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.
The Greed Bankers world-wide will have great trouble earning its keep if any variant of the Chicago Plan ever gains wide support.
Advantages of the Chicago Plan Revisited:
[...]The first advantage is that it permits much better control of what Fisher and many of his contemporaries perceived to be the major source of business cycle fluctuations, sudden increases and contractions of bank credit that are not necessarily driven by the fundamentals of the real economy, but that themselves change those
The second advantage is that having fully reserve-backed bank
deposits would completely eliminate bank runs, thereby increasing financial stability, and
allowing banks to concentrate on their core lending function without worrying about
instabilities originating on the liabilities side of their balance sheet.
The third advantage of the Chicago Plan is a dramatic reduction of (net) government
debt. The overall outstanding liabilities of today’s U.S. financial system, including the
shadow banking system, are far larger than currently outstanding U.S. Treasury liabilities.
The fourth advantage is the potential for a dramatic reduction of
private debts. As mentioned above, full reserve backing by itself would generate a highly
negative net government debt position. Instead of leaving this in place and becoming a
large net lender to the private sector, the government has the option of spending part of
the windfall by buying back large amounts of private debt from banks against the
cancellation of treasury credit. Because this would have the advantage of establishing
low-debt sustainable balance sheets in both the private sector and the government, it is
plausible to assume that a real-world implementation of the Chicago Plan would involve
at least some, and potentially a very large, buy-back of private debt.
edit on 29-10-2012 by Arken because: (no reason given)