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Currency School versus Banking School: an ongoing confrontation

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  • Goodhart, Charles
  • Jensen, Meinhard

Abstract

The Chicago Plan and Laina’s full-reserve banking proposal are themselves extensions of Ricardo’s earlier proposal for separating money creation from bank intermediation, as incorporated in the 1844 Bank Act. This was the key Currency School position, which was opposed then and subsequently by the Banking School. In this Commentary we outline the criticisms which Banking School supporters have made over the centuries of the Currency School, and indicate what alternative principles the Banking School has proposed.

Suggested Citation

  • Goodhart, Charles & Jensen, Meinhard, 2015. "Currency School versus Banking School: an ongoing confrontation," LSE Research Online Documents on Economics 64068, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:64068
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    File URL: http://eprints.lse.ac.uk/64068/
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    References listed on IDEAS

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    1. Jan Toporowski, 2005. "Theories of Financial Disturbance," Books, Edward Elgar Publishing, number 3179.
    2. Basil J. Moore, 1981. "Is the Money Stock Really a Control Variable?," Challenge, Taylor & Francis Journals, vol. 24(3), pages 43-46, July.
    3. Arnon,Arie, 2011. "Monetary Theory and Policy from Hume and Smith to Wicksell," Cambridge Books, Cambridge University Press, number 9780521191135, September.
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    Cited by:

    1. Jan Marc Berk & Jan Willem van den End, 2022. "Excess Liquidity and the Usefulness of the Money Multiplier," Credit and Capital Markets – Kredit und Kapital, Duncker & Humblot, Berlin, vol. 55(4), pages 457-488.
    2. Harris Dellas & George S. Tavlas, 2022. "Retrospectives: On the Evolution of the Rules versus Discretion Debate in Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 245-260, Summer.
    3. Xuan Wang, 2019. "When Do Currency Unions Benefit From Default ?," 2019 Papers pwa938, Job Market Papers.
    4. Samuel Demeulemeester, 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, Taylor & Francis Journals, vol. 25(2), pages 357-387, March.
    5. Dellas, Harris & Tavlas, George, 2021. "On the Evolution of the Rules versus Discretion Debate," CEPR Discussion Papers 15976, C.E.P.R. Discussion Papers.
    6. Klapkiv Lyubov & Ulgen Faruk, 2022. "An Evolutionary Perspective on the Endogenous Instability of Capitalist Dynamics," Central European Economic Journal, Sciendo, vol. 9(56), pages 291-308, January.
    7. Peter Dietsch, 2021. "Money creation, debt, and justice," Politics, Philosophy & Economics, , vol. 20(2), pages 151-179, May.
    8. Xuan Wang, 2021. "Bankruptcy Codes and Risk Sharing of Currency Unions," Tinbergen Institute Discussion Papers 21-009/IV, Tinbergen Institute.

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    More about this item

    Keywords

    Currency School and Banking School; rules vs discretion; money vs quasi-money; evolutionary vs static banking structure.;
    All these keywords.

    JEL classification:

    • N0 - Economic History - - General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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