Thursday, July 14, 2016

Miles Kimball — "Currie described the situation in a 1934 memo to Eccles: “Decentralized control is almost a..."


Interesting because of Eccles.

Confessions of a Supply Side Liberal
"Currie described the situation in a 1934 memo to Eccles: “Decentralized control is almost a..."
| Professor of Economics and Survey Research at the University of Michigan

7 comments:

Andrew Anderson said...

Does it occur to anyone that if the banks were deprivileged that there'd be far less need to control them in the first place?

Oh yeah, I know, "free banking has been tried and it doesn't work" EXCEPT:

1) It can be argued we've never had free banking, at least not in the US since its founding, since it's an apparent duty of a monetary sovereign to provide risk-free accounts in its fiat for all citizens.
AND
2) Why should we care if 100% private banks with 100% voluntary depositors sink or swim since all remaining deposits with them would be, BY DEFINITION, willingly undertook, at-risk, not necessarily liquid INVESTMENTS, not comingled with necessary day-to-day liquidity?

This isn't rocket science, is it? Though there is such a thing as being "blinded by the god of this world", I increasingly see.

Matt Franko said...

Yeah and you're being blinded by it....

Neil Wilson said...

"Why should we care if 100% private banks with 100% voluntary depositors "

We don't care if the currently private banks with voluntary depositors sink or swim, because the depositors are insured. You put the business into administration, wipe out the risk holders, make good the depositors via insurance, and refloat. It's a fairly straightforward administration procedure that FDIC does on a regular basis.

The reason the big banks were bailed out is because of political power. Nothing to do with the accounting, or rules or anything.

And it would be the same with 100% private banks. They would get bailed out. And for the same reason - power and politics - because nobody wants to see the loss cascade through the economy with all the knock on effects there.

The issue is size and coupling - not structure.

Nobody here is listening to your points. They have been debunked dozens and dozens of times and you are just wasting everybody's time. Perhaps time to move onto something else or you will just come across as an ideologue obsessive who won't listen.

Ralph Musgrave said...

Andrew Anderson asks "Does it occur to anyone that if the banks were deprivileged that there'd be far less need to control them in the first place? The answer to that is that advocates of full reserve banking worked that one out long ago. At least...

If if he word "deprivileged" is taken to mean banning private banks' right to print / create money, the above is true. Under the latter ban (i.e. where just the state issues money) private banks cannot lend on depositors' money because to do so is by definition to create new money. But what they can do is set up something like mutual funds for those who want their money to be loaned out.

And mutual funds just plain simple CANNOT GO INSOLVENT. As to people who want a particular bundle of money to be lodged in a totally safe manner, if that money is simply lodged at the central bank, then it's as near 100% as you can get in this world, plus no money creation takes place. So no regulation needed there either.

As for those mutual funds, there's little need to regulate them. If customers want to make risky investments with a high yield, then they can go for a risky mutual fund. And if they want something safer, they free to go for that.

Money market mutual funds in the US will have to obey the above sort of rules in the near future.

Andrew Anderson said...

The reason the big banks were bailed out is because of political power. Neil Wilson

And not the fact that the payment system MUST work through the banks, especially the big ones? News to me especially given limits on deposit insurance unless the FDIC decided to bailout all bank creditors.

And it would be the same with 100% private banks. They would get bailed out. Neil Wilson

Maybe so, once or twice, but people would quickly realize that the bailouts were politically motivated and not needed to keep the economy from collapsing since an alternative payment system to the one that MUST work through the banks would exist. Or we learn our society is hopelessly corrupt anyway. But let's find out, eh, and not assume?

Besides, as I keep pointing out, the proper abolition of government-provided deposit insurance should require $trillions in new reserves to be equally distributed to the population.

Refute? Seriously Neil? I've wiped the floor with your arguments so many times I thought you had run off for good. And also the arguments of MWR and Auburn Parks. Because I'm smarter? No, because I'm right and you guys, shame on you, are defending injustice. Expect God to pat you on the head for that?

No I won't quit because it's wrong for those in the right to yield to those in the wrong. So what now, Neil? Try to get me banned? I'll just move to another site. Murder? Just don't kill all the Andrew Andersons since I'm not one of them.

Besides, I'm making progress based on the increasing panic on your side. And I keep learning, even from you, if only that the best objections your side has are very lame. So why should I quit? I shouldn't.

Andrew Anderson said...

Under the latter ban (i.e. where just the state issues money) private banks cannot lend on depositors' money because to do so is by definition to create new money. Ralph Musgrave

I like the mutual fund idea but just in case borrowing short to lend long is a valid business model we should not ban it and it would be difficult to enforce anyway. Instead, let the banks create all the liabilities they dare but let those liabilities be real liabilities and not largely a sham wrt to the public.

Besides, with accounts for all at the central bank, we'd have something better than full reserve lending, we have the actual lending of reserves*!

*Fiat account balances at the central bank for us non-usurers.

Andrew Anderson said...

Also, when all citizens can have accounts at the central bank, the citizens can be bailed out without bailing out the banks. Since during the last crisis, the banks were bailed out without bailing out the population, I imagine the reverse would be very popular ESPECIALLY since it would tend to help the banks too - not that they deserve any help.