How should one keep track of whether one's banks have non-negligible crypto exposure, so that one may move one's money to safer institutions well in advance of the inevitable disaster?
Empirically, a lot of early ventures into any area tend to blow up.
The first people to try are, almost by definition, the risk takers.
That is not to say they all blow up, or even that the ones that blow up do so because of this particular venture. Just high risk taking is correlated with both blowing up and trying the new thing first.
They may blow up from some completely unrelated risky venture.
All the casino employees win despite going for a long time. Even when they lose they win - my cousin repairs slot machines, at the end of every shift he gets paid to lose the last of his test budget.
Regulated banks are designed specifically not to blow up, because they take the money of innocents, of taxpayers, and the rest of the economy with them. That was a cause of the Great Depression, the 'Great Recession' of 2008, and many similar negative events.
That's why the US created the Federal Reserve, deposit insurance (FDIC), and bank regulation - to prevent those things.
> They may blow up from some completely unrelated risky venture.
There were massive bank failures during the great depression. And, no FDIC type insurance. So depositors entirely wiped out. So conservative families, not speculating in the stock market or otherwise and "safely" saving their money in banks were simply wiped out. Stock investors also wiped out due to equity market downturn. Farmers wiped out due to food/commodity prices dropping. Every single asset class took its turn. Job losses quickly followed and then fed back on the stuff above to cause even more mayhem. There is no doubt that things like bank regulation and FDIC insurance made a massive difference and at least partly kept the great recession from becoming like the great depression.
FDIC would have solved the issue of contracting money supply, but the more direct cause was the federal reserve contracting money supply in the first place assuring bank failures in a fractional reserve system. FDIC is a bandaid for having a centrally planned fed rather than free market banking with private deposit insurance.
Yes the loose regulations of the Bush era led to the 2008 crisis. It took two consecutive presidential terms by the GOP, but they got there. Will Trump's speed run lead to even worse results? We shall see.
I don't understand what you are saying. We do have free market banking. Are you suggesting totally unregulated banking would work better? Literally we tried that, it was a huge contributor to the great depression.
We do not. A banking company recently applied for a banking license to provide full reserve banking ('narrow banking') and their license denied. The government makes it illegal to make a bank immune to failure when they contract supply.
>was a huge contributor to the great depression.
... the great depression happened under a central bank system, within 15 or 20 years of this industry becoming far more regulated.
Under a central bank system that did not have FDIC insurance. You are deliberately eliding my point. Not cool.
And the idea that a completely free market banking system where "narrow banks" can literally compete with the Fed makes any sense in the modern world is insane. Go to Somalia. Have fun staying alive and keeping any of your money.
On the contrary, FDIC encourages more reckless banking. Customers chase riskier high interest deposits knowing they cannot lose the deposit and that the 'insurance' is already baked in at a public loss if their gamble loses. The customer has little incentive to monitor underlying banking of these insured funds. This isn't just my words, the fdic has written of the moral hazards themselves. And the same principle applies to the central bank encouraging risky bank behavior by bailing them out as a lendor of last resort.
Most people have better things to do than individually monitoring the underlying banking of insured deposits. And they lack the expertise to do so anyway (I certainly wouldn't know how to accurately price or create a CLO, some complex structured note, swap, CMBS transaction, etc.). That's why we have regulators, and the benefit/cost ratio is phenomenally high.
I have no trouble beleiving having a central bank that can buy government debt with newly created money, essentially taxing the populace via inflation without exposing representatives to voting on a tax, might be highly attractive to governments worldwide. It is a fairly reliable way to burden the populace under an illusion they don't well see through.
> I have no trouble beleiving having a central bank that can buy government debt with newly created money, essentially taxing the populace via inflation without exposing representatives to voting on a tax, might be highly attractive to governments worldwide.
Then I recommend you learn some economics and how to look at past evidence.
First, it's not taxing people - pretty much zero people hold all their money in cash. Without targeted low inflation, countries run the risk of a deflationary spiral, which means massive unemployment and wealth destruction. At no point did a person pay them a tax. And any govt debt they buy is exactly the result of elected officials spending more than they take in. Don't want the Fed buying govt debt - tell your politicians to raise taxes to pay for what they use, or to cut (and note - the current DOGE idiocy looks at best to cut a fraction of a percent of the budget, while the GOP looks, once again, to add trillions to the debt under the never-once-worked belief that somehow tax cuts will pay for themselves... That is sheer idiocy of the highest form: not a single time has that done it, yet they and their ignorant followers try and try and try.... - this is where your debt comes from).
Assets other than cash inflate along with inflation, which is where most people hold assets (houses, stocks, pension funds, pretty much everything). Inflation also lowers payments for fixed loans, like mortgages, so inflation generally gives value to borrowers (they have less effective to pay back over time) at the cost to lenders. So most people at some point have a longer term loan (house, education), and inflation adds to their wealth by making them owe less.
So your argument is both ignorant and doesn't understand basic econ or reality. It's this ignorant, self-righteous and frankly incredibly stupid view nearly unique to Americans that is right now destroying trillions in wealth for Americans through equivalently stupid, ignorant, and short sighted policy. So congrats - you are the problem for America. I do not understand how the US went from an economic powerhouse with decent policy and an educated populace to support itself to the current idiot cycle of discredited ideas and such ignorant masses thinking they understand topics they clearly do not. Good luck tanking your economy. It looks like your health system is going along with it.
Lol I am paraphrasing Milton Friedman [0 1]. A very ignorant, stupid person with a Nobel prize in economics.
[0] “Do We Need Central Banks?”
by Milton Friedman
In Monetary Management in Hong Kong, Proceedings of the Seminar on Monetary Management
organized by the Hong Kong Monetary Authority on 18-19 October 1993, pp. 44-47
The problem with appealing to authority is they become obsolete. The 2022 Nobel in Econ went to work specifically about the value and importance of central banking surpassing Friedman’s long outdated view (and note his 1976 Nobel was not on central banking).
And nothing he said that you “paraphrased” supports your claims. Heck, the word “tax” never even appears in his essay.
If you’re going to appeal to authority, I recommend you at least look over the list of Econ Nobels after Friedman - there’s plenty after him actually on topic or much closer than his field of expertise. You may want to learn from them.
I'm not appealing to authority (I did not even mention economists who thought this way until YOU chose to make it personal about problem people for America), I am providing examples that the counter argument does not make you stupid, which was a cheap ad hominem attack. Its just a cheap underhanded attack to call people ignorant and stupid and then call it an appeal to authority as soon as an example is presented of someone who beleived same but was not. I am not saying the argument is correct because milton said it (t hat would be appeal to authority), I'm saying he disproves that the view must come from stupidity/ignorance.
>tax
The also cited lectures explain why he believed it was an invisible tax. Milton friedman beleived inflation was an invisible tax. Then he characterised our central bank as a source of inflation. We could dig up additional sources, but I think you know this if you know so much of nobel laureates in economists, it would merely be a make work exercise you would promptly discard. Deliberately feigning ignorance doesn't mean I haven't paraphrased him correctly, although really he is one of many I paraphrase because many economists have held this view.
> (and note his 1976 Nobel was not on central banking).
Both Friedmans and Bernankes nobel prize brief mention research that includes the central bank. Friedman's nobel brief specifically called out research on the federal reserve during the great depression in A Monetary History of the United States. But neither prize narrowed central banks as the center focus of the prize.
Right, so as the OP said above: half of the GD was caused by Smooth-Hawley - the implication being that the other half was caused by other things - most likely the massive bank failures. By letting banks play with crypto we seem to be trying to speed-run a new great depression.
> Half of the Great Depression was caused by tariffs.
The downvotes might be because it's unrelated to the discussion, but it's also not really wrong. The exact impact of the Smoot-Hawley Tariff Act probably can't be quantified, but it's well agreed that it contributed significantly to the extent of the depression itself due to the retaliatory tariffs triggered and the resulting drop in global trade. (Institutional access needed - https://www.cambridge.org/core/journals/journal-of-economic-...)
The paper you have linked is a survey (economic historians are like other people and believe things that do not have clear evidence too, as someone who studied economic history I can give you a long list of subjects on which opinions without evidence are common...this is one of the most notorious), it does not say that it contributed half (there is no way to know this either, it is an anti-factual statement, there is research that says it contributed to the drop in imports...but this is against the backdrop of a massive drop that was probably at least 5-10x as large caused by banking), the quantum is extremely important here because you can say something is probably negative but also probably irrelevant (true in this case, the reason why this statement is said is because tariffs are negative ceterius paribus, so it is easy to say that they were negative but this ignores all other context...the irrationality about tariffs is exposed by almost all of the growth miracles in economic history occurring in countries with extremely high tariffs), and (finally) there is massive amounts of evidence that 99% of the cause was banking.
On the latter, this is knowable because you can point to failures of specific banks that coincided with the Depression getting worse in areas where those banks traded (in particular, the failure of Caldwell). This is a very different kind of evidence to the one for tariffs, in economic history terms the latter is shrug maybe (this kind of thing is not apparent to people who don't know how the sausage is made). This is why you have papers (like Eichengreen) that revolve around asking why SH is such an obsession for economists (usually not actual economic historians). Compare this to the number of papers on banking history of the period, on the failures of massive banks like Caldwell...there are very few on this because banking history is extremely unpopular and boring amongst economists because you can't use mathematical models that show how clever you are, macro is very popular but completely useless (again, most people don't know how the sausage is made).
There is no evidence that it contributed significantly. This is like your house being on fire, and saying that your house collapsed because you left the kitchen door open (and, again, to repeat: there is no evidence that tariffs are bad either...because almost every country that has experienced huge growth had tariffs in the past, there is a lot of evidence that tariffs/trade barriers are bad for economically uncompetitive countries i.e. the EU today, South America in the 50/60s, and Britain 20-70s but those two things are not separable, tariffs have a context).
Other comments are also mostly wrong. Issue wasn't unregulated banks in the GD either, most banks that failed were regulated. There is an argument for saying that state regulators were worse, that there was massive regulatory fragmentation (in the 20s, banks were regulated in a completely different way to today) but I am not clear why people would assume regulation automatically leads to less crises. Savings and Loans were also heavily regulated...still blew up. The issue is that heavy regulation usually causes massive concentration in the banking sectors (Canada and Australia are two examples) and this generally leads to a much lower frequency of banking crises but significantly greater severity. The assumption that regulators can just magically find this optimum is not logical (and is based on the theory that people who work at banks do not have an incentive to stop failures, this aspect was sold heavily after 2008 to support significantly more regulation...but it isn't accurate, for example Lehman's senior management lost 95% of their net worth, and ignores that regulators were overseeing the institutions that failed before too).
I'm not as engaged in this topic as you are, likely because I'm not as ideologically fixated on it. But the idea that the Tariff Act had a significant negative impact is well analyzed (e.g above), hence the consensus.
Imports fell 40% and it is a small part of that fall. And, as the paper explains, the actual economic impact was quite limited in the context of the Great Depression and the financial system shutting down completely.
The reason why I am engaged is because I have a postgrad in economic history. Within economic history, SH is generally understood as something where the evidence is often misunderstood by journalists (for the reasons I have explained), and this filters down (the Irwin paper is somewhat notorious for this because Irwin is a trade economist who is often very careful, because trade economics is often non-conclusive, and you hear the conclusion from people who have never read or actually understood the paper...you may not have noticed but I alluded to this paper in my original argument, it is that well-known that people will misunderstand it).
The issue is that people who haven't studied GD in depth do not understand any part of the context. They just do a quick Google search and then act as if this is the same thing as prolonged study.
Your whole argument is based on "it's causal because we saw a peak just after a bank collapse", as if a fire started bt a spark couldn't have fuel and generate other sparks in a positive feedback loop. The rest is basically "there is evidence that" without nothing to back it up.
See Rustici (2005),Irwin (1998), Bond (1993) and Crucini (1996)
It also pushed Japan to invade all of Asia because they were an island nation dependent on trade (and ironically had been an upstanding world citizen and significant member of the League of Nations).
But in that case you just have a really inefficient database, and the entire point of the Rube Goldberg apparatus is gone. You don't need to solve the Byzantine Generals problem with a trustless system when you are trusting someone.
I didn't claim there was an exemption, but exemption or not the ways still exist. I'm claiming in practical reality bypassing kyc and aml is far more practical with crypto. Your comment is 99% academic without the context of reality.
It kind of does if the transfer is not between regulated entities. If you transfer crypto from one private wallet to another who is going to know you as a client?
I remember when that was the point of Bitcoin. Just about every other crypto out there is more fiat than fiat itself is, between centralization and arbitrary issuance.
And it still is for many; the banks just sort of want to throw their two cents in about that. And it turns out, the worst thing about bitcoin is that it's money for enemies; nobody can stop them from doing so (well, aside from their own regulators). Sort of how something being permissionless works.
Quite the opposite actually. In 2008-2010 most of the conversations I was involved with around crypto were around how dangerous fiat currency can be, and how valuable it is to have an algorithmically scarce resource that couldn't be printed by a central bank while still enabling digital transfers. The conversations were steeped in lack of trust of central banks, and it felt like a techno-splinter group of the Occupy movement. What conversations around crypto were you having during this time?
Mostly I was surprised by the indecision to modify the original bitcoin protocol to allow for more transaction throughput and the vast amount of energy that the bitcoin blockchain ending up consuming. Furthermore, while I understood the potential for fraud I was not expecting both the volume of fraudsters and the scope of some individual frauds.
Empirically, banks which get involved in any kind of financial activity tend to blow up: lending money, mortgages, forex trading, interest rate trading, ...
That was 2008, which was an extraordinary event - many say it was the worst economic crisis since the Great Depression. People are claiming bank bailouts are regular events - are there recent ones?
No. SVB was closed by regulators, and is now under the control of the FDIC. When a bank fails, this is the government agency that ensures depositors get access to their money. Shareholders will get wiped out, and management has been removed.
FDIC has limits. They were not respected, everybody was made whole. $150 billion of uninsured money was bailed out by the government.
> So, the FDIC, the Fed and the Treasury Department decided to go big and guarantee all SVB's deposits, even the roughly $150 billion that was supposed to be uninsured.
> Shareholders were wiped out.
Sure, but all the depositors were bailed out, which is what bailing out a bank means.
> all the depositors were bailed out, which is what bailing out a bank means
Not at all. Bailing out a bank means funding the corporation, its owners, and its management to continue their operations. In this case, as the GP makes clear, the corporation was acquired by another financial institution, its owners lost all their money, and the management was fired.
> A bank bailout is when resources are dedicated to a struggling entity to prevent collapse, preceding bank failure.
> Silicon Valley Bank and Signature Bank remain two of the largest bank bailouts in American history, with the U.S. government covering all taxpayer deposits but not supporting investors in the bank will not be protected.
My spider sense tells me Wells Fargo will be one of the first to go all in, they've generally been an org that makes solid, future-focused decisions right?
I don't know about labels but if you call most banks and say do you accept money paid in from crypto transactions in my experience they'll say no thanks. It's getting quite hard to find ones that will touch it due to money laundering regulations / risks.
This is what a proper balance sheet is supposed to address. It’s fine to have different tiers of assets and liabilities as long as the net capitalization requirements for the parts are valid.
You say that as if it hasn't been going on for at least decades. I'd wager that there's some perspective that could argue it's a default mode of society and financial systems, that occasionally is hard to notice during rapid increases in prosperity.
I mean, I guess it did peak in 2008, and also in the S&L scandal in the 80s, but still bitcoin serves no conceivable practical purpose. At least CDOs in principle were supposed to get people homes even if they were mostly a scam.
No, a CDO by definition is a rehypothecation of an asset that really didn't need it, it was just a means to let others bet on what seemingly was a sure thing until it was not. Not only was the underlying security, it's derivative, and an insurance product to boot, that's why insurance companies also got bailouts.
This massive failure is what created the need for bitcoin, a means in which to trap energy (you need to spend money to make bitcoin) and store/move it digitally, then you get the benefit of a visible record of transfers and stores.
As a silvergate, signature, and SVB customer they didn't hedge their t-bill duration risk properly, experienced a co-ordinated bank run and had to sell their assets off at a discount, making them insolvent.
CDOs allowed more finance to flow to housing, which in itself is a good thing - we need more housing. The problem was that the investments were highly risky - to the point of almost certain disaster - and regulators and most of the financial industry overlooked it.
But securitizing housing finance isn't in itself a bad thing.
> This massive failure is what created the need for bitcoin
How did the 2008 financial crisis create a need for cryptocurrency? How does it solve the problem of unregulated, high risk financial activity? How does it stop those things from tanking the whole economy? It would seem to make regulation even harder.
> CDOs allowed more finance to flow to housing, which in itself is a good thing - we need more housing.
There's a big leap in that statement. Money is made up and "doesn't matter" (except that we choose to structure our society to pretend it does); what matters is actual productivity. If you want to solve the housing problem, you have to produce more houses; if you just throw money at the problem, the market will expand to consume all available money.
I understand the philosophical concepts about money, fiat, productivity, etc. I don't understand what you mean beyond that:
It seems like - maybe I misunderstand - you are dismissing money as a store of economic value; a means of liquidity of resources; and its essential, overwhelmingly powerful role in productivity, including real estate development.
In this case, the CDOs provided liquidity to mortgages, and that reduces the cost of buyer financing and increases demand for housing. In particular, they financed mortgages for people with poorer credit - generally less well-off people, the people for whom housing is an issue. Increased demand should attract resources to homebuilding, and result in more homes and lower prices for that market.
> the market will expand to consume all available money
In some respects it is similar to the student loan industry: when the system makes money readily "available" but it's hard to actually increase the supply, prices rise radically; since this is a loan rather than a handout that means making people actually worse off. Or in other words, it mainly just steals (the industry term is "extracts value from") the productivity gains from other parts of the economy, rather than actually adding productivity.
I'm not trying to make a philosophical point really - just pointing out that you can't get a honest picture of economic concerns if you think from the perspective of the finance industry.
That's what small government, anti-welfare political groups say about student loans (and it's popular on places like HN), but it doesn't match basic microeconomics. If demand goes up and then prices follow, then the market attracts supply until prices drop to essentially the least profit that suppliers can sustain.
In the end, you have more demand - including students who couldn't otherwise afford college - and more supply. Of course, colleges will anticipate that and increase supply before prices peak.
> it's hard to actually increase the supply
Why would it be hard to increase supply of homes or college educations?
> you can't get a honest picture of economic concerns if you think from the perspective of the finance industry.
"need for bitcoin" I don't get this. There is no need for bitcoin. You can have a visible record of transfers and stores without bitcoin. Heck we already do. Any old database will do. You can even write in COBOL or ALGOL
It hasn't been going on for decades. Prior banking crises were because of holes in regulation (and of course bad behavior by banks) that were unknown to the public, regulators, and most of the banking industry. Regulators didn't give the green light to participate in highly risky activities that the public was already aware of.
There is always risk - everyone takes some risks - but the matter of degree is everything. Some people risk crossing the street against the light, some people go skydiving, some people climb in Yosemite without a rope.
I wasn't talking about risk, I was talking about fraud. There's a lot of fraud going on, and probably always has been and always will be. It becomes obvious when the pie is shrinking, and it's hard to notice when the pie is growing rapidly.
You're using a straw man about risk to argue against my point instead of addressing it directly.
Sure the fraud methods evolve, but the idea that it's some new recent phenomenon is what I'm arguing against.
It's the same mistake misconceiving of fraud rather than risk: The issue isn't its existance - of course there will be some somewhere - but the degree. It's like saying it rains everywhere - which is true - so everywhere is the same in terms of drought, floods, etc., and we shouldn't build dikes, storm sewers, water storage, etc. It's nonsensical.
The argument also fails logically: If there is all this fraud, why would we be seeking more? Someone just told me the US should invade Mexico because there has always been warfare. Same bizarre argument.
Let's minimize fraud and warfare, not increase them dramatically (because there has been fraud and warfare before).
I'm not arguing that because there has always been fraud we shouldn't fight it. I'm arguing that I don't think there's substantially more fraud now than there always has been.
I think there will be more with Trump in office, the Republicans controlling Congress, and as the federal government supports cryptocurrency. The FDIC's decision I think will increase fraud.
Irony: the first Bitcoin block has a link to an article about the bank bailouts, highlighting how it was created to be an alternative.
What started as an attempt to get away from the worst kinds of financial capitalism turned into an absurdist parody of it.
A take away of mine from the whole saga is: it’s actually very hard to get money to do useful things.
Money “wants” to scam, pump and dump, and most of all to gamble. A casino is what every financial system “wants” to become. Take away the regulations and rules and casinos is all you get.
I feel like a loose analogy can be made with trying to build a heat engine, to get energy that “wants” to just dissipate into entropy to do useful work.
Maybe there’s some kind of weird connection there. Useful investments are a lot harder — meaning less thermodynamically favorable, less likely to exist, lower entropy — than scams and bullshit and gambling. If money has an easy way to flow why would it take the hard way?
Interesting parralel, i'll go even further: given that the quantity of speech is infinite, but only a statistically insignificant part of it corresponds to truth, does it mean that truth-seeking is also going against the laws of thermodynamics ?
One of these days, just like most bitcoiners today have, the government is going to learn the hard way that bitcoin and crypto are not the same, and should not be treated the same. One has no issuer, the other has them. One has an immutable ledger, the other is full of examples of rollbacks and even lost ledgers (lookin' at you XRP). One is peer to peer, the other has a small in group calling the shots on protocol changes, due to node running being out of reach of consumer hardware. Heck, a lot of them don't even try to hide this, using proof of stake (read: oligarchic operations) rather than proof of work, which was the crux of how bitcoin was made to be trustless.
But like I said, this is something most bitcoiners had to learn the hard way, and the government and institutions are new to this game. With any luck they'll figure it out quickly, but it might be tough given how much lobbying money is being thrown around by the issuers of these shitcoins. Note how many CEO's we're seeing in these crypto summits...and be reminded that you'll never see the CEO of Bitcoin anywhere.
"World Liberty Financial, the cryptocurrency company started by Donald J. Trump and his sons, announced on Tuesday that it was planning to sell a digital currency called a stablecoin..."
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How is this part enforced? Self review?
How should one keep track of whether one's banks have non-negligible crypto exposure, so that one may move one's money to safer institutions well in advance of the inevitable disaster?
The first people to try are, almost by definition, the risk takers.
That is not to say they all blow up, or even that the ones that blow up do so because of this particular venture. Just high risk taking is correlated with both blowing up and trying the new thing first.
They may blow up from some completely unrelated risky venture.
That's why the US created the Federal Reserve, deposit insurance (FDIC), and bank regulation - to prevent those things.
> They may blow up from some completely unrelated risky venture.
That's not the case with regulated banks.
>was a huge contributor to the great depression.
... the great depression happened under a central bank system, within 15 or 20 years of this industry becoming far more regulated.
As a simple entry into the evidence start with https://cepr.org/voxeu/columns/recent-trends-central-bank-in..., and follow up via google scholar.
Then I recommend you learn some economics and how to look at past evidence.
First, it's not taxing people - pretty much zero people hold all their money in cash. Without targeted low inflation, countries run the risk of a deflationary spiral, which means massive unemployment and wealth destruction. At no point did a person pay them a tax. And any govt debt they buy is exactly the result of elected officials spending more than they take in. Don't want the Fed buying govt debt - tell your politicians to raise taxes to pay for what they use, or to cut (and note - the current DOGE idiocy looks at best to cut a fraction of a percent of the budget, while the GOP looks, once again, to add trillions to the debt under the never-once-worked belief that somehow tax cuts will pay for themselves... That is sheer idiocy of the highest form: not a single time has that done it, yet they and their ignorant followers try and try and try.... - this is where your debt comes from).
Assets other than cash inflate along with inflation, which is where most people hold assets (houses, stocks, pension funds, pretty much everything). Inflation also lowers payments for fixed loans, like mortgages, so inflation generally gives value to borrowers (they have less effective to pay back over time) at the cost to lenders. So most people at some point have a longer term loan (house, education), and inflation adds to their wealth by making them owe less.
So your argument is both ignorant and doesn't understand basic econ or reality. It's this ignorant, self-righteous and frankly incredibly stupid view nearly unique to Americans that is right now destroying trillions in wealth for Americans through equivalently stupid, ignorant, and short sighted policy. So congrats - you are the problem for America. I do not understand how the US went from an economic powerhouse with decent policy and an educated populace to support itself to the current idiot cycle of discredited ideas and such ignorant masses thinking they understand topics they clearly do not. Good luck tanking your economy. It looks like your health system is going along with it.
[0] “Do We Need Central Banks?” by Milton Friedman In Monetary Management in Hong Kong, Proceedings of the Seminar on Monetary Management organized by the Hong Kong Monetary Authority on 18-19 October 1993, pp. 44-47
[1] Free to Choose lecture films series
And nothing he said that you “paraphrased” supports your claims. Heck, the word “tax” never even appears in his essay.
If you’re going to appeal to authority, I recommend you at least look over the list of Econ Nobels after Friedman - there’s plenty after him actually on topic or much closer than his field of expertise. You may want to learn from them.
>tax
The also cited lectures explain why he believed it was an invisible tax. Milton friedman beleived inflation was an invisible tax. Then he characterised our central bank as a source of inflation. We could dig up additional sources, but I think you know this if you know so much of nobel laureates in economists, it would merely be a make work exercise you would promptly discard. Deliberately feigning ignorance doesn't mean I haven't paraphrased him correctly, although really he is one of many I paraphrase because many economists have held this view.
> (and note his 1976 Nobel was not on central banking).
Both Friedmans and Bernankes nobel prize brief mention research that includes the central bank. Friedman's nobel brief specifically called out research on the federal reserve during the great depression in A Monetary History of the United States. But neither prize narrowed central banks as the center focus of the prize.
The downvotes might be because it's unrelated to the discussion, but it's also not really wrong. The exact impact of the Smoot-Hawley Tariff Act probably can't be quantified, but it's well agreed that it contributed significantly to the extent of the depression itself due to the retaliatory tariffs triggered and the resulting drop in global trade. (Institutional access needed - https://www.cambridge.org/core/journals/journal-of-economic-...)
The paper you have linked is a survey (economic historians are like other people and believe things that do not have clear evidence too, as someone who studied economic history I can give you a long list of subjects on which opinions without evidence are common...this is one of the most notorious), it does not say that it contributed half (there is no way to know this either, it is an anti-factual statement, there is research that says it contributed to the drop in imports...but this is against the backdrop of a massive drop that was probably at least 5-10x as large caused by banking), the quantum is extremely important here because you can say something is probably negative but also probably irrelevant (true in this case, the reason why this statement is said is because tariffs are negative ceterius paribus, so it is easy to say that they were negative but this ignores all other context...the irrationality about tariffs is exposed by almost all of the growth miracles in economic history occurring in countries with extremely high tariffs), and (finally) there is massive amounts of evidence that 99% of the cause was banking.
On the latter, this is knowable because you can point to failures of specific banks that coincided with the Depression getting worse in areas where those banks traded (in particular, the failure of Caldwell). This is a very different kind of evidence to the one for tariffs, in economic history terms the latter is shrug maybe (this kind of thing is not apparent to people who don't know how the sausage is made). This is why you have papers (like Eichengreen) that revolve around asking why SH is such an obsession for economists (usually not actual economic historians). Compare this to the number of papers on banking history of the period, on the failures of massive banks like Caldwell...there are very few on this because banking history is extremely unpopular and boring amongst economists because you can't use mathematical models that show how clever you are, macro is very popular but completely useless (again, most people don't know how the sausage is made).
There is no evidence that it contributed significantly. This is like your house being on fire, and saying that your house collapsed because you left the kitchen door open (and, again, to repeat: there is no evidence that tariffs are bad either...because almost every country that has experienced huge growth had tariffs in the past, there is a lot of evidence that tariffs/trade barriers are bad for economically uncompetitive countries i.e. the EU today, South America in the 50/60s, and Britain 20-70s but those two things are not separable, tariffs have a context).
Other comments are also mostly wrong. Issue wasn't unregulated banks in the GD either, most banks that failed were regulated. There is an argument for saying that state regulators were worse, that there was massive regulatory fragmentation (in the 20s, banks were regulated in a completely different way to today) but I am not clear why people would assume regulation automatically leads to less crises. Savings and Loans were also heavily regulated...still blew up. The issue is that heavy regulation usually causes massive concentration in the banking sectors (Canada and Australia are two examples) and this generally leads to a much lower frequency of banking crises but significantly greater severity. The assumption that regulators can just magically find this optimum is not logical (and is based on the theory that people who work at banks do not have an incentive to stop failures, this aspect was sold heavily after 2008 to support significantly more regulation...but it isn't accurate, for example Lehman's senior management lost 95% of their net worth, and ignores that regulators were overseeing the institutions that failed before too).
Anyway,
https://www.jstor.org/stable/2646642
I'm not as engaged in this topic as you are, likely because I'm not as ideologically fixated on it. But the idea that the Tariff Act had a significant negative impact is well analyzed (e.g above), hence the consensus.
Wish you the best.
Imports fell 40% and it is a small part of that fall. And, as the paper explains, the actual economic impact was quite limited in the context of the Great Depression and the financial system shutting down completely.
The reason why I am engaged is because I have a postgrad in economic history. Within economic history, SH is generally understood as something where the evidence is often misunderstood by journalists (for the reasons I have explained), and this filters down (the Irwin paper is somewhat notorious for this because Irwin is a trade economist who is often very careful, because trade economics is often non-conclusive, and you hear the conclusion from people who have never read or actually understood the paper...you may not have noticed but I alluded to this paper in my original argument, it is that well-known that people will misunderstand it).
The paper you have linked is usually cited as evidence for SH having a limited effect - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=269524 is one among many examples.
The issue is that people who haven't studied GD in depth do not understand any part of the context. They just do a quick Google search and then act as if this is the same thing as prolonged study.
See Rustici (2005),Irwin (1998), Bond (1993) and Crucini (1996)
And it still is for many; the banks just sort of want to throw their two cents in about that. And it turns out, the worst thing about bitcoin is that it's money for enemies; nobody can stop them from doing so (well, aside from their own regulators). Sort of how something being permissionless works.
Mostly I was surprised by the indecision to modify the original bitcoin protocol to allow for more transaction throughput and the vast amount of energy that the bitcoin blockchain ending up consuming. Furthermore, while I understood the potential for fraud I was not expecting both the volume of fraudsters and the scope of some individual frauds.
See my comment in this same subthread: https://news.ycombinator.com/item?id=43510850
The normal procedure is that the blown up bank is sold to another bank and the _depositors_ are bailed out by deposit insurance.
There are ~4500 banks in the US and about 2 blow up a year https://www.fdic.gov/bank-failures/failed-bank-list
Did the government bail out Silicon Valley Bank?
No. SVB was closed by regulators, and is now under the control of the FDIC. When a bank fails, this is the government agency that ensures depositors get access to their money. Shareholders will get wiped out, and management has been removed.
> So, the FDIC, the Fed and the Treasury Department decided to go big and guarantee all SVB's deposits, even the roughly $150 billion that was supposed to be uninsured.
> Shareholders were wiped out.
Sure, but all the depositors were bailed out, which is what bailing out a bank means.
Not at all. Bailing out a bank means funding the corporation, its owners, and its management to continue their operations. In this case, as the GP makes clear, the corporation was acquired by another financial institution, its owners lost all their money, and the management was fired.
> Silicon Valley Bank and Signature Bank remain two of the largest bank bailouts in American history, with the U.S. government covering all taxpayer deposits but not supporting investors in the bank will not be protected.
https://www.bankrate.com/banking/what-is-a-bank-bailout/
The fdic “call reports” are the ones you want. They have bulk download but it’s been ages since I looked at the format.
This massive failure is what created the need for bitcoin, a means in which to trap energy (you need to spend money to make bitcoin) and store/move it digitally, then you get the benefit of a visible record of transfers and stores.
As a silvergate, signature, and SVB customer they didn't hedge their t-bill duration risk properly, experienced a co-ordinated bank run and had to sell their assets off at a discount, making them insolvent.
But securitizing housing finance isn't in itself a bad thing.
> This massive failure is what created the need for bitcoin
How did the 2008 financial crisis create a need for cryptocurrency? How does it solve the problem of unregulated, high risk financial activity? How does it stop those things from tanking the whole economy? It would seem to make regulation even harder.
> rehypothecation
?
There's a big leap in that statement. Money is made up and "doesn't matter" (except that we choose to structure our society to pretend it does); what matters is actual productivity. If you want to solve the housing problem, you have to produce more houses; if you just throw money at the problem, the market will expand to consume all available money.
It seems like - maybe I misunderstand - you are dismissing money as a store of economic value; a means of liquidity of resources; and its essential, overwhelmingly powerful role in productivity, including real estate development.
In this case, the CDOs provided liquidity to mortgages, and that reduces the cost of buyer financing and increases demand for housing. In particular, they financed mortgages for people with poorer credit - generally less well-off people, the people for whom housing is an issue. Increased demand should attract resources to homebuilding, and result in more homes and lower prices for that market.
> the market will expand to consume all available money
Yes! We want the housing market to expand. ?
I'm not trying to make a philosophical point really - just pointing out that you can't get a honest picture of economic concerns if you think from the perspective of the finance industry.
In the end, you have more demand - including students who couldn't otherwise afford college - and more supply. Of course, colleges will anticipate that and increase supply before prices peak.
> it's hard to actually increase the supply
Why would it be hard to increase supply of homes or college educations?
> you can't get a honest picture of economic concerns if you think from the perspective of the finance industry.
Yes, agreed.
There is always risk - everyone takes some risks - but the matter of degree is everything. Some people risk crossing the street against the light, some people go skydiving, some people climb in Yosemite without a rope.
You're using a straw man about risk to argue against my point instead of addressing it directly.
Sure the fraud methods evolve, but the idea that it's some new recent phenomenon is what I'm arguing against.
The argument also fails logically: If there is all this fraud, why would we be seeking more? Someone just told me the US should invade Mexico because there has always been warfare. Same bizarre argument.
Let's minimize fraud and warfare, not increase them dramatically (because there has been fraud and warfare before).
We'll love bailing out the crypto scammers like we bailed larger banks.
None of us will benefit. Those who will, well, good for them, I suppose. That big pool will surely be full of, wet water, I suppose ?
It's not like anything matters anymore, right ? Enjoy !!!!
What started as an attempt to get away from the worst kinds of financial capitalism turned into an absurdist parody of it.
A take away of mine from the whole saga is: it’s actually very hard to get money to do useful things.
Money “wants” to scam, pump and dump, and most of all to gamble. A casino is what every financial system “wants” to become. Take away the regulations and rules and casinos is all you get.
I feel like a loose analogy can be made with trying to build a heat engine, to get energy that “wants” to just dissipate into entropy to do useful work.
Maybe there’s some kind of weird connection there. Useful investments are a lot harder — meaning less thermodynamically favorable, less likely to exist, lower entropy — than scams and bullshit and gambling. If money has an easy way to flow why would it take the hard way?
But like I said, this is something most bitcoiners had to learn the hard way, and the government and institutions are new to this game. With any luck they'll figure it out quickly, but it might be tough given how much lobbying money is being thrown around by the issuers of these shitcoins. Note how many CEO's we're seeing in these crypto summits...and be reminded that you'll never see the CEO of Bitcoin anywhere.
"World Liberty Financial, the cryptocurrency company started by Donald J. Trump and his sons, announced on Tuesday that it was planning to sell a digital currency called a stablecoin..."
I don't suppose that could be related?