3 ms·

I don't buy the argument that allowing maximal loss in 2008 would have been good in a practical sense. Yes, it would have been edifying to watch those bankers w

I don't buy the argument that allowing maximal loss in 2008 would have been good in a practical sense. Yes, it would have been edifying to watch those bankers who screwed up face their comeuppance. But firstly, the bankers already got the bonuses during the good times and they don't personally own the assets that would go to zero. And secondly the process of unwinding all of that debt and those complex financial instruments in an uncontrolled open market would likely have seen plenty of perfectly good investments go to the wall simply because the market wasn't able to fairly value them. You can't just put the entire economy on hold for 12 months whilst an army of PhDs go through and re-value every single marketable instrument. It's perfectly reasonable for the government to step in and say "We'll back stop this now, but we're going to examine this and put in rules to make sure this can't happen again"- and that's what happened here. The reason JPMorgan can step in is because they have stronger regulations on them that have made them safer than last time.

roenxi 3y ago
> It's perfectly reasonable for the government to step in and say "We'll back stop this now, but we're going to examine this and put in rules to make sure this can't happen again"- and that's what happened here We've just witnessed several of the largest bank failures in history happening this year. In an unexpected turn of events, Bitcoin is proving to be more stable than institutions like First Republic Bank (and Credit Suisse). We'll probably see a few more interesting names before this is through. Run me through this "can't happen again" part. We've had banks for 300 years now and there is a financial crisis every decade or so these days. What is "this"? It seems to be happening quite regularly for something that can't happen again. The government has been all but force-feeding credit into markets for the last decade, that is hardly a strategy to build strong institutions. The US is at serious risk of being overshadowed by nominal Communists. My money is on the pension system bearing the brunt of this crisis. What are the signs of regulatory success that we're supposed to be looking at? They seem to have taken an era of unprecedented prosperity and technological progress and done their best to bring that back to neutral.
- SilverBirch 3y ago
  What are you comparing to though? Are you comparing bitcoin to an equity investment in a single regional bank? Because if so, yeah if you just so happened to pick First Republic Bank and compared it to Bitcoin, Bitcoin has been more stable in the last 6 months. But that's only because you've looked at what happened now, then gone back in time 6 months to select the worst outcome and compared that to bitcoin. If you picked a random regional bank or took an average of banks, they've been more stable than bitcoin - and even then you're talking about an equity investment that is known to have real risk. If you're comparing to the depositors in FRB or CS or whichever bank, their money has been absolutely safe, way more stable than bitcoin - and government guaranteed. >What are the signs of regulatory success that we're supposed to be looking at? That in capitalism, individual companies are going to succeed or fail, and those that invest in them will take the gains or losses, but that the broader system still works. And that's basically what is happening so far. To take your bitcoin example, whenever a crypto company fails, the question is always "Will retail customers get their deposits back" and the answer is... basically always no. That's not how we expect companies to work - the customer deposits are meant to be protected.
  - roenxi 3y ago
    But over any time frame that includes the present and FRB, anyone who tried to store value in FRB has underperformed the people storing value in Bitcoin. Many quite badly. It isn't really cherry picking to note that one of the systems has imploded rather more significantly - the one that was regulated and had bad incentives. What is the value add of all these regulations? We could arguably replicate the system, more stably, if everyone just owned bitcoin and the government bailed out anyone who lost their keys. The regulations aren't doing anything useful. The role of the regulators here is destabilising the system. We're running a live experiment between lightly and heavily regulated systems here; turns out that less regulation is more stable even with the waste of Bitcoin mining. That says a lot about what the market thinks of the regulators and their regulations - substantial value destruction, and a significant cause of instability. They caused this crisis by loading up the system with debt and risk through 0 interest rate policies. The regulators are overseeing a system that is underperforming your definition of regulatory success. The unregulated system sees individual companies succeeding and failing but the broader system carrying on. Where the regulators are involved it seems quite likely that the government is going to have to step in and prop up the regulated system again because it isn't sound. Odds are good the bank failures won't end here if it is anything like '08. > whenever a crypto company fails, the question is always "Will retail customers get their deposits back" and the answer is... basically always no. That is certainly true, but that is why the crypto ecosystem is outperforming the US dollar system here in terms of stability. People actually have to pay attention to what they do with their crypto. A 6% raise in rates hasn't been accompanied by mass failures in crypto. Mainly because they deal with the problems by a string of small failures that wipe out an inconsequential number of people and keep the incentives correctly in place. The US regulators disrupted that natural market cleansing and look what it gets them - massive value destruction. And we aren't quite sure yet where the blow is going to hit.
jredwards 3y ago
In practice, they just roll back the regulations later. Bank Failures --> Glass-Steagall --> Repeal --> Bank Failures --> Dodd-Frank --> Repeal --> Bank Failures --> ...

roenxi 3y ago

> It's perfectly reasonable for the government to step in and say "We'll back stop this now, but we're going to examine this and put in rules to make sure this can't happen again"- and that's what happened here We've just witnessed several of the largest bank failures in history happening this year. In an unexpected turn of events, Bitcoin is proving to be more stable than institutions like First Republic Bank (and Credit Suisse). We'll probably see a few more interesting names before this is through. Run me through this "can't happen again" part. We've had banks for 300 years now and there is a financial crisis every decade or so these days. What is "this"? It seems to be happening quite regularly for something that can't happen again. The government has been all but force-feeding credit into markets for the last decade, that is hardly a strategy to build strong institutions. The US is at serious risk of being overshadowed by nominal Communists. My money is on the pension system bearing the brunt of this crisis. What are the signs of regulatory success that we're supposed to be looking at? They seem to have taken an era of unprecedented prosperity and technological progress and done their best to bring that back to neutral.

SilverBirch 3y ago
What are you comparing to though? Are you comparing bitcoin to an equity investment in a single regional bank? Because if so, yeah if you just so happened to pick First Republic Bank and compared it to Bitcoin, Bitcoin has been more stable in the last 6 months. But that's only because you've looked at what happened now, then gone back in time 6 months to select the worst outcome and compared that to bitcoin. If you picked a random regional bank or took an average of banks, they've been more stable than bitcoin - and even then you're talking about an equity investment that is known to have real risk. If you're comparing to the depositors in FRB or CS or whichever bank, their money has been absolutely safe, way more stable than bitcoin - and government guaranteed. >What are the signs of regulatory success that we're supposed to be looking at? That in capitalism, individual companies are going to succeed or fail, and those that invest in them will take the gains or losses, but that the broader system still works. And that's basically what is happening so far. To take your bitcoin example, whenever a crypto company fails, the question is always "Will retail customers get their deposits back" and the answer is... basically always no. That's not how we expect companies to work - the customer deposits are meant to be protected.
- roenxi 3y ago
  But over any time frame that includes the present and FRB, anyone who tried to store value in FRB has underperformed the people storing value in Bitcoin. Many quite badly. It isn't really cherry picking to note that one of the systems has imploded rather more significantly - the one that was regulated and had bad incentives. What is the value add of all these regulations? We could arguably replicate the system, more stably, if everyone just owned bitcoin and the government bailed out anyone who lost their keys. The regulations aren't doing anything useful. The role of the regulators here is destabilising the system. We're running a live experiment between lightly and heavily regulated systems here; turns out that less regulation is more stable even with the waste of Bitcoin mining. That says a lot about what the market thinks of the regulators and their regulations - substantial value destruction, and a significant cause of instability. They caused this crisis by loading up the system with debt and risk through 0 interest rate policies. The regulators are overseeing a system that is underperforming your definition of regulatory success. The unregulated system sees individual companies succeeding and failing but the broader system carrying on. Where the regulators are involved it seems quite likely that the government is going to have to step in and prop up the regulated system again because it isn't sound. Odds are good the bank failures won't end here if it is anything like '08. > whenever a crypto company fails, the question is always "Will retail customers get their deposits back" and the answer is... basically always no. That is certainly true, but that is why the crypto ecosystem is outperforming the US dollar system here in terms of stability. People actually have to pay attention to what they do with their crypto. A 6% raise in rates hasn't been accompanied by mass failures in crypto. Mainly because they deal with the problems by a string of small failures that wipe out an inconsequential number of people and keep the incentives correctly in place. The US regulators disrupted that natural market cleansing and look what it gets them - massive value destruction. And we aren't quite sure yet where the blow is going to hit.

jredwards 3y ago

In practice, they just roll back the regulations later. Bank Failures --> Glass-Steagall --> Repeal --> Bank Failures --> Dodd-Frank --> Repeal --> Bank Failures --> ...