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I'm not sure why you're being downloaded since that's more or less what happened in a general sense last time. Strong, sensible banking regulations help preve

• barrkel 17y ago
  People whose faith on free markets have been challenged by the recent "troubles" have a potential crisis, and they can generally do either of two things: accept that market regulation is a necessary evil; or think that the real problem is that the markets weren't actually free, owing to governments propping up banks and preventing panic. I believe this second approach is misguided, unrealistic, and frankly juvenile, a position that only those young enough (or cloistered enough) to favour ideology over pragmatics can hold. It doesn't take much panic for a bank to collapse, owing to how their multipliers work, and when you have three or four banks collapsing around you, it's only reasonable to assume that all banks are dodgy. Getting into that kind of a situation for the sake of an ideological approach to free markets is dangerous, IMHO. IMO, banks should be small enough that they can fail, and there ought to be a procedure that lets them fail in a relatively clean way. Joe Q. Public should have his savings and deposits protected (up to a limit), and perhaps even small business similarly, but the rest of debt should be converted to equity, and previous shareholders wiped out. But regulations are required, both to limit bank size, and to standardize the procedure so that it's a known quantity (and explicitly removes the bailout moral hazard) and shareholders can apply sufficient pressure to management to avoid self-destruction.
  • nradov 17y ago
    I agree with most of that, but interest-bearing savings accounts should not be insured by the government. If you're earning interest there needs to be some actual risk involved, otherwise it creates too much moral hazard.
    • barrkel 17y ago
      How do you expect the saving public to evaluate the stability of the banking organizations they frequent? How on earth do you think they are going to be able to overcome the information asymmetry? What planet are you from?
      • nradov 17y ago
        Under my proposal, those who can't evaluate the stability of banks should stick to insured, non-interest-bearing accounts.
        • barrkel 17y ago
          I get it, only rich people should be allowed to save (since a non-interesting bearing account will actually lose real value over time, i.e. a tax on mere keeping of money). Riiiight.
          • nradov 17y ago
            You seem to be presuming that consumer price inflation will be perpetually positive. But that isn't desirable, or necessary.
            • artsrc 17y ago
              Seems like a scenario worth considering since it has been the case for most modern economic history.
    • artsrc 17y ago
      Deposits could just buy treasuries, pay interest and be government guaranteed. The question is what additional investments you want to allow. I would allow mortgages of high quality (recourse mortgages, size < 2 * earnings and size < 65% of value) when accompanied by appropriate capital.
  • lionhearted 17y ago
    > People whose faith on free markets have been challenged by the recent "troubles" have a potential crisis Humans acting stupidly and making bad decisions happens under all economic and political systems. People say things like, "Capitalism is rocky and prone to booms and busts..." but that's a bit off. Despotism, feudalism, slavery-based economies, communism, and so on have all had booms and busts. Humans make bad decisions regardless of how the conditions are. Regulated/unregulated, free/restricted, decentralized/centralized, it doesn't matter - people make bad decisions in all of these conditions. Throughout history, once bad decisions are made, people are willing to give themselves over to leaders who promise they have the answers and reassure people. These leaders create new power structures that may or may not help fix the problem. Once the emergency passes, the new power structures are retained and used to further agendas. This gradually leads to a legal code and government with complex and inconsistent laws, which is one of the reasons all nations and empires fall eventually. It's not specifically a capitalism/free market thing at all.
• joubert 17y ago
  Everyone loves to get downloaded.