Discussion about this post

User's avatar
flipshod's avatar

I'm for the narrowing of banking. The idea that depositors are being magically convinced to take on more risk than they intend to just by pooling everyone together and relying on timing differences always redounds back to the government to prop up. (liability transfer is not much different from check kiting)

I agree that quantitative easing is a trap we've found ourselves in, and I'm not sure how we unwind that, but I take the positive view on central bank digital currency. If every citizen had an account with the Fed, property rights to that money would be clearer and stronger. People point to the actions of the Canadian govt during the trucker protests, but there the government was able to freeze funds precisely because they were tied up with third-parties.

If basic property rights in a bank account are at risk, we have bigger problems than we think.

You give examples of how money is pooled and put to use in the real economy. That process is working fine.

The amount of money tied up in financial contracts dwarfs the amount of money in the real economy, so raising money for investment in actual things is not the issue. All of the debt created via QE is the bigger threat.

Expand full comment
QImmortal's avatar

"With only narrow banking, there would be less investment, and economic activity would be crippled."

It's not clear to me why this would have to be the case. Let's say everyone with a bank account today suddenly got their money back and were told they could either put it into equities or into a vault that basically charged a negative interest rate to keep their money safe. It isn't obvious to me that an allocation with less investment than before would be the inevitable result. While it could go either way, shouldn't an allocation reflecting previous appetites be the expected result?

Expand full comment
16 more comments...

No posts