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392:, a senior member of the financial services industry, writes: "If Bear had not been put into sound hands and provided solvency and liquidity, the credit markets would simply have frozen... The stock market would have crashed by 20% or more... We would have seen tens of trillions of dollars wiped out in equity holdings all over the world." The Bear Stearns debacle was a watershed event in a housing market crisis that precipitated massive devaluations, left the economy reeling, and required massive government action.
36:
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production the
Federal government should own and operate them... Promote economic stability by reform of the monetary system and establishment of stable rules for monetary policy... Reform the tax system and promote equity through income tax... Abolish all tariffs... Limit waste by restricting advertising and other wasteful merchandising practices.
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needed to be more flexible to accommodate fluctuations in output and employment. To this end, he advocated a minimum of short-term borrowing, and a maximum of government control over the circulation of money. This would result in an economy with a greater tolerance of disturbances and the prevention
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and transaction windows and the institutional separation of banks as "lender-investors" and banks as depository agencies. The primary benefit would be to enable lending and investing institutions to focus on the provision of "long term capital in equity form" (233). Banks could be "free to provide
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Simons writes that all it takes to precipitate a massive liquidation of securities is "a relatively small decline of security values". Simons is emphatic in pointing out that corporations that traded on a "shoestring of equity, and under a mass of current liabilities" are "placing their working
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Eliminate all forms of monopolistic market power, to include the breakup of large oligopolistic corporations and application of antitrust laws to labor unions. A Federal incorporation law could be used to limit corporation size and where technology required giant firms for reasons of low cost
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such funds out of their own capital". Short-term interest-based commercial loans would be phased out, since one of the "unfortunate effects of modern banking," as Simons viewed it, was that it had "facilitated and encouraged the use of short-term financing in business generally".
281:, which Simons viewed to be inherently unstable. This would have prevented unsecured bank credit from circulating as a "money substitute" in the financial system, and it would be replaced with money created by the government or central bank that would not be subject to bank runs.
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that were responsible for much of the existing volatility. Simons, an opponent of the gold standard, advocated non interest-bearing debt and opposed the issuance of short-term debt for financing public or corporate obligations. He also opposed the payment of
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354:(loans) issued by banks and corporations effectively create "abundant (fiat) money substitutes during booms". When demand becomes sluggish, a sector of the economy undergoes a shrinkage, or the economy as a whole begins to lapse into
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of "accumulated maladjustments" all coming to bear at once on the economy. In sum, for Simons, a financial system in which the movement of the price level was in many ways beholden to the creation and liquidation of short-term
440:, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money.
103:
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Simons believed that a financial system so structured would be "repeatedly exposed to complete insolvency". In due course, government intervention would inevitably be necessary to forestall
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In Simons' ideal economy, nothing would be circulated but "pure assets" and "pure money," rather than "near moneys," "practically moneys," and other precarious forms of short-term
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on money, demand deposits, and savings. Simons envisioned private banks which played a substantially different role in society than they currently do. Rather than controlling the
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This is the chain of events predicted by Henry Simons in the event of a large-scale liquidation of inflated securities such as mortgage loans. In
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According to Simons, financial disturbances in the economy are perpetuated by "extreme alternations of hoarding and dis-hoarding" of money.
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Simons, Henry C. "Economic Policy for a Free
Society." University of Chicago Press, Chicago, IL. (1948), pp. 165–248
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In the interest of stability, Simons envisioned banks that would have a choice of two types of holdings: long-term
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A Positive
Program for Laissez Faire: Some Proposals for A Liberal Economic Policy; Public Policy Pamphlets No. 15
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through the issuance of debt, Simons' banks would be more akin to "investment trusts" than anything else.
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capital precariously on call," and hence at risk, in the event of the slightest financial disturbance.
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Mauldin, John, peter. "Thoughts on the
Continuing Crisis." Frontline Weekly Newsletter. 21 March 2008.
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Depression, which would have abolished the
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The
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Friedman, Milton (1967). "The
Monetary Theory and Policy of Henry Simons".
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Henry Simons argued for changing the financial architecture of the
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582:(1967). "The Transmission of the Ideals of Economic Freedom".
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The
Forgotten Henry Simons – Florida State University College
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A recent example would be the $ 10 billion bailout by the
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University of
Chicago Special Collections Research Center
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334:more effective and mitigate periodic cycles of
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590:. London: Routledge & Kegan Paul. p.
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734:Guide to the Henry C. Simons Papers 1925-1972
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436:. Simultaneously, they would hold increased
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699:Stein, Herbert. "Simons, Henry Calvert,"
640:. The University of Chicago Press: 1–13.
80:Learn how and when to remove this message
691:Rationalism in Politics and Other Essays
346:Corporate finance and the business cycle
43:This article includes a list of general
703:New Palgrave: A Dictionary of Economics
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743:Works by or about Henry Calvert Simons
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311:A Positive Program for Laissez Faire
284:Simons is noted for a definition of
443:Simons advocated the separation of
269:. He was a founding author of the
613:Economic Policy for a Free Society
495:The Encyclopedia of Libertarianism
397:Economic Policy for a Free Society
49:it lacks sufficient corresponding
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279:fractional-reserve banking system
1149:20th-century American economists
683:The Political Economy of Freedom
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362:" of the secondary monies, or "
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609:Simons, Henry Calvert (1948).
487:"Economics, Chicago School of"
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1144:University of Chicago faculty
706:(1987), v. 4, pp. 332–35
373:due to traders' bad bets and
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634:Journal of Law and Economics
783:Chicago school of economics
288:, developed in common with
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511:10.4135/9781412965811.n85
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1139:Economists from Illinois
358:, "hopeless efforts at
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352:Short-term obligations
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309:In one of his essays,
265:models influenced the
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497:. Thousand Oaks, CA:
251:University of Chicago
161:University of Chicago
1083:Julian Lincoln Simon
1061:Business and finance
1052:Frank H. Easterbrook
971:Public choice school
908:New social economics
880:New economic history
802:Henry Calvert Simons
456:Simons believed the
294:Haig–Simons equation
214:Henry Calvert Simons
96:Henry Calvert Simons
999:William A. Niskanen
505:. pp. 135–37.
898:Robert M. Townsend
679:Oakeshott, Michael
27:American economist
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305:Program of reform
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672:(2002), ch 3
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558:. Retrieved
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386:Bear Stearns
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271:Chicago plan
255:Frank Knight
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1088:Eugene Fama
1047:Robert Bork
921:Gary Becker
807:Jacob Viner
580:Hayek, F.A.
458:price level
410:instruments
366:," result.
360:liquidation
145:Nationality
62:introducing
1118:Categories
827:Monetarism
626:References
529:2008009151
463:securities
371:insolvency
364:fire sales
356:depression
263:monetarist
198:Influences
117:1899-10-09
70:April 2018
45:references
662:154308028
537:750831024
340:deflation
336:inflation
259:antitrust
247:economist
188:tradition
180:Economics
153:Education
790:Founders
560:22 March
485:(2008).
438:reserves
415:interest
330:to make
148:American
745:at the
736:at the
493:(ed.).
445:deposit
430:consols
249:at the
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650:JSTOR
489:. In
469:Notes
428:, or
426:bonds
176:Field
701:The
562:2022
533:OCLC
525:LCCN
515:ISBN
499:SAGE
434:cash
338:and
300:Work
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