tag:blogger.com,1999:blog-26706564.post2373588184901038883..comments2024-03-25T07:51:47.758-04:00Comments on Thoughts On Economics: Endogenous Money Supply In The Long RunRobert Vienneauhttp://www.blogger.com/profile/14748118392842775431noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-26706564.post-40636348387580960422009-10-09T12:56:57.776-04:002009-10-09T12:56:57.776-04:00We have FDIC insurance today and still have "...We have FDIC insurance today and still have "bank failures, crises and economic cycles."<br /><br />Right - money is not "just" the medium of exchange. It also comes about spontaneously and arbitrarily by government decree. <br /><br />We have a fractional reserve banking system that allows banks to create loans. The FED has the monopoly power to print unlimited dollars if a bank is in trouble. So, it is the power to inflate that stands behind the fractional reserve system. In this sense my checking account is money; the bank will lend out 10x the balance because it is backed by the FED. <br /><br />Banks are capitalists operating in tandem with the federal government in the market to make money. What could go wrong?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-26706564.post-79319654678497412052009-10-09T04:39:16.241-04:002009-10-09T04:39:16.241-04:00Wow. Money is "just" the medium of excha...Wow. Money is "just" the medium of exchange... That notion was blown out the water by Sraffa and others in the 1930s when von Hayek raised it...<br /><br />As for "my checking account itself is not money", well, I would suggest reading up on how banks create credit and make loans...<br /><br />As for guaranteeing bad debts, well, the state did not guarantee banks before the 1930s and there were plenty of bank runs, bank failures, crises and economic cycles....<br /><br />Why? Well, because banks are capitalists operating in the market to make money. To suggest that "markets" work singularly fails to understand the basics of capitalism and banking as a capitalist industry...<br /><br />Iain<br /><a href="http://www.anarchistfaq.org.uk" rel="nofollow">An Anarchist FAQ</a>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-26706564.post-86354120413846162932009-10-08T23:33:03.386-04:002009-10-08T23:33:03.386-04:00Goods do buy goods; "money" is just the ...Goods do buy goods; "money" is just the medium of exchange. Goods therefore are exchanged indirectly for one another using a currency to replace the need to barter. <br /><br />When I write a check against my checking account, I am writing the check against the balance in the account. My checking account itself is not money. <br /><br />Debt instruments fall more reasonably under a definition of an "asset" that is redeemable for money. <br /><br />Assets like debt instruments should *never* be guaranteed. Guaranteeing bad debt removes the risk of holding it on your balance sheet. The fear of certain failure or insolvency must not be numbed by an FDIC guarantee when a firm considers holding riskier assets.<br /><br />Perhaps the best way to "regulate" the financial industry is to simply let markets fester out poorly-run institutions. Institutions that run soundly, profitably, and responsibly would attract the most private capital and those that are wildly leveraged against bad debt or without enough capital would simply fail - making markets a safer place to invest. <br /><br />Just my .02e.j.noreply@blogger.com