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A Program for Monetary Reform (1939) was never published. A copy of the paper was apparently preserved in a college library.{{citation needed|date=November 2012}} Copies of the paper, stamped on the bottom of the first and last pages, “LIBRARY - COLORADO STATE COLLEGE OF A. & M. A. - FORT COLLINS COLORADO” were circulated at the 5th Annual [[American Monetary Institute]] Monetary Reform Conference (2009) and the images were scanned for display on the internet.[http://home.comcast.net/~zthustra/pdf/a_program_for_monetary_reform.pdf]
Ronnie J. Phillips, then a Professor of Economics at [[Colorado State University]], referenced the paper in his book, ''The Chicago Plan & New Deal Banking Reform'' (1995). Phillips is currently a Senior Fellow at the [[Indiana State University#Colleges and school|NetWorks Financial Institute]] at Indiana State University.
==Authors==
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The July 1939 draft proposal, coauthored by Paul Douglas and five others, resurrected proposals for banking and monetary reform from the Chicago plan but did not result in any new legislation.
== "A Program for Monetary Reform": full text ==
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(a) The [[United States dollar|dollar]], [[Swiss franc|franc]], [[Dutch guilder|guilder]], or other monetary unit was the equivalent of, and usually was redeemable in, a fixed amount of gold of a certain [[Millesimal fineness|fineness]]. For instance, the American dollar was a definite weight of gold (23.22 grains of fine gold). This made an ounce of gold 9/10 fine identical with $20.67. Conversely, $20.67 was convertible into an ounce of gold of this quality. In other words, “one dollar” was roughly a twentieth of an ounce of gold or precisely 100/2067ths of an ounce.
After the [[Gold standard#Suspending gold payments to fund the war|war]], chiefly as a result of a shortage in gold reserves, some of the smaller nations changed their currencies by making them redeemable in some foreign currency which, in turn, was convertible into gold. This system was called the [[Gold standard#
(b) Because every gold currency was redeemable in a fixed amount of gold, the exchange relationship of those currencies to each other was to all intents and purposed fixed: That is, the foreign exchange rates of gold-standard currencies were constant, or only varied within extremely narrow limits. A grandiose ideology has been built up on this so-called “stability” of gold-standard currencies. The public has been confused and frightened by the cry, “the dollar is falling” or “the French franc is falling”, which simply means falling with reference to gold; whereas it may well have been that the real trouble was that the value of gold was rising with reference to commodities. Indeed such was often the case. Yet the uninformed public never realized that the so-called “stability” of the golden money had little to do with any stability of [[buying power]] over [[goods and services]]. In fact, the buying power of so-called “stable” gold currencies fluctuated quite violently, because the value of gold itself was changing. Perhaps the most vicious feature of the gold standard was that, so long as exchange rates – the price of gold in terms of gold – remained unchanged, the public had a false sense of security. In order to maintain this misleading “stability” of gold and exchange rates, the “[[Great Depression#Gold standard|gold bloc]]” nations periodically made terrific sacrifices which not only destroyed their prosperity, and indeed brought them to the brink of bankruptcy, but ultimately destroyed the gold standard itself.
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(a) Establish a constant-average-[[Per capita|per-capita]] supply or volume of circulating [[Medium of exchange|medium]], including both “pocket-book money” and “check-book money” (that is, demand deposits or individual [[Checkable deposits|deposits subject to check]]). One great advantage of this “constant-per-capita-money” standard is that it would require a minimum of discretion on the part of the Monetary Authority.
(b) Keep the dollar equivalent to an ideal “[[market basket]] dollar”, similar to Sweden’s market basket [[Swedish krona|krona]]. This market basket dollar would consist of a representative assortment of [[consumer goods]] in the [[retail market]]s (so much [[food]], [[clothing]], etc.), thus constituting the reciprocal of an [[Cost-of-living index|index]] of the [[cost of living]]. Under this “constant-cost-of-living” standard the Monetary Authority would, however, as has been found in Sweden, have to observe closely the movements of other, more sensitive indexes, with a view to preventing the development of disequilibrium as between sensitive and insensitive prices.
Under the former of those two arrangements all the Monetary Authority would have to do would be to ascertain the amount of circulating medium in active circulation whatever amount of circulating medium seemed necessary to keep unchanged the amount of money per head of population. For this purpose, the statistical information regarding the volume of means of [[payment]] should be improved. At present, we have on the weekly figures of leading banks and the semi-annual figures of the [[Federal Deposit Insurance Corporation]].
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Whatever technical criterion of monetary stability is adopted, as mentioned under (4) above, the ultimate object of monetary policy should not be merely to maintain monetary stability. This monetary stability should serve as a means toward the ultimate goal of full production and employment and a continuous rise in the scale of living. Therefore, the Monetary Authority should study the movements of all available indicators of economic activity and prosperity with a view to determining just what collection of prices, if stabilized, would lead to the highest degree of stability in production and employment.
Essentially, however, the purpose of any monetary standard is to standardize the unit of [[Value (economics)|value]] – just as a [[bushel]] standardizes the unit of [[quantity]], and an [[ounce]] standardizes the unit of [[weight]]. To furnish a dependable standard of value should therefore be the only requirement of monetary policy.
===Legislative Feature A===
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(a) There should be constituted a “Monetary Authority” clothed with carefully defined powers over the monetary system of the country, including the determination of the volume of circulating medium.
That is, the “Monetary Authority” would become the agent of Congress in carrying out its function as set forth in the [[United States Constitution|Constitution]], [[Article One of the United States Constitution|Article I]], [[Article One of the United States Constitution#Enumerated powers|Section 8]], - “to coin money, regulate the value therof, and of foreign coin…” This Monetary Authority would receive all the powers necessary to “regulate” – in particular, the power to determine – the value of circulating medium and the domestic and foreign value of the dollar. All of the miscellaneous powers now scattered among the Federal Reserve Board, the Secretary of the Treasury, the President and others would have to be transferred to this one central Monetary Authority.
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However, in determining its course of action the Monetary Authority should take note of all other activities of the Government intended to affect or likely to affect economic conditions, and it should, when necessary, cooperate with other agencies of the Government.
In the [[Emergency Banking Act|emergency of 1933-34]], the absence of any permanent monetary agency capable of handling the situation was a valid reason for giving the President and the Secretary of the Treasury [[emergency powers]] over our monetary machine. Even now, so long as we have no single Monetary Authority specifically charged by Congress to carry out a defined policy, there is much reason for continuing these discretionary powers. But once Congress has established a Monetary Authority and given it a mandate, no other agency should then have any concurrent or conflicting powers.
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(9) A chief loose screw in our present American money and banking system is the requirement of only [[fractional reserve]]s behind demand deposits. Fractional reserves give our thousands of commercial banks power to increase or decrease the volume of our circulating medium by increasing or decreasing bank loans and investments. The banks thus exercise what has always, and justly, been considered a prerogative of [[sovereign power]]. As each bank exercises this power independently without any centralized control, the resulting changes in the volume of the circulating medium are largely haphazard. This situation is a most important factor in booms and depressions.
Some nine-tenths of our business is transacted, not with [[Cash|physical currency]], or “pocket-book money”, but with demand deposits subject to check, or “check-book money”. Demand deposits subject to check, though functioning like money in many respects, are not composed of physical money, but are merely promises by the bank to furnish such money on the demands of the respective depositors. Under ordinary conditions only a few depositors actually ask for real money; therefore, the banks are required to hold as a cash reserve only about 20 per cent of the amounts they promise to furnish. For every $100 of cash which a bank promises to furnish its depositors, it needs to keep as a reserve only about $20. And even this reserve is not actual cash on hand. It is nothing but a “deposit” with a Federal Reserve Bank, though any fraction of this may, in fact, be borrowed from the Reserve Banks themselves.
The question which naturally occurs is: How do these demand deposits affect the volume of the circulating medium?
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(a) The simplest method of making the transition from fractional to 100% reserves would be to authorize the Monetary Authority to lend, without interest, to every bank or other agency carrying demand deposits, sufficient cash ([[Federal Reserve notes]], other [[Federal Reserve System#Federal funds|Federal Reserve credit]], [[United States notes]], or other lawful money) to make the reserve of each bank equal to its demand deposits.
The present situation would be made the starting point of the 100% reserve system by simply lending to the banks whatever money they might need to bring the reserves behind their demand deposits up to 100%. While this money might, largely be, newly issued for the occasion – for example, newly issued Federal Reserve notes – it would not inflate the volume of anything that can circulate. It would merely change the nature of the reserves behind the money which circulates. By making those reserves 100%, we would eliminate a main distinction between pocket-book money and check-book money. The bank would simply serve as a big pocket book to hold its depositors’ money in storage. If, for instance, new Federal Reserve notes were issued and stored in the banks, as the 100% reserve behind the demand deposits, a person having $100 on deposit would simply be the owner of $100 of Federal Reserve notes thus held in storage. He could either take his money out and make payments with it, or leave it in and transfer it by check. The $100 depositor would have $100. Furthermore, the bank could not inflate by lending out the $100 on deposit, for, under the 100% system, that $100 would not belong to the bank nor even be within the bank’s control.
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