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Originally Posted by Elephant Walk
Let's see.
First off, banks are allowed fractional reserve banking. Do you know what fractional reserve banking is? That's when banks are allowed to only keep a certain percentage of your money reserved. I believe it's around 10% (I know it was in the 60's, I doubt it's changed much). So, if everyone went to the bank right now, the bank would only be able to give back 10% of your money. Well, this amounts to a Ponzi scheme. This is the sort of stuff that Madoff was convicted for. Now, that doesn't mean that the free-market would necessarily have prevented it. But this is the sort of crap the government does not apply to banks even though it does to humans. That said, in a true free-market system with no fiat money (this is from the Austrian theory, Chicagoans can disagree), the banks would no longer be able to lend money which they do not have.
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Yes, I do know what it is, and it's really not quite the same as what Madoff was convicted off, nor is it essentially a Ponzi scheme.
But none of this is an argument against regulation necessarily, as you seem to concede in the bolded above -- banks are "allowed" and "that doesn't mean that the free-market would have prevented it." While I take it you're coming from an Austrian perspective (not exactly in the mainstream of economics), what you've said seems to suggest that it's the wrong kind of regulation that's at issue, not regulation period. "Austrians" would disagree, I know.
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I can go on, but the beer and melatonin is kicking in.
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I can relate.
Hybrid Mode
