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There is no solution to resources which were already misallocated. The best we can do is to 1) not missallocate more resources (via a ballout) and 2) end the sy

There is no solution to resources which were already misallocated. The best we can do is to 1) not missallocate more resources (via a ballout) and 2) end the system that credited the debt bubble. Here's how to do that: End Fractional Reserve Banking Allow banks only to lend their deposits. This also eliminates the need for central banks - let people use 100% deposit banks when they want deposit security. This will prevent large debt bubbles (speculative investment bubbles) and the resulting massive misallocation of resources. End Inflationary Monetary Policies Never print more money. Period. Use smaller denominations as slow deflation occurs due to an increasing population. This will keep prices in line with value and allow people to save without making high risk investments.

alecco 18y ago
> Allow banks only to lend their deposits. That doesn't work in a bank run. Central banks or some similar mechanism is needed to fix the asymmetry of time for deposits (e.g. savings) and loans (e.g. mortgages.) Due to our behavior set on risk aversion most of us wouldn't take bonds matching the times of a mortgage. No matter how good the deal is. That's what the bankers exploit.
- stevedekorte 18y ago
  As I said, if you want to secure your deposit, use a 100% deposit bank that gives no interest and charges a small storage fee. What we commonly call banks aren't - they're investment houses - and very highly leveraged ones at that. And what we commonly call deposits aren't - they're investments and no investment is a sure thing. Any system that pretends that there is a sure thing will fail sooner or later and the bigger the system the more catastrophic the failure.
  - 0x44 18y ago
    (T)hey're investments and no investment is a sure thing. That's why your "investment" in the bank is insured.
    - stevedekorte 18y ago
      The so-called insurance is a promise by the central bank to print money to cover your deposit. That is, to steal value from everyone else holding cash in order to pay for the losses of those that choose to invest theirs unwisely. It's not like an insurance company that keeps enough real cash reserves to cover potential costs. For example, the FDIC only has enough in reserve to cover ~1% of the deposits in US banks.

alecco 18y ago

> Allow banks only to lend their deposits. That doesn't work in a bank run. Central banks or some similar mechanism is needed to fix the asymmetry of time for deposits (e.g. savings) and loans (e.g. mortgages.) Due to our behavior set on risk aversion most of us wouldn't take bonds matching the times of a mortgage. No matter how good the deal is. That's what the bankers exploit.

stevedekorte 18y ago
As I said, if you want to secure your deposit, use a 100% deposit bank that gives no interest and charges a small storage fee. What we commonly call banks aren't - they're investment houses - and very highly leveraged ones at that. And what we commonly call deposits aren't - they're investments and no investment is a sure thing. Any system that pretends that there is a sure thing will fail sooner or later and the bigger the system the more catastrophic the failure.
- 0x44 18y ago
  (T)hey're investments and no investment is a sure thing. That's why your "investment" in the bank is insured.
  - stevedekorte 18y ago
    The so-called insurance is a promise by the central bank to print money to cover your deposit. That is, to steal value from everyone else holding cash in order to pay for the losses of those that choose to invest theirs unwisely. It's not like an insurance company that keeps enough real cash reserves to cover potential costs. For example, the FDIC only has enough in reserve to cover ~1% of the deposits in US banks.