AFJM Coffeehouse Study Stack

Why Do We Need CBDCs:
Comparing the Different Perspectives

with Dr. Ronnie Phillips

Content: Link to Recording / Introduction / About the Speaker / Highlights / The Study Stack

Why Do We Need CBDCs? with Dr. Ronnie Phillips - March 2022
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Dr. Ronnie Phillips focused on the varying viewpoints on why we need Central Bank Digital Currencies (CBDCs). Dr. Phillips' starting point was Henry Simons' "financial good society" and how CBDCs fit in this framework.
Ronnie Phillips received his B.A. in Urban Studies from the University of Oklahoma in 1973 and his Ph.D. in Economics from The University of Texas at Austin in 1980. He is Professor Emeritus of Economics at Colorado State University in Fort Collins. Ronnie Phillips is renowned for his book The Chicago Plan. He has published widely on banking issues, entrepreneurship, and public policy in books, academic journals, newspapers, magazines, and public policy briefs. Ronnie Phillips' Curriculum Vitae is on his website.
Some Highlights of the Presentation
  • Dr. Phillips introduced the topic of CBDC by reviewing what we hope the monetary system will provide. He then reviewed the changes which Henry Simons proposed for the monetary system. Simons called his system the "financial good society," where issuing money should be the exclusive monopoly of the Treasury. With CBDCs, Simons’ Chicago Plan vision could be adopted.
  • He felt there was merit in the paper by Kumhof/Omarova et al, "Central Bank Money: Liability, Asset, or Equity of the Nation?" which describes Central Bank Money as social equity, and considers how CBDC could fit into that perspective.
Some Highlights of the Discussion
  • A discussion about Selgin’s paper was intriguing because of his Cato background. Surprisingly, his proposal could reduce bank money creation.
  • The stablecoin firm Circle (which interviewed Dr. Phillips) was discussed. Its payment system would be backed 100% by secure collateral like government securities. They want to be a bank and would then be backed by Central Bank Money.
  • Dr. Phillips made the remarkable comment that monetary reform faces the obstacle of politicians not understanding the monetary system. That statement recalls a true story of a bright conscientious federal politician indicating the system was still on a gold standard.
  • He speculates that the competition of stablecoins could drive the banks out of the money creation business.
  • In response to Jeff’s question about how to inject debt-free money into the economy, Phillips refers to Jesse Jones’ book on the Reconstruction Finance Corporation that FDR used. This is a model that Phillips believes we should still use when the lender of last resort process is needed to assist business activity. This model is very similar to Omarova’s National Investment Authority.
  • Paul asked a critical question about whether CBDCs would be created from converting existing bank-created money or if the Fed was going to create a new reservoir of reserves for CBDCs.
  • Joe said the number of CBDCs produced may depend on how cost-efficient and disruptive the tech industry is.
  • The 25th Anniversary Issue of Dr. Phillips’ book The Chicago Plan can be obtained for just $15.
  • The Bank of Spain has a paper on Central Bank Digital Currency linking it to the Chicago Plan.
  • Wright Patman was a congressman who supported the Chicago Plan. He asked many questions of the famed Fed Chair Marriner Eccles. On the ownership of the Fed, Eccles replied in a letter something very similar to Dr. Phillips' reply at the presentation.
  • Wright Patman proposed during the war a simple change that would have accomplished much of the Plan.
  • President Biden recently issued an Executive Order on ensuring responsible development of digital assets.
Bikas, Konstantin & Livingstone, Zack. 2020. "
Money We Trust: Designing Cash's Digital Counterpart". Positive Money.
Disparte, Dante. 2022. "
A Coming of Age Moment for Crypto, Reflections on the White House Executive Order on Digital Assets". Circle.
Disparte, Dante. 2021. "10 Stablecoin Myths: Internet Wildcat Banking or Always-on Dollars?". Circle.
Fisher, Irving. 1936. 100% Money. Mises Edition. New York, Adelphi.
Jones, Jesse Holman. 1951. Fifty Billion Dollars: My Thirteen Years with the RFC (1932-1945). New York: Macmillan.
Kotlikoff, Laurence J. 2010. Jimmy Stewart is Dead. Ending the World’s Ongoing Plague with Limited Purpose Banking. Hoboken, NJ: Wiley.
Kumhof, Michael & Allen, Jason Grant & Lastra, Rosa María & Bateman, Will & Omarova, Saule & Gleeson, Simon. 2020. "Central Bank Money: Liability, Asset, or Equity of the Nation?". Cornell Legal Studies Research Paper 20-46.
Kumhof, Michael & Benes, Jaromir. 2012. “
The Chicago Plan Revisited”. IMF Working Papers 12/202. Washington: International Monetary Fund.
Knight, Frank & Cox, Garfield & Director, Aaron & Douglas, Paul & Hart, Albert & Mints, Lloyd & Schultz, Henry & Simons, Henry. 1933. “Memorandum on Banking Reform”, Franklin D. Roosevelt Presidential Library, President’s Personal File 431, March 1933. Also known as the first version of the Chicago Plan. Reproduced in Phillips, Ronnie. 1994. The Chicago Plan & New Deal Banking Reform. Armonk, NY: M.E. Sharpe,191–199.
Lainà, Patrizio. 2015a. “Proposals for Full-Reserve Banking: A Historical Survey from David Ricardo to Martin Wolf”. Economic Thought, 4/2 (28 Sep 2015): 1-19. 
Lainà, Patrizio. 2015b. “Money Creation under Full-reserve Banking: A Stock-flow Consistent Model”. Working Paper No. 851. Levy Economics Institute. 
Lainà , Patrizio. 2018. "Full-Reserve Banking – Separating Money Creation from Bank Lending". Dissertation, Faculty of Social Sciences, University of Helsinki.
Litan, Robert. 1987. What Should Banks Do? Washington, D.C.: Brookings Institution Press.
McMillan, J. 2014. The End of Banking: Money, Credit, and the Digital Revolution. Zurich, Switzerland: Zero/One Economics.
Omarova, Saule T. 2020. "The People's Ledger: How to Democratize Money and Finance the Economy". Cornell Legal Studies Research Paper No. 20-45, 74 Vanderbilt Law Review 1231 (2021).
Phillips, Ashton S. 2014. “Bank-Created Money, Monetary Sovereignty, and the Federal Deficit: Toward a New Paradigm in the Government-Spending Debate“. Western New England Law Review, 36: 221-56.
Phillips, Ronnie J. 1992a. “The ‘Chicago Plan’ and New Deal Banking Reform”. The Jerome Levy Economics Institute, Working Paper No. 76, June 1992. 
Phillips, Ronnie J. 1992b. “Credit Markets and Narrow Banking“. The Jerome Levy Economics Institute of Bard College, Working Paper No. 77, July 1992.
Phillips, Ronnie J. 1996. “The ‘Chicago Plan’ and New Deal Banking Reform.” In Papadimitriou, Dimitris (Ed), Stability in the Financial System, London: Palgrave Macmillan. 94-114.
Phillips, Ronnie J. 2015 (1994). The Chicago Plan & New Deal Banking Reform. Oxon, UK & New York, NY: Routledge.
Selgin, George. 2022. "A "Narrow" Path to Efficient Digital Currency". Briefing Paper No. 134. Cato Institute.
Simons, Henry & Cox, Garfield & Director, Aaron & Douglas, Paul & Hart, Albert & Knight, Frank & Mints, Lloyd & Schultz, Henry. 1933. “Banking and Currency Reform”, Manuscript. Also known as the second version of the Chicago Plan. Reprinted in Samuels, Warren (ed.), 1990, Research in the History of Economic Thought and Methodology. Archival Supplement, Volume 4. Greenwich, CT: JAI Press.
Simons, Henry. 1948. Economic Policy For A Free Society. Archive.Org edition.
[On page 16 he refers to the “state monopoly of currency issue.”]

Zarlenga, Stephen. 2002. The Lost Science of Money. The Mythology of Money – the Story of Power. Valatie, NY: American Monetary Institute.
Note: A related presentation by Dr. Phillips can be found here.
Caveat: The views and opinions expressed in AFJM Coffeehouses are those of the presenters and participants and do not necessarily reflect the official policy or position of the Alliance For Just Money.
AFJM is an organizational member of the
International Movement for Monetary Reform

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