When your head hurts, hit it some more
One dreads pointing out the exceptionally obvious to the US Senate, but expanding deposit insurance takes us in the opposite direction of where we need to be. It will encourage riskier loans, promote moral hazard, give depositors a false sense of security, and add to the overall debt problem. Oy vey. See Rothbard on the whole notion of "deposit insurance."
Comments (14)
I second your "oy vey." How disappointing. Why is it most of the proposals coming through eschew economic principles that work in the long term for short term band-aids?
Published: September 30, 2008 10:43 PM
What's the alternative to deposit insurance and how do we get there?
In Australia we don't have deposit insurance. We have had a couple of failed banks in the past that were bailed out (by state govts) by raising new taxes for a short period of time. This does give Australians some comfort about their deposits. However, the govt recently announced that they are thinking about a $20,000AUD deposits insurance. This raises more fears than it quells!
Published: September 30, 2008 11:16 PM
As said on this excellent site: this scene is a crime scene not an economic scene. And everytime when I read about the so-called rescue plan (BAILOUT), I cannot let go of the feeling I am reading some new kind of novel by George Orwell. Love is hate, peace is war, freedom is oppression and insurance is chimera. Scary stuff, this is.
Published: October 1, 2008 1:57 AM
After reading this and the responses to the post about Randians favoring monetary pumping, I want to suggest something.
We are not, nor will we ever be living in a society that uses sound money. When someone advocates pumping, it is likely that they do so only because they prefer that to giving Paulson $700B to "invest".
When someone advocates expanding FDIC, it is because they want less pumping. Everyone wants less intervention in the end.
There are not that many Libertarians around. We need to pick less nits amongst ourselves and go after those who are still enthralled by the State.
Published: October 1, 2008 6:32 AM
This post is yet another illustration that the politicians and power brokers don't care about doing what is economically sensible and ethically correct. They are overwhelmingly driven by the goal of bailing out the financially and politically powerful, largely at the expense of everyone else.
Published: October 1, 2008 7:16 AM
Milena
Short term band aids are all you will ever get because politicians are only concerned with the relatively short term election cycle. Long term solutions that cause short term pain are politically unfeasable.
Published: October 1, 2008 7:29 AM
But what about the children? Do you want them to be poor and homeless? You don't hate children, right?
(Yes, that was sarcasm.)
Published: October 1, 2008 8:12 AM
Don't the monetarists at the Cato Institute agree with Austrian economists about the undesirability of deposit insurance?
Published: October 1, 2008 9:43 AM
Deposit insurance is a great idea! But let the private insurance companies offer it, not the government. Better yet, get off of Fractional Reserve banking, and there would be little need for such insurance.
Published: October 1, 2008 9:52 AM
We are not, nor will we ever be living in a society that uses sound money.
Sure we will. Right after the collapse. The Western Roman Empire, for example, had terribly unsound money, and the unsoundness got worse over time, first using clipped coins, then adding base metals to their silver, and ultimately resorting to outright price fixing (enforced by a death penalty, of course).
These measures caused exactly what they are doing to us -- the total collapse of empire and, ultimately, the government.
Money became much more sound after that.
And it will again, in much the same way.
And, no, I'm not kidding.
Published: October 1, 2008 10:00 AM
The market easily circumvents the FDIC limit.
Look her.
http://www.promnetwork.com/
Published: October 1, 2008 11:49 AM
Thanks you for posting this brief, but wise and refreshing blog post. We need more common sense like this.
Published: October 1, 2008 12:33 PM
Подскажите, как найти хозяина blog.mises.org.
С меня пыво)
---------
Интересные факты
Published: October 11, 2008 1:47 PM
Do you care to ?
Make your choice of ?
Offers brand name ?
Can't touch this!
Published: November 3, 2008 4:32 AM