Monetary Reform Talk, 4.09, Part 8: Milton Friedman

In Part 8 (of 9), Joe highlights Milton Friedman's opposition of money creation by private banks by highlighting the following quote:

"A reform of the monetary and banking system to eliminate both the private creation and destruction of money and discretionary control of the quantity of money by the central bank authority. The private creation of money can perhaps best be eliminated by adopting the 100% reserve proposal, thereby separating the depository from the lending function of the banking system

These modifications would leave as the chief monetary functions of the banking system the provision of depositary facilities, the facilitation of check clearance, and the like; and as the chief function of the monetary authorities, the creation of money to meet government deficits or the retirement of money when the government has a surplus."
From A Monetary and Fiscal Framework for Economic Stability in The American Economic Review, June 1948, p.247. Available on the web at : www.jstor.org/stable/1810624


(Video is an excerpt of Joe Bongiovanni's talk on "America's Debt Crisis and the Need for Monetary Reform", April 8, 2009, Montpelier VT, produced by EconomicStability.org)

Category:

News & Politics

Tags:

• Milton Friendman
• economic stability
• debt-free money
• EconomicStability.org
• Joe Bongiovanni
• debt crisis
• full reserve banking
• 100% reserve banking
• Irving Fisher
• 100% Money
• Federal Reserve

[clevebrowns3]

Thanks, for your replies to my comments. I really do enjoy watching your vids. You are a very good teacher and I agree with about 90% of what you say. However, I do have one question. Would we not see more money being printed/more inflation, if we were to return the power to create money to congress? It seem that they would be more irrational than the Fed.

[EconomicStability]

c,

Thanks.

The Fed is private, operates in secrecy and without public accountability, plus it REALLY only created HALF the money supply over the past 10 years.

We should ELIMINATE the other half - the shadow/investment bankers, turning them into savings/investment TRUSTS that only invest real money.

Replacing the Fed's money-creation powers with a transparent and accountable Federal Monetary Authority was backed by most economists in the 30's , and is part of the AMI proposal for reform today.

[clevebrowns3]

Thanks, for the reply. Is there any good programs that you would recommend me applying too? I have already applied for the FEE (foundation of economic education) for the summer and I wanted to know if there were any other good one's that you would recommend?

[EconomicStability]

cleve,

no free banking with fractional reserves.

So, what to do, what to do?

Pete and I are beginning a series on Austrian vs government-issue monies, using the AMI proposal.

We are basing it on the Kaj Grussner piece on The Dangers of Monetary Reform on the MisesBlog from a week or so ago.

Hope you'll join in.

[clevebrowns3]

I do have confidence in free banking in general, but not in the situation that we are now in. I think it would be too late to go back to 100% reserve banking, but I do wish we could. One of the reasons why I do think it is too late, is because there is too much at stake. We would see major declines in GDP, even too the point where we could see our economy collapse.

[EconomicStability]

After the switch to FR banking, the quantity of new money coming into existence should be exactly the same as with fractional-reserve banking.

So, with FR banking, the circulating medium is adequate to support the same amount of economic growth.

Why not?

There may be good reason to abandon the Austrian position, but fiat money and FR banking should not be one.

I don't think of it as 'easy' credit - more like adequate credit.

[EconomicStability]

there are basically two problems economists have with full-reserve banking.

One is inflation - see the vonMisesblogpost on The Dangers of Monetary Reform.

The other is deflation.

Just depends which way you want to go.

Here's the thing.

The FR proposals for monetary reform like the Chicago Plan and this Friedman topic were laid down for the specific purpose of defeating the inflation-deflation cycles and save capitalism.

Now, if you're an Austrian, don't you have confidence in free-banking?

[clevebrowns3]

By the way, I consider myself an austrian economist. However, I see a lot of danger in having 100% reserves because so many businesses depend on easy credit.

[clevebrowns3]

I have a question, would you not cause the GDP to go down drastically, which could create another great depression, if you were to have a 100% banking reserves?

[EconomicStability]

I have tried unsuccessfully to post the link here several times, but hasn't been posted yet, so I put the link in the description of this video in the upper RH corner, click "more info. "

Pete