What Lessons Has The Economy Learned From 2008? Apparently None.

The systemic risks of financial institutions haven’t changed much since 2008.

April 7, 2011

Comments

Robert Lenzer notes that the despite the hard lessons of 2008, the financial industry is still concentrated, meaning that the same systematic risks that led to the Financial Crisis are still with us.

All told, the 6 largest US financial institutions scrutinized by [Robert] Wilmers have 35% of all deposits and 53% of assets. The danger lies in their trading revenues, accomplished with borrowed funds, which amounted in 2010 to $56.1 billion- or 93% of ALL trading revenues by ALL banks.

But, get this- ‘the combined trading revenues of the 4 largest banks represent more than the pre-tax income of all the other banks.’ herein lies the risk. these large institutions have as their chief counter-parties in all their derivative trading each other.

In other words Goldman Sachs has JP Morgan Chase and Morgan Stanley on other side of their big trades, and those others have Goldman Sachs. So, should there be a problem with one institution, instantly the wherewithal of the others would be impacted. This is not a perpetually safe arrangement. Another 2008 would be worse than the last.

It wasn’t too long after the Financial Crisis that lots of people were predicting that the exposure of the flaws in the financial industry, though wreaking economic havoc in the short term, could potentially lead to long term benefits. It was assumed that the economy would learn it’s lesson and start moving towards more focus on “making things” rather than just “managing money.” I remember Doug Rushkoff, Chris Anderson and others pointing out that the ubiquity of the web should make this more possible.

So far, though, the evidence doesn’t seem to be supporting that conclusion. Not only is the financial industry basically intact and back to turning record profits, but it’s business models have barely been tweaked. In the meantime, as the Federal Reserve of Atlanta reports, the past three years have shown no growth in the number of businesses — the trendline has been flat. And that’s happening at a time when the numbers of employees per business has plummeted (except for health care), as you can see on the chart below:

I think that the economy is in for a long, hard slog over the next few years. Market corrections only lead to economic improvements when people learn their lessons.

56 responses to “What Lessons Has The Economy Learned From 2008? Apparently None.”

john personna

April 7, 2011 at 11:31 am

The US government is pwn3d

While GOP cannon fodder kept up the “socialism!” meme (and the “kenyan!” and “muslim!” memes), the GOP l33t quietly secured ownership.

As I’ve asked before (tongue in cheek), why the heck do you think Chelsea Clinton married into Goldman Sachs? The Clintons aren’t dumb.
john personna

April 7, 2011 at 11:46 am

Actually I wrote in error. The l33t isn’t just GOP. They use both parties. They handled the Bush-Obama hand-off with practiced ease.
Steve Verdon

April 7, 2011 at 12:00 pm

None, nothing has been learned by “the economy”. Anthropomorphize much?
Steve Verdon

April 7, 2011 at 12:03 pm

The US government is pwn3d

While GOP cannon fodder kept up the “socialism!” meme (and the “kenyan!” and “muslim!” memes), the GOP l33t quietly secured ownership.

As I’ve asked before (tongue in cheek), why the heck do you think Chelsea Clinton married into Goldman Sachs? The Clintons aren’t dumb.

Tell us again how you are an independent?
Alex Knapp

April 7, 2011 at 12:12 pm

None, nothing has been learned by “the economy”. Anthropomorphize much?

In business journalism parlance, the collective decisions and behaviors of economic actors is often tagged “the economy” or “the market” — though the latter is usually reserved for trading activities. And that’s clearly how I’m using the term here.
Barry

April 7, 2011 at 12:15 pm

“It wasn’t too long after the Financial Crisis that lots of people were predicting that the exposure of the flaws in the financial industry, though wreaking economic havoc in the short term, could potentially lead to long term benefits. It was assumed that the economy would learn it’s lesson and start moving towards more focus on “making things” rather than just “managing money.” I remember Doug Rushkoff, Chris Anderson and others pointing out that the ubiquity of the web should make this more possible.”

Why would they think this? The ‘lesson learned’ would be the the political balance shifted back into putting a choke-chain on Wall St. Wall St will not regulate itself, or keep itself stable; there’s too much money in the short-term.
ponce

April 7, 2011 at 12:32 pm

Why would a group of people who are making tons of money doing rather easy work voluntarily change the industry they work in?
tom p

April 7, 2011 at 12:42 pm

Tell us again how you are an independent?

Steve, read jp’s second post.
Dave Schuler

April 7, 2011 at 12:58 pm

Well, let’s see. When the objective of policy is to re-inflate the bubble, to do so not only does it allow the banks to keep doing what they’ve been doing it incentivizes their doing it, and the banks keep doing what they’ve been doing, we should be surprised?
john personna

April 7, 2011 at 1:06 pm

I’ve got admit I’m more frustrated with GOP shock troops. They just seem so incredibly unaware of the true narrative. They actually think “Democrats are socialists” explains things. Try to get them to notice the commonality between Bush bailouts and Obama bailouts, and their brains just reboot. They have no recollection of the previous 5 minutes.
Steven Donegal

April 7, 2011 at 1:10 pm

Alex, I think you missed what has happened in the last three years. In that time, the US financial system has morphed into a good bank/bad bank system. The bad bank is Fannie and Freddie and the Fed and is where all the bad assets either reside or are headed. Since the Fed can print the money to buy them, this won’t be a problem until people figure out that those Federal Reserve Notes are just the debt of a bad bank. In the future, Greenspan and Bernanke will be our Andrew Mellon and Herbert Hoover.
Steve Verdon

April 7, 2011 at 1:25 pm

Alex,

In business journalism parlance, the collective decisions and behaviors of economic actors is often tagged “the economy” or “the market” — though the latter is usually reserved for trading activities. And that’s clearly how I’m using the term here.

Yeah and it is dubious since it implies the economy is one large entity when in fact it is comprised of many different entities each one doing different things. I think this is part of the problem. People often don’t realize they are part of the economy. Different businesses, even in the same industry, maybe pursuing different strategies. A policy that is great for one part of the economy might be bad for the other (something we maybe seeing here–great for finance but the other sectors of the economy are still lagging). The economy, contrary to what business writers and many economists might think, cannot simply be aggregated. I think this is wrong. Especially since you ask the question about the economy, but then look at just one sector in the economy. Granted an important sector, but still just one sector.

tom,

Steve, read jp’s second post.

I did, but so what, he never listens to my clarifications so what is good for the goose….

Well, let’s see. When the objective of policy is to re-inflate the bubble, to do so not only does it allow the banks to keep doing what they’ve been doing it incentivizes their doing it, and the banks keep doing what they’ve been doing, we should be surprised?

Pretty much this. They learned the lesson alright. They learned that being to big to fail means you can’t fail…the government wont allow it, so business as normal. Big shock. Nothing to see here move along now.
john personna

April 7, 2011 at 1:48 pm

Wow, you come across as so adult, Steve.

Pretty much this. They learned the lesson alright. They learned that being to big to fail means you can’t fail…the government wont allow it, so business as normal. Big shock. Nothing to see here move along now.

As much as you’d like to be part of the solution, you are just part of the system.

We can’t do anything to limit size or risks taken, right Mr. Free Market? All we can do is have a pie-in-the-sky hope that next time a bailout won’t come.

Never mind that bailouts date back through American history.

(Insert fantasy that they all started with Clinton and the non-bailout at LTCM.)
john personna

April 7, 2011 at 1:51 pm

As an aside, Steve really does demonstrate part of this dynamic and dysfunction. He’s way out there at that extreme, where companies should not be limited in any way, but where they should be allowed to fail even when they potentially take the whole economy with them.

That extreme really won the deregulation argument, but to all our peril, because they were never going to stop the bailouts.

All they did was make this ruin more likely.
Steve Verdon

April 7, 2011 at 4:53 pm

As an aside, Steve really does demonstrate part of this dynamic and dysfunction. He’s way out there at that extreme, where companies should not be limited in any way,…

I’d like you to find a post here by me that supports this claim.

…but where they should be allowed to fail even when they potentially take the whole economy with them.

This is yet another dishonest and inaccurate representation of my position. I think that through poorly thought out policies we have ended up with institutions that are too big to fail. We need either a major reorganization or we need to let one or more of these firms fail to get out of the cycle. Staying in the cycle really isn’t a viable/sustainable solution.

That extreme really won the deregulation argument, but to all our peril, because they were never going to stop the bailouts.

All they did was make this ruin more likely.

Changing one set of regulations for another is not deregulation. We do not have an unregulated finance sector.

Never mind that bailouts date back through American history.

No, they are a much more recent phenomenon by and large. Going back 40 even 50 years is not “American history” it is part of it. There was the New York City Trusts in 1907, but it was 63 years till you got to the next one in 1970.
PJ

April 7, 2011 at 5:20 pm

They learned the lesson alright. They learned that being to big to fail means you can’t fail…the government wont allow it, so business as normal. Big shock. Nothing to see here move along now.

I’m a bit unsure about what lesson they would learn if the companies they worked for actually were allowed to fail.

It’s not like they would have to give back their millions. Nor am I sure that they wouldn’t be rehired, as long as they made the people employing them money, which they have.
steve

April 7, 2011 at 10:48 pm

“Changing one set of regulations for another is not deregulation.”

Successfully lobbying to have capital requirements lowered was not deregulation?

Steve
john personna

April 8, 2011 at 8:50 am

Glass-Steagall?

I don’t know maybe SteveV should remind us. Which did he support?
john personna

April 8, 2011 at 8:52 am

Or did he really just say that periodic failure, and national calamity, was the solution?
Steve Verdon

April 8, 2011 at 12:53 pm

Still waiting for that quote John. Put up or shut up.

As for Glass-Steagall I had no position at the time as I was not aware of it. In hindsight given the structure of the finance industry and the unspoken bailout policies in place probably a bad idea.

Or did he really just say that periodic failure, and national calamity, was the solution?

No, you wrote it and now want to attribute it to me. Just another example of your dishonest nature.
Steve Verdon

April 8, 2011 at 1:01 pm

PJ,

I’m a bit unsure about what lesson they would learn if the companies they worked for actually were allowed to fail.

It’s not like they would have to give back their millions. Nor am I sure that they wouldn’t be rehired, as long as they made the people employing them money, which they have.

First off, a failure would mean that the people employing them would not make money. Second, there would be the creditors who provide the money for many of these ventures. They’d lose too. The idea is that without an assurance of a bailout the creditors would be less willing to lend money to excessively risky ventures.

Now, earlier I wrote that we either need a major reorg or the financial sector or to let one or more of these “too big to fail” firms fail and stick it out. The latter if very, very painful. The Feds tried that with Lehman and we can see how well that worked (BTW that’s sarcasm). But the pussed out at the end and we had TARP, the Stimulus and QE and QE2 to get us out of the mess letting Lehman fail helped bring about.

Now a reorganization might be a better and hopefully less painful route…well for the country as a whole, it would be painful from those currently benefiting from the current dysfunctional finance industry. I’ve written on this topic and the posts can be found in the archives. Of course, given the incestuous nature of Wall Street and DC and upper level members or any administration/members of Congress etc. such reorganization is very unlikely. Instead we get stuff like the Dodd-Frank bill, which in my view simply further entrenches the current dysfunctional finance industry.

steve,

Successfully lobbying to have capital requirements lowered was not deregulation?

No. It is a change in the regulations. Maybe an unwise change, but it is not deregulation. Deregulation means removing regulations.

Some might include simplification of a regulatory regime under deregulation, but I don’t think changing reserve requirements fits there either. It isn’t simplifying or eliminating the current regulatory regime merely changing it.
john personna

April 8, 2011 at 1:01 pm

What are you talking about Steve, asking me to prove a negative? Do you think you have spoken for financial oversight (to give you the most generous and open category )?
Steve Verdon

April 8, 2011 at 1:07 pm

I’m asking you to back up your assertion that I don’t want firms, finance firms in particular, to face any sort of regulation in any way. You wrote,

He’s way out there at that extreme, where companies should not be limited in any way….

Prove it, or at least provide some evidence that this is the case. I on the other hand am taking the negative position that the above view is not an accurate representation of my position…hence I’m the one who would have to “prove a negative,” not you. So either put up, or shut up.
john personna

April 8, 2011 at 1:11 pm

Steve, i’m saying I cannot recall you ever supporting oversight.
Steve Verdon

April 8, 2011 at 1:23 pm

Do you think you have spoken for financial oversight (to give you the most generous and open category )?

Yes, or at least linked favorably (read the comments) to one possible change in the system. Oh and look, there you are commenting under the name Odograph.

Steve, i’m saying I cannot recall you ever supporting oversight.

Are you trying to slowly ease into saying your initial comment was wrong?
Drew

April 8, 2011 at 1:24 pm

“Steve, i’m saying I cannot recall you ever supporting oversight.”

C’mon, jp, that’s just stupid. The financial services industries are among the most highly regulated in the country. You know that, Steve V knows that. Everybody knows that. Aside from G-S we are talking regulatory changes at the margin. And G-S was repealed under your hero, WJC. Deal with it. That “fact based reality” thingy, you know?

BTW – and as highly regulated indusries, they know where their bread is buttered. HUGE contributors to a certain hopey changy B Obama.
john personna

April 8, 2011 at 1:38 pm

What a couple losers. If Steve had ever spoken for oversight it would be easy to skewer me. And Drew’s defence is that you can .. what .. speak against oversight and still be for it?

(Points off for the petty attemp to wound me, lol)
Steve Verdon

April 8, 2011 at 1:40 pm

More here JP.

Also this comment by you,

If we could realistically change the course of our Bailout Nation, I’d be on board. The problem is, I can’t pretend. I can’t say “oh, I’ve got maybe 5 or 10% of the voters who will really stick to their guns the next time depression looms and when their job is on the line.”

I’ve got be real. I know, we all should know, that Americans only talk tough between bailouts. Which is why all this talk of making bailouts “more likely” is silly. Of course we’ll do them, the next time a big player fails in some novel or traditional way.

And so, a bill to make bailouts orderly, and to make the bailees pay for them, is the best we can do. Realistic policy has to work the the majority sentiment.

Possibly the best way to do this with a small Tobin Tax, just something to charge the players as the make and take the risks.

Priceless. “We can’t stop bailouts so, meh. Oh a Tobin tax that will do….nothing to prevent future bailouts.”

But I’m the one who is failing to talk about financial oversight when your comment suggests the entire exercise is totally pointless.

Just stop posting.
Steve Verdon

April 8, 2011 at 1:43 pm

Oh and John, even if I didn’t post on financial oversight that doesn’t mean I’m in favor of zero regulations on financial businesses. So, can you man up and admit your statement was extreme? Now I find that funny…you being the “extremist”.
john personna

April 8, 2011 at 1:52 pm

I am on my phone, but have tried my best to follow your links and find a straightforward statement in favor of oversight. Now you say “even if I didn’t post on oversight …”

So my memory was correct?

But you want to abuse me rather than just speak rationally about oversight?

You poor guy, you have a hard time arguing with people who have a little self-control.
Drew

April 8, 2011 at 2:39 pm

Nice try, jp. But you’ve been reduced to walking off like a yellow dog with your tail between your legs. As always, you make overwrought, literalist arguments like a high school sophomore debater.

The facts are simple.

A. Financial services are aggressively regulated.

B. Everyone with a brain understands that, including you.

C. Your argument rests on the fact that Steve V didn’t write an editorial to the NYTimes or WSJournal advocating regulation.

D. You can’t come to grips with the fact that we are talking regulation at the margin, and that the single biggest deregulatory move in the last 50 years was G-S repeal, under the guy you – heh – “independantly” slobber over: WJClinton.

E. Team Obama is a wholly owned subsidiary of Wall Street.

Facts are a bitch, eh jp??
john personna

April 8, 2011 at 4:07 pm

Excellent example of lack of control there as well, Drew.

You made it about me while acknowledging that my memory was correct.

I mean, think about it, you and Steve want to have an unstated and undefined position in support of some unspecified baseline oversight … and you think I should just give you that? I should sign off that your unstated position is reasonable?

Wouldn’t it be easier, and less emotional, if you spent a few words on what oversight you can endorse?

Notice that I can be fair with you.
Steve Verdon

April 8, 2011 at 4:14 pm

So my memory was correct?

Oh for crying out loud. No, I’m saying the absence of me expressing a view point does not mean there is no view point. I think our current system of financial oversight does not work. I think it has contributed to “to big to fail”. I know this might send you off again, but LTCM is an example of the failure of that oversight. As much as you might want to deny it the deal that saved LTCM could not have happened without the government acting as an enforcer.

In other words, if I don’t come out and say I’m opposed to raping toddlers that is not evidence that I am in favor of raping toddlers.

But you want to abuse me rather than just speak rationally about oversight?

I have written about financial oversight. I’ve discussed Dodd-Frank and what I see its implications being. I’ve also pointed to an article on how to reorganize the finance sector to make the idea of a bank failure almost impossible. I’ve provided links to posts that deal with both. Now admittedly I have offered a comprehensive plan for finance oversight with the current market structure…expecting something as grandiose as that is a bit much.
mantis

April 8, 2011 at 4:17 pm

A. Financial services are aggressively regulated.

Except when they’re not.

B. Everyone with a brain understands that, including you.

Everyone with a brain knows what happened to the economy in 2007-2008, and how lax regulation contributed greatly to it. Apparently you have no brain.

It’s not really worth going into your posts any further if that’s the kind of BS you’re shoveling.
Steve Verdon

April 8, 2011 at 4:20 pm

I mean, think about it, you and Steve want to have an unstated and undefined position in support of some unspecified baseline oversight … and you think I should just give you that? I should sign off that your unstated position is reasonable?

Bullshit. I want you to support your allegation against me that I support absolutely no regulation of businesses. You have yet to do so…because you can’t. You can find nothing to support your position.

Wouldn’t it be easier, and less emotional, if you spent a few words on what oversight you can endorse?

Why? Maybe we should just agree with prior your comment and conclude it is a pointless exercise and be done with the whole thing, no?

I’ve already indicated, more than once, I favor reorganizing the finance industry. That tinkering around at the edges wont do much. Further entrenching the current industry structure and oversight probably isn’t a good idea. Now I’m supposed to endorse yet one more thing so….so what? So we can look like we have self control in your eyes? Pretty funny when I stop and consider you are making unsupported allegations about what I apparently think and advocate.

Notice that I can be fair with you.

Okay, start with this. Admit that your initial statement about how I don’t think firms should regulated in any way what so ever was false and an exaggeration on your part. I’m thinking you wont do it.
john personna

April 8, 2011 at 4:21 pm

I understand that you can be critical of oversight Steve, i’ve been reading that for years. I’m asking what level or type you endorse.

I think that is a fair and straight up question.

It isn’t an ad homenim, of the sort we’ve seen recently.
john personna

April 8, 2011 at 4:23 pm

Steve, buddy, you want to be silent on appropriate oversight, and you want me to acknowledge that you have a secret position? Serious?
Steve Verdon

April 8, 2011 at 4:23 pm

I understand that you can be critical of oversight Steve, i’ve been reading that for years. I’m asking what level or type you endorse.

I think that is a fair and straight up question.

It isn’t an ad homenim, of the sort we’ve seen recently.

Coward.

Steve, buddy, you want to be silent on appropriate oversight, and you want me to acknowledge that you have a secret position? Serious?

I’ve been pretty clear that I advocate the limited purpose banking as put forward by Kotlikoff, Leamer and others.
john personna

April 8, 2011 at 4:35 pm

So I talk about “ad hominems” (mis-spelled of course). and you call me a name. Good one. Really shows the old self-control.

Now, actually if you look back at that first link, this was your entire comment:

Laurence J. Kotlikoff and Edward Leamer put forward how the financial sector should be redesigned.

It wasn’t clear to me that you were endorsing that, certainly not as your sole-best way forward, … but it also isn’t about improving oversight or acknowledging it in our current system. It is about something pretty radical:

We need a financial sector but not one like this. Nor do we need Wall Street hitting us up for its gambling debts. What we need is Limited Purpose Banking (LPB), which would transform all financial corporations, including insurance companies and hedge funds, into mutual funds. They would, henceforth, be called banks.

Do I really understand you to say that you have no policy recommendations short of revolution?
Steve Verdon

April 8, 2011 at 4:39 pm

So I talk about “ad hominems” (mis-spelled of course). and you call me a name. Good one. Really shows the old self-control.

It is fitting because you can’t bring yourself to admit your error.

It wasn’t clear to me that you were endorsing that, certainly not as your sole-best way forward, … but it also isn’t about improving oversight or acknowledging it in our current system. It is about something pretty radical:

Yes, as I’ve already indicated, futzing around the edges of the current system will get you nothing. Further entrenching and ossifying the current system will in all likelihood make things worse. You yourself said we probably can’t stop bailout nation. But I’m supposed to find the silver bullet in the comments section to ~~Doug’s~~ Alex’ post.

Do I really understand you to say that you have no policy recommendations short of revolution?

Oh for fuck’s sake….
john personna

April 8, 2011 at 4:39 pm

Note, I kind of knew you were a dreamer, who had divorced himself from day to day policy, by wanting something so far out of the mainstream that it was impossible. Hence, some bitterness.

I will acknowledge that the shape of that “out of the mainstream and impossible thing” sometime eludes me. I think that’s understandable.
Steve Verdon

April 8, 2011 at 4:46 pm

Note, I kind of knew you were a dreamer, who had divorced himself from day to day policy, by wanting something so far out of the mainstream that it was impossible. Hence, some bitterness.

I’m not bitter, I’m annoyed that you can’t engage in a discussion without distorting my position…and when called on it refuse to admit it.

And I don’t consider it being a dreamer by noting that tinkering at the margins isn’t going to do a damn thing to prevent a similar situation from arising in the future. Trying to putter around with “day to day policy” is a waste of time. But feel free to play that suckers game if you find it entertaining.
john personna

April 8, 2011 at 4:49 pm

BTW, you might misread me. I’m actually open to lots of incremental changes. I think one can argue for instance for a Tobin Tax (did this guy really say that NYSE stocks are now held for an average of 20 seconds?) without thinking that it is the only way forward. I might just think that option is under-considered. I can be for any number of other incremental improvements.
john personna

April 8, 2011 at 4:53 pm

You gotta understand Steve, most of us are looking at they day’s news, and incremental changes on our current system. Interspersed with those are your criticisms of one or another incremental policy.

It’s hard to remember that you aren’t really defending the status-quo when you deride change.

You could help us by saying something like “instead we should move immediately to a Kotlikoff-Leamer banking system.”
john personna

April 8, 2011 at 4:54 pm

BTW, my 16:49 post might serve as a template for gentle explanation, without ad hominem.
Drew

April 8, 2011 at 4:57 pm

Sigh. I’m going to leave jp to keep whackin’ off in his closet while hurling nonsensical invective at me and Steve V. Sad to see potential going wasted because of juvenile absurdity.

As for Alex’s post:

“It was assumed that the economy would learn it’s lesson and start moving towards more focus on “making things” rather than just “managing money.” ”

I don’t know who the “economy” is or who assumed that, but I’m the poster boy for investing in “making things” and I’m here to tell you that the Dem Congress of 2007 – 2010 and Obama were no friends to that effort. In fact, they were downright enemies. And who did they favor? Wall Street and Large Corporate. I kno that doesn’t fit the usual, and stupid, “Republicans are for the Rich” meme, but its a fact.

“Not only is the financial industry basically intact and back to turning record profits, but it’s business models have barely been tweaked. In the meantime, as the Federal Reserve of Atlanta reports, the past three years have shown no growth in the number of businesses — the trendline has been flat.”

I rest my case, your honor.
Steve Verdon

April 8, 2011 at 4:59 pm

It’s hard to remember that you aren’t really defending the status-quo when you deride change.

And this is what puts my teeth to grinding.

YOU are the one who wants the status quo. I’ll quote you again,

I’ve got be real. I know, we all should know, that Americans only talk tough between bailouts. Which is why all this talk of making bailouts “more likely” is silly. Of course we’ll do them, the next time a big player fails in some novel or traditional way.

And so, a bill to make bailouts orderly, and to make the bailees pay for them, is the best we can do. Realistic policy has to work the the majority sentiment.

You are saying, in effect, “Oh well, nothing we can do. Might as well codify all this crazy nonsense so we know how to do it from now on. Bubbles and bailouts are our future.”

You’re the one defending what has been done and advocate doing it again and again. While I may have a radical idea on how to get out of the mess and hopefully keep it from happening again….at least my position isn’t insane.
john personna

April 8, 2011 at 5:01 pm

Excellent self-control, Drew.
john personna

April 8, 2011 at 5:04 pm

Steve, you quoted this up above:

I’ve got be real. I know, we all should know, that Americans only talk tough between bailouts. Which is why all this talk of making bailouts “more likely” is silly. Of course we’ll do them, the next time a big player fails in some novel or traditional way.

And so, a bill to make bailouts orderly, and to make the bailees pay for them, is the best we can do. Realistic policy has to work the the majority sentiment.

That isn’t really an endorsement of the status-quo, is it?

Bailouts aren’t orderly. The “bailees” aren’t paying.
john personna

April 8, 2011 at 5:05 pm

BTW, would you agree that the “Volker rule” would be an incremental improvement? I think I’d be open to that.
wr

April 8, 2011 at 5:12 pm

This may be the dullest flame war in internet history. Can’t someone mention a birth certificate or something?
john personna

April 8, 2011 at 5:22 pm

For the next round, Steve can tell us how a Kotlikoff-Leamer banking system is going to get passed.
Steve Verdon

April 8, 2011 at 6:20 pm

Listen John, I’m not going take that from a foreign subversive agent such as yourself. Admit it, you are secretly a Huguenot! Is it or is it not true you were born in Malta?
john personna

April 8, 2011 at 6:31 pm

What I’d like to know is whether Drew had any idea we were heading toward Kotlikoff-Leamer at the beginning? That’s a full-reserve banking system, right? An end to fractional-reserve banking?

Drew, you down with that?

Or … was it just a chance to pile on …
Steve Verdon

April 8, 2011 at 7:00 pm

What I’d like to know is whether Drew had any idea we were heading toward Kotlikoff-Leamer at the beginning? That’s a full-reserve banking system, right? An end to fractional-reserve banking?

Drew, you down with that?

Or … was it just a chance to pile on …

Ok, perhaps this is the problem or part of it anyways.

I’m not Drew’s sockpuppet nor is he mine. We might agree on a number of areas, but I think in others we’d have substantial disagreement. So, why is my support for limited purpose something Drew has to defend?

But, what is the big deal with a 100% reserve in a fiat money system? I can understand fractional reserve lending when you have commodity based monetary system, but we haven’t had that in a very long time. Creating more money is pretty easy.
john personna

April 9, 2011 at 9:24 am

I felt a bit of a tag-team up top. Surely it reads back that way.

Drew jumped in because I was me, and he felt himself on your team, not because he was really on the same page as you (I suspect!) on fractional reserve banking.

Now, on full reserve banking, I’m afraid that is something I can feel friendly enough about, but at the same time, I can apply a little Rational Inattention.

I don’t know, maybe when Ron Paul is running high in the polls(!?) we can readdress it.