what the?

Originally posted by magma
reply to post by ChaoticOrder

 

So the reality is it could never work unless asset values were inflated to cover the shortfalls in losses in the absorbtion.

Smells like sever hyperinflation to me.

Imagine the bad debt contingency

Throwing the head bankers out high rise windows would work.

reply to post by BlindBastards


Yes, there would be pullbacks, but there must. The current fractional reserve system is dependant on perpetual exponential growth, something that is obviously unsustainable.

When money is de-facto created as debt there will never be enough money to pay the debt. Every time the central banks lend $100 to the government they have created $100.50 in debt. We are only digging ourselves deeper and deeper with no end in sight.

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.



Sweet deal.

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.

www.imf.org...

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%
reserve backed.

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
government.
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.

www.imf.org...

Originally posted by phroziac
Remember the bull# ass austerity bull# from the greek default? Aka, omg you have to pay the fake debt to the evil banker cartel that runs the world before you take care of your citizens?

Yeah, didnt the imf say that crap? So what the?

I'm curious here, the IMF has been racking up lending to countries all over the place, once this new government back money is made, and all household debt is wiped, does that mean the IMF keeps it's balance sheets of debt owed to them?

If so, they get paid back in now government backed money?

reply to post by boncho


This translates for the householder all debt being converted pro rata and the security being transfered to the government.

Ummmm. NWO .

reply to post by soulshn


When you say “pullbacks” you mean a depression? I know how the system of debt currency works. I know it’s a house of cards. I don’t see any other way; continue with the charade, but maybe try to gradually scale it back over the course of years and let it bleed out slowly and throw all the crooks in jail or abolish it and send the Western world into another great depression, one that would be incredibly difficult to near impossible to break. How could you break it when no one has money and credit/fractional banking no longer exists?

The hole has already been dug very deep for us by relatively few. There’s no easy, quick nor painless way out of it what we’re in.

In all honesty things such as housing, energy and water should never be owned by anyone, but instead distributed by the government. These markets as they are, are too sensible to manipulation and inflation... and hoarding with higher prices as a result.

Originally posted by flice
In all honesty things such as housing, energy and water should never be owned by anyone, but instead distributed by the government. These markets as they are, are too sensible to manipulation and inflation... and hoarding with higher prices as a result.

Seriously dude? Why cant people be self sufficient? Do you have any clue whay kind of stupid bull# the government would do with that power? Fairly sure id be homeless.