An IMF working paper is suggesting "100% reserve backing for deposits."
How, exactly, can one have 100% reserve backing for deposits in a fiat regime?
First, deposits are already FDIC insured (given, up to a limit).
Second, why bother with "reserves" (whatever they mean by that term)? We're already have the case that loans create deposits, and trigger corresponding changes in "bank-reserves."
Unless I'm totally confused, these IMF authors seem very confused. Orthodox economics seems to get curiouser & curiouser all the time. They could start by at least defining what they mean by "reserves." They seem to be mixing metaphors, which inevitably leads to irrational policy advice. Broken semantics and monetary policy don't belong in the same mix.
The Chicago Plan Revisited http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
Jaromir Benes & Michael Kumhof. August 01, 2012
Summary: At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate