reply on: Central banks need escape route from cycle of boom and bust \ stacker news ~econ

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10 sats \ 6 replies \ @Undisciplined 2 Nov \ parent \ on: Central banks need escape route from cycle of boom and bust econ

Sort of, but without central bank credit expansion, bank runs are a real threat to independent banks engaged in fractional reserve lending.

In an environment like that, I'd expect business cycles to be very mild.

18 sats \ 4 replies \ @Aardvark 2 Nov

A good way to promote banks acting responsibly is to stop bailing them out. If they go insolvent, the FDIC makes the customers whole, and the bank shuts its doors.

10 sats \ 3 replies \ @Satosora 2 Nov

If we stop bailing them out, wont they lose even more public credibility?

51 sats \ 0 replies \ @Rothbardian_fanatic 2 Nov

The only way they had credibility was with FDIC. Get rid of the FDIC and the banks will have to behave themselves or go bankrupt. They won’t, theoretically, lend much more than they have taken in as deposits. They won’t be backed by the Fed, they won’t be naked short on commodities. That would cure many, many problems.

10 sats \ 1 reply \ @drlh 2 Nov

Malinvestment drives the economy.

0 sats \ 0 replies \ @Rothbardian_fanatic 2 Nov

Malinvestment drives the economy into the ground. Malinvestment arises due to economic miscalculation because of “unnatural” interest rates. The natural interest rate is the rate that demand for and supply of money balance. That would be savings and loans. With the Fed arbitrarily deciding the interest rates, nobody can do proper economic calculation for investments.

5 sats \ 0 replies \ @Rothbardian_fanatic 2 Nov

Yes, they are at risk of a bank run, but that is the controlling factor for banks; bankruptcy. Too many fractions, loss of business. THEY earn those consequences.