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Divorcing money creation from bank loans: revisiting the “100% money” proposal of the 1930s
[Dissocier la création monétaire des prêts bancaires : retour sur la proposition "100% monnaie" des années 1930]

Author

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  • Samuel Demeulemeester

    (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

The 2007-2008 global financial crisis has brought strong renewed interest in the "100% money" reform proposal, inherited from the 1930s, which aims at divorcing money creation from bank lending by imposing 100% reserves on current account deposits. This reform idea, however, is frequently subject to confusion, being sometimes likened to the idea of abolishing bank intermediation, sometimes to that of setting up a currency board, or yet mistaken for the more recent "narrow banking" proposal. For this reason, this article offers to clarify its concept and objectives, by revisiting the works of the authors of this proposal in the 1930s—Henry Simons, Lauchlin Currie and Irving Fisher in particular. After briefly recalling the history of the "100% money" idea, we present its main arguments, and then discuss its implications for the payment system, bank intermediation, and the institutional framework of money issuance. We conclude on the importance of a conceptual clarification of this reform idea in respect of the ongoing discussions about it.

Suggested Citation

  • Samuel Demeulemeester, 2022. "Divorcing money creation from bank loans: revisiting the “100% money” proposal of the 1930s [Dissocier la création monétaire des prêts bancaires : retour sur la proposition "100% monnaie"," Post-Print hal-03938669, HAL.
    • Handle: RePEc:hal:journl:hal-03938669
    DOI: 10.3917/redp.325.0835
    Note: View the original document on HAL open archive server: https://hal.science/hal-03938669
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    References listed on IDEAS

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    1. 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.
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    1. Samuel Demeulemeester, 2024. "The case for 100% money: Ten reasons for separating money issuance from banking," Economic Affairs, Wiley Blackwell, vol. 44(1), pages 57-70, February.

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    Keywords

    100% money; money creation; Irving Fisher; Chicago Plan; narrow banking; 100% monnaie; Plan de Chicago; création monétaire;
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