Saturday, May 21, 2016

Tony Wikrent — Michael Lewis: The Book That Will Save Banking From Itself

During my visit with Jon last month, we both agreed that Michael Lewis is one of the best USA writers living. Here is partial list of some of Lewis's books:
The Big Short was the basis of the movie Jon reviewed here a couple months ago; I reviewed the book back in June 2011.

Since the article below was written by Lewis, I overcame my grave misgivings, and decided to post it here. It is a rather detailed review of a recent book by the former governor of the Bank of England (2003-2013) Mervyn King. The books is entitled The End of Alchemy: Money, Banking, and the Future of the Global Economy, and it presents King's argument that nothing has fundamentally altered the financial system's stupidity, greed, and appetite for high-payoff risks, then King's detailed proposal for what governments and financial regulators should do before the next crisis inevitably hits. 
Normally, I do not believe that highly technocratic financial discussions conduce to furthering an enlightened public discourse. Frankly, such discussions are usually a steaming pile of bovine manure. But now that it appears that our sole choice for USA President is Trumpillary, it seems very likely that the best we can hope for in terms of forcing the banksters to behave civilly is exactly the sort of proposal King is putting forward.…
Good read.

real economics
Michael Lewis: The Book That Will Save Banking From Itself
Tony Wikrent

9 comments:

Andrew Anderson said...

Is there no end of those who wish to save banking from itself?

How about saving the world from the banks, eh?

“The issue which has swept down the centuries, and which will have to be fought sooner or later, is the people versus the banks.” — Lord Acton

Andrew Anderson said...

Small depositors, whose funds are being turned into risky investments, are still covered by deposit insurance, so they could care less what the bankers do.

So abolish government-provided deposit insurance and allow everyone to have inherently risk-free accounts at their respective central banks.

What's not to like? Equal Protection under the Law wrt fiat - supposedly the citizens' money?

MRW said...

So abolish government-provided deposit insurance and allow everyone to have inherently risk-free accounts at their respective central banks.

It’s not "government-provided.” it’s government-guaranteed. Commercial banks provide FDIC. They pay the premiums.

"risk-free accounts at their respective central banks?” Only treasury securities are risk-free (Federal Reserve savings/securities accounts). But you have to buy them to get that risk-free investment. Small fry can do that right now on Treasury’s .gov site. But they are only as liquid as your local bank’s CD.

And it doesn’t matter whether you get your treasury securities from the Federal Reserve or Treasury. You wire your money to the same place. Buying from the Treasury is considered ‘fiscal’ = the funding of expenditures. Buying the same securities from the Federal Reserve is considered ‘monetary’ = controlling interest rates. But why would small depositors give a shit what they call it? Why should small depositors give a damn how they account for it on the country’s ledger. They can stick with FDIC.

Andrew Anderson said...

Commercial banks provide FDIC. They pay the premiums. MRW

In that case, then no US Federal Government backing is needed if the premiums adequately cover the risk. But they don't, now do they? Hence the need for welfare from the Federal Government for the banks and the rich, the most so-called creditworthy - which you are defending.

Only treasury securities are risk-free (Federal Reserve savings/securities accounts). Mrw

Baloney since even if the Fed could lose money from an account by, say, an accounting error or computer failure, it could recreate that money since it is monetarily sovereign.

MRW said...

Hence the need for welfare from the Federal Government for the banks and the rich, the most so-called creditworthy - which you are defending.

Andrew, I’m defending diddly. You’re mixing apples and oranges. The Fed does protect and regulate banks as part of their charter. Congress took away their right to help banks everywhere and anywhere globally to the tune of $29 trillion (which Bernanke did) in 2010. Individuals and businesses that had more than $250,000 in an INDIVIDUAL BANK ACCOUNT that went belly-up in 2008 were shit out of luck. Before 2008, it was half that: $125 Gs. You’re just shooting blame jism without being accurate.

Baloney since even if the Fed could lose money from an account by, say, an accounting error or computer failure, it could recreate that money since it is monetarily sovereign.

You wrote above "allow everyone to have inherently risk-free accounts at their respective central banks.” I was referring to the people and businesses (“everyone”) in your comment, not to one of the federal government entities that sell them; ie: the central bank.

Andrew Anderson said...

The point is that there is no need for government-provided/guaranteed/whatever deposit insurance since accounts at a central bank are inherently risk-free.

Moreover, fiat is the citizens' money and it is morally absurd that they may only deal with it as physical fiat, aka cash.

And of course people and businesses can exhaust their accounts even if those accounts are held at the cb. Yet those accounts are still risk-free from being ruined by anyone else.

MRW said...

Whatever. You don’t understand fiat currency.

Andrew Anderson said...

What's to understand? Fiat is tax credits that must be accepted back by the issuing government for payment of taxes and fees. It comes in two forms, physical fiat, aka "cash" and account balances at the central bank, aka "reserves" in the case when it is held in the accounts of depository institutions.

Your problem, I suspect, is that I do understand fiat and how the banks and other members of the usury cartel have commandeered it (except for physical fiat, soon to be eliminated if the banks get their wish) for the benefit of themselves and the most so-called creditworthy, the rich.

Work at a bank, do you? Or looking to?

You'll have to do better than merely assert I don't understand fiat when the evidence is, if I may say so, that I do.

Simsalablunder said...

"Work at a bank, do you? Or looking to?"

A standing accusation from the morally superior…