Season 1 · Episode 344
Chicago Plan – why it never went anywhere
The principle sounded okay, but do we really want to see banks stopping money creation?
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
March 29, 202333m 13s
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Show Notes
After the Great Depression a bunch of economists got together to hatch a plan to stop future runs on banks. The plan called for banks to only accept demand deposits “subject to a 100% reserve requirement in in lawful money and/or deposits with the Reserve Banks”. Some read that as an end to fractional reserve banking but, as Steve Keen explains this week, fractional reserve banking doesn’t really exist because banks don’t lend out deposits. And whilst some good came out of the Chicago Plan, he reckons restricting a banks ability to create money would be bad news for the economy. And wouldn’t stop a bank run – as evidenced by the recent collapse of SVB in the US.
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