A Program for Monetary Reform

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A Program for Monetary Reform is a July 1939 first draft proposal to repair and rebuild the American economic system following the Great Depression which began with the sudden, devastating collapse of US stock market prices on October 29, 1929, known as Black Tuesday and after apparent recovery in the mid-1930s was followed by the Recession of 1937-1938. The program was sent to the most complete list of academic economists available at the time. General approval of the program was expressed by 235 economists from 157 universities and colleges; another 40 economists approved of it with some reservations; only 43 economists expressed disapproval.[citation needed]



Widely distributed among academic economists, the draft proposal for A Program for Monetary Reform (1939) was never published and did not lead to legislation. Some copies of the program found their way into university and college libraries or private collections.

Joe Bongiovanni, cofounder of The Kettle Pond Institute for Debt-Free Money recalled that a copy of the draft proposal had been maintained by his father, Joseph T. Bongiovanni (1910–2001), a monetary reform advocate who had testified several times before the United States Congress Joint Economic Committee on his own proposal for a Socio-Economic National Growth Act (SENGA) premised upon sound money and economic democracy. Sadly, Bongiovanni's was lost.

Ronnie J. Phillips, then a Professor of Economics at Colorado State University, referenced the draft proposal in his book, The Chicago Plan & New Deal Banking Reform (1995). Phillips is currently a Senior Fellow at the Networks Financial Institute at Indiana State University. .

Copies of the draft proposal stamped on the bottom of the first and last page, “LIBRARY - COLORADO STATE COLLEGE OF A. & M. A. - FORT COLLINS COLORADO” surfaced at the 5th Annual American Monetary Institute Monetary Reform Conference (2009) and one was acquired for the Kettle Pond Institute by cofounder Pete Young. With the help of Jane Clary, Professor of Economics at the College of Charleston, the images were scanned for dispay on the institute's web site.


A Program for Monetary Reform was coauthored by six notable economists:

Paul H. Douglas

Paul H. Douglas (1892–1976)[1] was an American economist and politician. He earned a PhD in economics from Columbia University in 1921. Together with the mathematician Charles W. Cobb, he developed the Cobb-Douglas production function (1928). He authored Real Wages in the United States, 1890-1996 (1930), The Theory of Wages (1934) and Social Security in the United States (1936; 2nd ed. 1939). Douglas was a professor of economics at the University of Chicago when he coauthored A Program for Monetary Reform (1939).

He later went into politics and was elected to the United States Senate where he served from 1948 until 1966. Douglas had a reputation of being an unconventional liberal; he passionately supported civil rights but was equally concerned about fiscal discipline. He was best known for his support of environmental protection, public housing, and truth in lending laws. While serving in the Senate, Douglas authored the Consumer Credit Protection Act and Ethics in Government (1952). After leaving the Senate, he held a position at The New School for Social Research.

Irving Fisher

Irving Fisher (1867–1947)[2] was a celebrated American economist and Yale University professor of economics who is best known for his work on the quantity theory of money. Fisher was a true celebrity and one of the major influences on Milton Friedman's monetarism. Friedman called Fisher "the greatest economist the United States has ever produced."[3] The Fisher equation, the Fisher hypothesis, the international Fisher effect, and the Fisher separation theorem are all concepts named after him.

The stock market crash of 1929 and the subsequent depression cost Fisher much of his personal wealth and academic reputation. He famously predicted, a few days before the crash, "Stock prices have reached what looks like a permanently high plateau." Irving Fisher stated on October 21 that the market was "only shaking out of the lunatic fringe" and went on to explain why he felt the prices still had not caught up with their real value and should go much higher. On Wednesday, October 23, he announced in a banker’s meeting “security values in most instances were not inflated.” For months after the October 29 crash, he continued to assure investors that a recovery was just around the corner. Fisher was so discredited by his 1929 pronouncements and by the failure of a firm he had started that few people took notice of his debt-deflation analysis of the depression.

Fisher believed that deflation was the principal cause of the disastrous cascading insolvencies then plaguing the American economy. He said that deflation had increased the real value of debts fixed in dollar terms. Fisher was also convinced that unemployment was linked to the unstable buying power of the dollar. Fisher's influence as a coauthor is apparent in A Program for Monetary Reform (1939). Today, his views on debt-deflation as the cause of periodic recessions, depressions and unemployment are getting new attention.

Frank D. Graham

Frank D. Graham (1890–1949)[4] was an American economist and Princeton University professor of economics whose early papers influenced theories on international trade and general equilibrium. He coauthored A Program for Monetary Reform (1930) opposing the gold standard. Graham supported a market basket standard for currency which he believed would lead to full employment. His theories are brought together in Social Goals and Economic Institutions (1948).

Earl J. Hamilton

Earl J. Hamilton (1899–1989)[5] was an American economist and economic historian. He authored American Treasure and the Price Revolution in Spain, 1501-1650 (1934) and Money, prices and wages in Valencia, Aragon and Navarre, 1351-1500 (1936). He was a professor of economics at Duke University (1927–1944) when he coauthored A Program for Monetary Reform (1939). He was later a professor of economics at Northwestern University (1944–1947) and the University of Chicago (1947–1967), and was Distinguished Professor of Economic History at the State University of New York at Binghamton (1966–1969). He authored War and Prices in Spain, 1651-1800 (1947), served as editor of the Journal of Political Economy (7 years) and was the president of the Economic History Association (1951 to 1952).

Willford I. King

Willford I. King (1880–1962)[6] was a noted American statistician and economist. As a boy, he attended a one-room school in rural Nebraska. He attended and graduated from the University of Nebraska (1905) before receiving his PhD in Philosophy from the University of Wisconsin-Madison (1913). King moved to Washington, D.C. and became a statistician with the United States Public Health Service (1917–1920) and then an economist with the National Bureau of Economic Research (1920–1927).

He left public service to become a professor of economics at New York University (1927–1945). It was at this time that King coauthored A Program for Monetary Reform (1939). He opposed the New Deal, instead advocating a sliding scale of wages based on production, currency expansion, and the reduction of taxes and regulations. He founded the Committee on Economic Accord (1933) and, after he retired, became chairman of the Committee for Constitutional Government, which sought to "uphold Constitutional principles and our system of free enterprise."

Charles R. Whittlesey

Charles R. Whittlesey (1900–1979) was an American economist and Princeton University professor of economics.

Historical Significance

Many of the efforts made by economists to reform the banking system in the wake of the Great Depression found their way into the history books. Perhaps the most notable proposals were first put forward by economists at the University of Chicago in a six-page memorandum on banking reform which was given limited and confidential distribution to about 40 individuals on March 16, 1933. A copy of the memorandum was sent to Henry A. Wallace, then Secretary of Agriculture, with a cover letter signed by Frank Knight. Paul Douglas was listed among the supporters of the plan.

During the period March to November, the Chicago economists received comments from a number of individuals on their proposal and in November 1933 another memorandum was prepared. The memorandum was expanded to thirteen pages, there was a supplementary memorandum on "Long-time Objectives of Monetary Management" (seven pages) and an appendix titled "Banking and Business Cycles" (six pages). Evidently written by Henry Simons the memorandum was again supported by Paul Douglas.

The collective recommendations of these memorandum have come to be known and the Chicago plan. The memorandum generated much interest and discussion among lawmakers but the suggested reforms, such as the abolition of the fractional reserve system and imposition of 100% reserves on demand deposits, were set aside and replaced by watered down alternative measures. The Banking Act of 1935 institutionalized Federal deposit insurance and the separation of commercial and investment banking; it successfully restored the public's confidence in the banking system and ended discussion of banking reform until the Recession of 1937-1938.[7]

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.

Current Significance

With the advent of what is being called the Great Recession beginning in 2007, some economic reform advocates are revisiting the proposals embodied in the memorandum of March 1933 and November 1933 and the draft proposal of July 1939. One proposal put forward by Stephen Zarlenga and the American Monetary Institute, closely parallels these suggested reforms; it is being call the The American Monetary and Financial Security Act[8] (aka Tha American Monetary Act).

Representative Dennis Kucinich's 16-point plan for economic recovery[9] includes The American Monetary Act. Kucinich recently addressed the need for and benefits of monetary reform at a session of the United States House of Representatives.[10][11][12]

There is not currently a high level of awareness or popular support for the reforms suggested in A Program for Monetary Reform (1939) or the The American Monetary and Financial Security Act (2009) among lawmakers, in the media or in the general public. Legislation has not yet been introduced to the United States House of Representatives, but Dennis Kucinich has indicated that he will soon do so.[13]

"A Program for Monetary Reform": full text

See also


  1. ^ "Paul H. Douglas, 1892-1976". The New School. http://www.newschool.edu/nssr/het/profiles/douglas.htm. 
  2. ^ "Irving Fisher, 1867-1947". The New School. http://www.newschool.edu/nssr/het/profiles/fisher.htm. 
  3. ^ Friedman, Milton (1994). Money Mischief: Episodes in Monetary History. Houghton Mifflin Harcourt. pp. 37. ISBN 0-15-661930-X. 
  4. ^ "Frank D. Graham, 1890-1949". The New School. http://www.newschool.edu/nssr/het/profiles/fgraham.htm. 
  5. ^ "Earl J. Hamilton Papers on the Economic History of Spain 1351-1830". Duke University. http://scriptorium.lib.duke.edu/economists/hamilton/. 
  6. ^ "Guide to the Wilford I. King Papers, 1912-1962". The Northwest Digital Archives (NWDA). http://nwda-db.wsulibs.wsu.edu/findaid/ark:/80444/xv64995. 
  7. ^ Phillips, Ronnie J. (June 1992), The 'Chicago Plan' and New Deal Banking Reform,Working Paper No. 76, The Levy Economics Institute., http://www.levyinstitute.org/pubs/wp/76.pdf 
  8. ^ Zarlenga, Stephen (July 18 2009), Presenting the American Monetary Act, American Monertary Institute., http://www.monetary.org/amacolorpamphlet.pdf 
  9. ^ "Kucinich's Main Street Recovery Plan". September 28, 2008. Archived from the original on 26 August 2010. http://kucinich.us/index.php?option=com_content&task=view&id=2444&Itemid=1. Retrieved September 13, 2010. 
  10. ^ Dennis Kucinich speaks on the American Monetary Act in House of Representatives - Part 1, March 2009, http://www.youtube.com/watch?v=bZmDV9Z03N8, retrieved September 13, 2009 
  11. ^ Dennis Kucinich speaks on the American Monetary Act in House of Representatives - Part 2, March 2009, http://www.youtube.com/watch?v=loJAuveiPhQ, retrieved September 13, 2009 
  12. ^ Dennis Kucinich 5 Minutes on Money on House Floor, http://www.youtube.com/watch?v=6T1g4dhwfO0, retrieved September 13, 2009 
  13. ^ Dennis Kucinich addresses AMI Monetary Reform Conference Participants 2009, September 27, http://www.youtube.com/watch?v=v8OjgN-3ZDA, retrieved September 13, 2009 


External links