Sunday, March 24, 2013
SEPTEMBER 24, 1976 – DEATH OF PAUL DOUGLAS, ECONOMIST, US SENATOR, QUAKER
1976 – DEATH OF PAUL DOUGLAS, ECONOMIST, US SENATOR, QUAKER
A prominent University of Chicago economist, Douglas was one of six economists who developed A Program for Monetary Reform in 1939. It was sent to President Roosevelt as a proposal to end the Great Depression. More than 230 economists from 150 universities approved it without reservations while an additional 40 supported it with some reservations.
In assessing the problem of the day, the PMR states, “If the purpose of money and credit were to discourage the exchange of goods and services, to destroy periodically the wealth produced, to frustrate and trip those who work and save, our present monetary system would seem a most effective instrument to that end.” It also stated monetary systems based on a gold standard “has had…disastrous results all over the world.”
The PMR called for government creation and maintenance in the quantity of money. “Our own monetary policy should…be directed toward avoiding inflation as well as deflation, and in attaining and maintaining as nearly as possible, full production and employment.” The plan also called for eliminating fractional reserve lending – the process of banks loaning ourt many more times the amount of money in their possession. Back in the 1930’s the reserved requirement was 5:1. Today it’s 9:1. Some of the major banks involved in the economic collapse of 2007 had ignored this law and were loaning out 50 times their reserves. The PMR called for a 100% reserve requirement – banks could only lend the amount of money they possessed.
The document goes on, “In early times the creation of money was the sole privilege of the kings or other sovereigns – namely the sovereign people, acting through their Government. This principle is firmly anchored in our Constitution and it is a perversion to transfer the privilege to private parties to use in their own real or presumed interest. The founders of the Republic did not expect the banks to create the money they lend.
Their plan to reduce the national debt was simply to have the government purchase government bonds with new US debt-free money.
The PMR was the outgrowth of an earlier similar proposal from many of the same economists, The Chicago Plan, which was introduced as federal legislation in 1934, as a means to end the Great Depression The Chicago Plan called for the issuance of debt-free U.S. money and the end of banks lending less that their assets as means to reduce public and private debt, eliminate bank runs, and gain control over money creation.
[NOTE: A new economic/mathematical analysis of the The Chicago Plan has just been published The Chicago Plan Revisited is a working paper by two International Monetary Fund economists, Jaromir Benes and Michael Kumhoff. It affirms virtually every assertion by its advocates in the 1930’s. The paper is at http://www.stanford.edu/~kumhof/chicago-imfwp.pdf ]