Posted on 06/12/2016 12:25:49 PM PDT by BUSHdude2000
Review by Steve Parkhurst:
Who Needs The Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America’s Central Bank, is not a dense economics book like the macro or micro economics of our youth. This book is written much more clearly than those old textbooks, and is actually interesting. The many rather short chapters make their case and then move along to the next. Tamny’s utter disdain for the Fed is both evident, and humorous along the way. But his book is not an angry diatribe, instead it is a fact-filled, example-laden approach to understanding a complex entity.
(Excerpt) Read more at bigjollypolitics.com ...
Good question.
The American Political Class.
If they were constrained by honest money there's no way they could spend (and steal) the way they do.
ML/NJ
So who or what is going to serve as lender of last resort once we have abolished the Fed?
J. P. Morgan and his friends.
JP Morgan was in fact who did that pre-Fed as I suspect you know.
His last time of backstopping the banking system was the 1907 Panic. He then let Teddy Roosevelt and Congress know that the U.S. economy had grown too big for him and his ad hoc rescue party of NYC bankers to be able to do this again. Morgan was a prime force pushing for the creation of the National Monetary Commission and advocated a central bank modeled after the ones in Europe. This eventually led to Congress creating the Fed.
Who would be borrowing from this “lender of last resort”?
Banks hit with runs. Banks don’t keep a lot of cash on hand. When they are hit with mass withdrawals in a panic they have to have a way to hypothecate their illiquid assets or an otherwise sound bank can be bankrupted. This happened on a huge scale from 1930-33 when the Fed failed to act as lender of last resort and let nature take its course. One third of American banks simply vanished, taking their depositors assets with them. No FDIC.
If just one bank is having problems they can sell assets to other banks. If the public at large panics then that won’t work because too many banks get hit at the same time and they can’t bail each other out. Then you get a system failure and a replay of the 1930s.
When the housing bubble blew banks found themselves holding a trillion dollars of worthless paper. I suspect that a lot of major banks that we all know may have been technically bankrupt or close to it. The Bernanke Fed was aware of the major blunders of the 1930s Fed and their policy was to provide as much liquidity as possible to keep a cascading failure from starting.
Did you read that I posted the link to? Tamny has an incredible answer about insuring banks. I really would like to suggest you read the rather short book, 180 pages, and then let’s have this discussion. We’re asking and addressing the wrong questions.
“Tamny has an incredible answer about insuring banks. “
I saw one mention of FDIC but no elaboration.
Milton Friedman considered the creation of FDIC to be the most important piece of legislation to come out of the Great Depression. You can find that in the chapter ‘The Great Contraction’ in A Monetary History of the United States.
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