IDEAS home Printed from https://ideas.repec.org/p/szg/worpap/1406.html
   My bibliography  Save this paper

Intertemporal discoordination in the 100 percent reserve banking system

Author

Abstract

The 100%-Money Plan advocated by Fisher (1936) has a Misesian avor as it aims at mitigating intertemporal discoordination by reducing (i) the discrepancy between investment and voluntary savings, and (ii) the manipulation of interest rates by monetary injections. Recent proposals to adopt the 100 percent reserve banking system, such as the Chicago Plan Revisited by Benes and Kumhof (2013) or the Limited Purpose Banking by Kotlikoff (2010), take, however, a fundamentally different attitude towards the role of the central bank in the credit market and ignore that intertemporal discoordination arises independently from whether the credit expansion is financed by the creation of outside or inside money. These plans allow the central bank to inject outside money into the credit market and to effectively lower interest rates in negative territory in order to overcome the limit that the liquidity trap sets to credit expansion in the fractional reserve system. Although such an attempt may succeed in stimulating the economy in the short run, it exacerbates intertemporal discoordination and weakens economic stability in the long run.

Suggested Citation

  • Romain Baeriswyl, 2014. "Intertemporal discoordination in the 100 percent reserve banking system," Working Papers 14.06, Swiss National Bank, Study Center Gerzensee.
    • Handle: RePEc:szg:worpap:1406
    as

    Download full text from publisher

    File URL: http://www.szgerzensee.ch/fileadmin/Dateien_Anwender/Dokumente/working_papers/wp-1406.pdf
    File Function: Full text
    Download Restriction: None
    ---><---

    References listed on IDEAS

    as
    1. James W. Angell, 1935. "The 100 Per Cent Reserve Plan," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 50(1), pages 1-35.
    2. Selgin, George, 1994. "Free Banking and Monetary Control," Economic Journal, Royal Economic Society, vol. 104(427), pages 1449-1459, November.
    3. Andrew Atkeson & Patrick J. Kehoe, 2004. "Deflation and Depression: Is There an Empirical Link?," American Economic Review, American Economic Association, vol. 94(2), pages 99-103, May.
    4. Henry C. Simons, 1936. "Rules versus Authorities in Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 44(1), pages 1-1.
    5. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    6. Roger W. Garrison, 2004. "Overconsumption and Forced Saving in the Mises-Hayek Theory of the Business Cycle," History of Political Economy, Duke University Press, vol. 36(2), pages 323-349, Summer.
    7. Michael D. Bordo & John Landon Lane & Angela Redish, 2004. "Good versus Bad Deflation: Lessons from the Gold Standard Era," NBER Working Papers 10329, National Bureau of Economic Research, Inc.
    8. Anat Admati & Martin Hellwig, 2013. "The Bankers' New Clothes: What's Wrong with Banking and What to Do about It," Economics Books, Princeton University Press, edition 1, volume 1, number 9929.
    9. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    10. Bagus, Philipp & Howden, David, 2010. "The Term Structure of Savings, the Yield Curve, and Maturity Mismatching," MPRA Paper 79592, University Library of Munich, Germany.
    11. Bagus, Philipp & Howden, David, 2010. "Fractional Reserve Banking: Some Quibbles," MPRA Paper 79590, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter Dietsch, 2021. "Money creation, debt, and justice," Politics, Philosophy & Economics, , vol. 20(2), pages 151-179, May.
    2. Philippe Bacchetta, 2018. "The sovereign money initiative in Switzerland: an economic assessment," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-16, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pender, Casey, 2024. "Is deflation cause for panic? Evidence from the National Banking era," Journal of Macroeconomics, Elsevier, vol. 82(C).
    2. Craighead, William D. & Tien, Pao-Lin, 2015. "Nominal shocks and real exchange rates: Evidence from two centuries," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 135-157.
    3. Niall Ferguson & Andreas Schaab & Moritz Schularick, 2015. "Central Bank Balance Sheets: Expansion and Reduction since 1900," CESifo Working Paper Series 5379, CESifo.
    4. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
    5. Hogan, Thomas L. & White, Lawrence H., 2021. "Hayek, Cassel, and the origins of the great depression," Journal of Economic Behavior & Organization, Elsevier, vol. 181(C), pages 241-251.
    6. Van Den Hauwe, Ludwig, 2017. "Monetary Constitutionalism: Some Recent Developments," MPRA Paper 83052, University Library of Munich, Germany.
    7. Josh Ryan-Collins, 2015. "Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935-75," Economics Working Paper Archive wp_848, Levy Economics Institute.
    8. George S. Tavlas, 2015. "In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 99-121, February.
    9. Moe Thorvald Grung, 2018. "Financial Stability and Money Creation: A Review of Morgan Ricks: The Money Problem," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 8(2), pages 1-16, July.
    10. T. Gerasimos S. & V. Erotokritos & Т. Герасимос С. & В. Эротокритос, 2017. "Предварительный поведенческий подход в таргетированию реальных доходов // A Tentative Behavioral Approach to Real Income Targeting," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(1), pages 17-31.
    11. Hoffmann, Andreas & Schnabl, Gunther, 2016. "Monetary policies of industrial countries, emerging market credit cycles and feedback effects," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 855-873.
    12. Philipp Bagus & David Howden & Amadeus Gabriel, 2015. "Oil and Water Do Not Mix, or: Aliud Est Credere, Aliud Deponere," Journal of Business Ethics, Springer, vol. 128(1), pages 197-206, April.
    13. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    14. Sylvie Rivot, 2020. "Information and Expectations in Policy-Making: Friedman's Changing Approaches to Macroeconomic Dynamics," GREDEG Working Papers 2020-39, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    15. Philipp Bagus & David Howden, 2012. "Monetary equilibrium and price stickiness: A rejoinder," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 271-277, September.
    16. Gregor W. Smith, 2006. "The spectre of deflation: a review of empirical evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 39(4), pages 1041-1072, November.
    17. Bagus, Philipp & Howden, David, 2011. "Unanswered Quibbles with Fractional Reserve Free Banking," MPRA Paper 79594, University Library of Munich, Germany.
    18. Zinn, Jesse Aaron, 2022. "The Money Multiplier and Other Measures of Financial Sector Performance," SocArXiv zusqa_v1, Center for Open Science.
    19. Musgrave, Ralph S., 2017. "Privately issued money reduces GDP," MPRA Paper 78896, University Library of Munich, Germany.
    20. István Ábel & Pierre Siklos, 2023. "Macroeconomic Risks and Monetary Policy in Central European Countries: Parallels in the Czech Republic, Hungary, and Poland," Risks, MDPI, vol. 11(11), pages 1-26, November.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:szg:worpap:1406. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: library (email available below). General contact details of provider: https://szgerzensee.ch/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.