There are so many illegal things the US gov't has done in the past 10 years, one more doen't really matter. At least this time it didn't involve killing people.
The banking cartel* gave itself more than half of the annual output of the world's largest economy. Bankers got and continue to get huge bonuses. Everyone else? Not so much. Heckuva job, guys.
As the article asks, “Banks don’t give lines of credit to corporations for free. Why should all these government guarantees and liquidity facilities be for free?”
The banks are simply too big as well. "Too big to fail" should mean "too big to exist". The process should be: get a bailout, get broken up.
*"A cartel is a formal (explicit) agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production."
That would be even better. And if the units are small enough, it'll work. "Bailout then breakup" is a proposed mechanism for making those units small enough.
There was no reason to bailout AIG, it merely was a way to pump cash into these banks. They should have been forced into bankruptcy and their assets sold of to more responsible banks.
> The banking cartel gave itself more than half of the annual output of the world's largest economy.
The word "gave" is not really correct. The 7.77 trillion dollar figure is the total amount of loan guarantees and credit authorizations. The highest amount ever loaned out at one time was just over 1 trillion dollars, and that's all been paid back.
TL;DR: basically it is mostly short term paper, and each "loan" is being counted multiple times to get the high number. For instance, suppose I loan you $1, to be repaid tomorrow. Tomorrow you say "OK, I'm ready to pay you back!", and I say "Go ahead and keep it another day!". We do this 200 times. By the logic of the article, I've loaned you $200, even though I only had $1 in play at any given time.
Surprising and a little bit dispiriting. Adding econ to crypto in my list of topics Reddit now demonstrably handles better than HN.
Sometimes there's a benefit to being a smaller community, but here's an instance where there's a benefit to Reddit being bigger; it's less likely to get held captive by agreeable narratives.
Can you explain to me how a long rambling story on reddit counts as "thoroughly refuted"? Perhaps you could link to the salient points because I missed them.
What is "liquidity" any more than "reputation"? Why do banks get loaned short term paper when nobody trusts them? Does the Serious Sam Android App get a bailout while they shore up their credibility? Nobody is buying their product because of a "reputation" problem. Where is their $400bn in short term paper? I'm sure they can get buy on the interest from that while they recover.
Apparently only banks are allowed to loan money that they don't have, and when they lose their reputation, we just loan them short term money until either a) everybody forgets or b) its clear that no banks will be allowed to fail.
I'm not objecting to fractional reserve lending provided we have one simple rule: when the rich people in charge fuck it up so badly then they get wiped out.
17 comments
[ 0.18 ms ] story [ 644 ms ] threadSo this story isn't exactly news.
Here is a good timelime of the economic crisis, all the way back to WWII:
http://www.jamesaltucher.com/2011/11/pearl-harbor-caused-the...
As the article asks, “Banks don’t give lines of credit to corporations for free. Why should all these government guarantees and liquidity facilities be for free?”
The banks are simply too big as well. "Too big to fail" should mean "too big to exist". The process should be: get a bailout, get broken up.
*"A cartel is a formal (explicit) agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production."
The word "gave" is not really correct. The 7.77 trillion dollar figure is the total amount of loan guarantees and credit authorizations. The highest amount ever loaned out at one time was just over 1 trillion dollars, and that's all been paid back.
Imagine if you were a start-up, and you could tell any investor, "I have a $1 billion guarantee from the Federal Reserve".
Are you saying that that would have NO VALUE, even if you never used it?
Now imagine every other startup you compete against has this guarantee and you don't. What are your chances now?
The dollar in your pocket has no value when someone else can be loaned $1T at any moment.
TL;DR: basically it is mostly short term paper, and each "loan" is being counted multiple times to get the high number. For instance, suppose I loan you $1, to be repaid tomorrow. Tomorrow you say "OK, I'm ready to pay you back!", and I say "Go ahead and keep it another day!". We do this 200 times. By the logic of the article, I've loaned you $200, even though I only had $1 in play at any given time.
Sometimes there's a benefit to being a smaller community, but here's an instance where there's a benefit to Reddit being bigger; it's less likely to get held captive by agreeable narratives.
What is "liquidity" any more than "reputation"? Why do banks get loaned short term paper when nobody trusts them? Does the Serious Sam Android App get a bailout while they shore up their credibility? Nobody is buying their product because of a "reputation" problem. Where is their $400bn in short term paper? I'm sure they can get buy on the interest from that while they recover.
Apparently only banks are allowed to loan money that they don't have, and when they lose their reputation, we just loan them short term money until either a) everybody forgets or b) its clear that no banks will be allowed to fail.
I'm not objecting to fractional reserve lending provided we have one simple rule: when the rich people in charge fuck it up so badly then they get wiped out.