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Too-big-to-fail banks warp the playing field : Comments
By Nicholas Gruen, published 8/2/2013Competing on a level playing field, securitisation might well dominate home lending.
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That is not so much a theory, as five categories of assertions/assumptions that government has the competence to manage money and banking.
However you still haven’t explained what reason there is to think that government has the competence to do what you believe it should do in the first place. You’ve just assumed it.
And you haven’t said what government would need to know, in order for it to have the competence to manage the supply of money and credit.
So ... what would they need to know?
For example
Point 1. Government creates money.
No doubt it does. But the question is, how does government know whether it’s creating too much, too little, or just the right amount?
What account have you taken of the possibility that, if its creating the wrong amount, this is generating economic instability and social injustice for which you assume the solution is more interventions?
And why wouldn’t a general ban on fraud be sufficient for all purposes of regulation of money and banking?
So you’re not really joining issue, all you’re doing is repeating the assumption that I say is unjustified, and that you haven’t justified.
For example, government interventions in money and banking obviously do promote fiat money and fractional reserve banking, inflation of the money supply, cozy banking cartels making huge profits from a government-granted licence to print money based on thin air, and systematic handouts to political favourites, bubbles, and waste.
If my theory is correct, we would see what we are in fact seeing.
But if your theory is correct, and government has the presumptive wisdom and capacity and selflessness to optimise money and banking, then why is there any non-optimal allocation of resources at all? Not enough monopoly power, presumably?
So I think either way, the interventionists lose the argument.
(BTW, Google shows the following USA regulators:
Securities & Exchange Commission
Commodity Futures Trading Commission
Federal Reserve System
Federal Deposit Insurance Corporation
Financial Industry Regulatory Authority
Office of the Comptroller of the Currency
National Credit Union Administration
Office of Thrift Supervision.
Highly regulated isn’t it?)