| The systemic risk argument is absurd. The risk posed by any financial asset is not distributed uniformly across the economy. Its impact on any party is proportional to their direct and indirect exposure to that asset, which is something that they control and have to take responsibility for. In the absence of the government bodies that socialize the losses of irresponsible actors, those actors who take on imprudent risks would see the share of the financial market that they control steadily shrink at the expense of those who do not. The suspension of this market feedback mechanism is what increases the risk of financial crisis. For example, the FDIC has been found to stimulate risk-taking and thereby contribute to more systemic risk and more frequent and severe financial crises. [1] For another example, in the wake of the 2008 financial crisis, well-capitalized players like Walmart, which was expanding its banking activity via its Sam's Club lending, were well positioned to replace the incumbent Wall Street firms as major lenders, but that was forestalled by Congress and the Federal Reserve socializing the losses of the major financial institutions with a bailout and prohibiting nonbanking parties from providing banking services. [2] >>And right now our government is literally feeding the capitalists while watching millions of people go w/o food, housing, health care. Agreed. The Central Bank is an engine for corruption and centralization of power. I disagree that the solution is more cookie-cutter rules that violate the freedom to contract and centralize power in the hands of powerful regulatory body subject to regulatory capture - which very well could have been the principal factor behind regulators stopping Sam's Club from expanding its lending activity, considering the banks' lobbying activity against it. The solution is to stop creating moral hazard with a Central Bank that holds the exclusive power to create the national currency and allocate it to the private parties of its own choosing. [1] https://www.nber.org/papers/w22223 [2] https://www.nytimes.com/2007/03/17/business/17bank.html |