Author Govert SchullerPosted on Categories Monetary Reform
Focus
The focus of the American Monetary Institute was and is on the almost unbridled credit creation facility of commercial banks (and its frequent turning off the tap) as a major cause of the destructive booms & busts in the financial sector and its spilling over into the real economy with disastrous consequences for regular people.
Furthermore, as a viable, structural, long-term solution we promote so-called sovereign monetary reform based on 1930s proposals collectively known as the Chicago Plan developed by prominent economists (Phillips, Demeulemeester, Kumhof).
Our first focus is on monetary theory and AMI embraces the so-named ‘credit creation theory of money and banking’ (Werner, McLeay, Ryan-Collins), aka ‘endogenous money’ in post-Keynesian parlance (Rochon & Rossi), and very nicely explained as the ‘finance franchise’ in Hockett & Omarova (2017).
Secondly, based on numerous analyses and models (Kumhof, Yamaguchi, van Egmond, Huber, Jackson), we promote the proposal that,
a) a nation’s money supply (and central bank if not yet done so) should be nationalized and transformed into debt-free, stable money,
b) stop the credit creation privilege of commercial banks and make them thereby into true intermediaries,
c) institute a monetary authority to manage the money supply, and
d) let congress allocate the seigniorage (or taxation) coming out of the monetary authority’s decision process.
Implementation
This monetary theory and, based on it, radical reform proposal were a) incorporated into the 2012 NEED Act (HR 2990), with the help of AMI (Zarlenga), and sponsored (only) by Kucinich and Conyers; b) considered by the parliament of Iceland (Sigurjonsson); c) became the subject of a 2017 referendum in Switzerland, sorely lost by 75-25 (Lyons); and d) was debated by the parliament of the Netherlands in 2016, triggered by a citizens initiative, which only led to a thorough report after three years (Schuller; WRR).
After these half successes the movement seems to have burned out a little. Besides there was also a friendly schism, if I can say so, within the AMI leading to the formation of the Alliance For Just Money in 2018. And we had the shock that our very successful sister organization in the UK, Positive Money, thought it was advisable to distance itself from sovereign monetary reform because, in their still non-published deliberations, they thought it would crash the economy. On top of that COVID-19 hit with interesting financial responses by governments, from which we still try to extract the economic lessons.
For now AMI is giving some space to a) economists and monetary activists from LDCs; b) discussing the promises and perils of CBDC; c) of public and non-profit banking; d) of local currencies; and e) of parity economics, i.e. the idea to set a minimum price for raw materials in agriculture, fishing and mining.
But in the end, we are aiming at a ‘big switch’, when the money supply gets secured and prudently managed, and banking as we know it will end.
Sources
Demeulemeester, Samuel. 2018. “The 100% Money Proposal and its Implications for Banking: The Currie–Fisher Approach versus the Chicago Plan Approach“. The European Journal of the History of Economic Thought, 25/2: 357-387.
H.R.2990 – National Emergency Employment Defense Act of 2011 (NEED Act). 112th US Congress (2011-2012).
Hockett, Robert C. & Omarova, Saule. 2017. “The Finance Franchise“. Cornell Law Review, 102: 1143-1218.
Huber, Joseph. 2017. Sovereign Money. Beyond Reserve Banking. London: Palgrave Macmillan.
Jackson, Andrew & Dyson, Ben. 2012. Modernising Money: Why Our Monetary System Is Broken And How It Can Be Fixed. London: Positive Money.
Kumhof, Michael & Benes, Jaromir. 2012. “The Chicago Plan Revisited.” IMF Working Papers 12/202. Washington: International Monetary Fund.
Lyons, Matthew. 2018. “Will Switzerland Be The First Country In The World To Introduce A Sovereign Money System?” London: Positive Money. 28 Feb 2018.
McLeay, Michael & Radia, Amar & Thomas, Ryland. 2014a. “Money Creation in the Modern Economy”. Monetary Analysis Directorate. Bank of England Quarterly Bulletin (Q1, 2014): 14-27.
Phillips, Ronnie. 1995. The Chicago Plan & New Deal Banking Reform. Oxon, UK & New York, NY: Routledge.
Rochon, Louis-Philippe & Rossi, Sergio (eds.). 2015. The Encyclopedia of Central Banking. Cheltenham, UK & Northampton, MA: Edward Elgar Publishing.
Ryan-Collins, Josh & Greenham, Tony & Werner, Richard & Jackson, Andrew. 2012. Where Does Money Come From? A Guide to the UK Monetary and Banking System. London: New Economics Foundation. “Introduction”.
Schuller,Govert. 2019. “Ons Geld and the Road to the WRR Report“. AFJM, 8 Mar 2019.
Sigurjonsson, Frosti. 2015. “Monetary Reform: A Better Monetary System for Iceland“. A Report Commissioned by the Prime Minister of Iceland. March 2015. Foreword by Aidar Turner. Rekjavik, Iceland.
Van Egmond, Nicolas D & de Vries, Bert JM. 2016. “Dynamics of a sustainable financial-economic system”. Sustainable Finance Lab Working Paper. Utrecht University, The Netherlands.
Werner, Richard. 2014c. “How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking”. International Review of Financial Analysis, 36 (2014): 71–77.
—–, —–. 2016. “A lost century in economics: Three theories of banking and the conclusive evidence”. International Review of Financial Analysis, 46 (July 2016): 361-379.
WRR. 2019. “Money Creation”. The Hague: The Netherlands Scientific Council for Government Policy (WRR).
WRR. 2019. Money and Debt: The Public Role of Banks – Summary of WRR Report. The Hague: Netherlands Scientific Council for Government Policy.
Yamaguchi, Kaoru. 2011. “Workings of a Public Money System of Open Macroeconomies: Modeling the American Monetary Act Completed”. In: Proceedings of the 29th International Conference of the System Dynamics Society, Washington D.C., USA, 2011. The System Dynamics Society.
—–, —–. 2012. “On the Monetary and Financial Stability under A Public Money System (Revised): Modeling the American Monetary Act Simplified”. Paper presented at the 8th Annual AMI Monetary Reform Conference in Chicago, USA, Sept. 20 – 23, 2012. It was originally presented at the 30th International Conference of the System Dynamics Society, St. Gallen, Switzerland, July 22 – 26, 2012.
Zarlenga, Stephen. 2014 (2006). “Presenting the American Monetary Act / The 32-Page Brochure”. Valatie, NY: American Monetary Institute. Extensive introduction to, and final version of, the NEED Act.
Govert Schuller
Shillong, September 20, 2023
That’s an excellently succinct summing up of the movement and of where it stands today, with the many useful references provided for anyone’s use. I like the apt phrase, “finance franchise”, which I hadn’t come across. I deliberately took my own attention off the subject of money, what it really is, and what it could be, a few years ago, though I surely recognize that it’s a deeply important subject for humanity and civilization: up there in importance, though few realize it, with a culture’s ontology or religious beliefs, and system of governance. I simply did so because I was juggling too many balls at once, and found my attention was upon too many subjects at once to handle them all as they needed to be handled. So I totally didn’t know the extremely surprising news that the UK’s Positive Money has “distanced itself from sovereign monetary reform”! Why, surely everyone got involved in it because that was the very core, prime goal and purpose of the organisation! It’s akin to the Vatican quietly, in unpublished deliberations, deciding to carry on as normal, or as if everything was normal, having decided that they’re actually all agnostics!