Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

A Proposal for Banking Reform:The Theory of a 100-Percent Reserve Requirement 733Simons’s contributions 24 were followed by those FritzLehmann made in his article, “100 Percent Money” 25 and bythe article Frank D. Graham published in September of 1936with the title, “Partial Reserve Money and the 100 Percent Proposal.”26Irving Fisher compiled these proposals in book form in100 Percent Money. 27 Following World War II, they were takenup again by Henry C. Simons in his 1948 book, Economic Policyfor a Free Society, and by Lloyd W. Mints in Monetary Policyfor a Competitive Society. 28 This trend culminated in the publicationof Milton Friedman’s A Program for Monetary Stability in1959. 29 Milton Friedman, like his predecessors, recommendsthe current system be replaced with one which includes a100-percent reserve requirement. 30 The only difference is thatFriedman suggests the payment of interest on such reserves,24 Henry C. Simons, in footnote 7 on p. 320 of his Economic Policy for aFree Society, adds:There is likely to be extreme economic instability under anyfinancial system where the same funds are made to serve at onceas investment funds for industry and trade and as the liquid cashreserves of individuals. Our financial structure has been builtlargely on the illusion that funds can at the same time be bothavailable and invested—and this observation applies to oursavings banks (and in lesser degree to many other financialinstitutions) as well as commercial, demand-deposit banking.25 Fritz Lehmann, “100 Percent Money,” Social Research 3, no. 1: 37–56.26 Frank D. Graham, “Partial Reserve Money and the 100 Percent Proposal,”American Economic Review 26 (1936): 428–40.27 Irving Fisher, 100 Percent Money (New York: Adelphi Company, 1935).28 Lloyd W. Mints, Monetary Policy for a Competitive Society (New York,1950), pp. 186–87.29 Milton Friedman, A Program for Monetary Stability (New York: FordhamUniversity Press, 1959). Friedman first published his ideas on a100-percent reserve requirement in 1948 in his article, “A Monetary andFiscal Framework for Economic Stability,” American Economic Review 38,no. 3 (1948): 245–64. Rothbard’s criticism of Friedman is in his article,“Milton Friedman Unraveled,” Journal of Libertarian Studies 16, no. 4(Fall, 2002): 37–54.30 Friedman, A Program for Monetary Stability.