tag:blogger.com,1999:blog-6245381193993153721.post7705295449079527341..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Selgin on Fractional Reserve BankingLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6245381193993153721.post-56233583186872231602011-07-12T01:57:49.959-07:002011-07-12T01:57:49.959-07:00"The Australian bank failures/restructurings ...<i>"The Australian bank failures/restructurings of the 1890s appear to show reasonable resilience to a major terms of trade shock: some banks like the ANZ got through without failing or being restructured, some major banks were re-structured with minimal depositor losses, and many fringe institutions failed"</i><br /><br />The country was plunged into nearly a decade long depression, which was a major result of the financial collapse.<br /><br />Even if true, "reasonable resilience" (which I doubt anyway) is pointless if the real economy is devastated for years on end.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-13349927623169979952011-07-12T01:52:12.071-07:002011-07-12T01:52:12.071-07:00Selgin is wrong on the gold standard. The gold sta...Selgin is wrong on the gold standard. The gold standard proper refers to gold coin as the standard of value. What people use as a medium of exchange is a different question. As a free banker, Selgin should be happy with people using bank notes and cheque accounts to mediate trade, while the legal standard of value is gold coin. In fact, free bankers should be comfortable with the displacement of silver and copper for small change, and the use of low denomination bank notes and tokens instead, resulting in a single standard of value for values large and small: gold coin.<br /><br />Whether or not central banks with a monopoly of issue of bank notes can influence credit or interest rates is another question that divides the banking school from the free banking school. My analysis leads me to the banking school position (although I'm a free banker): in a small open economy on a world gold standard, a central bank cannot influence the world interest rate. Domestic banking institutions are, by definition, irrelevant to the interest rate. Selgin's reason for having a different view is that he for some reason holds to some form of the quantity theory of money, which I reject.<br /><br />I can't see how you can honestly ignore the wonky banking institutions in the US as contributing in a major way to the financial crises, panics and bank failures. Sound banking requires freedom of branching to enable large, strong, prudent, long-lived banks. Such banks, and such a banking system, on a stable monetary standard, can I believe withstand a wide range of stresses. The Australian bank failures/restructurings of the 1890s appear to show reasonable resilience to a major terms of trade shock: some banks like the ANZ got through without failing or being restructured, some major banks were re-structured with minimal depositor losses, and many fringe institutions failed. If major banks can be restructured and re-opened within 1 business day rather than 2 months this to me would imply that the financial system (and the monetary standard) could be robust even with major shocks that cause the failure of many major banks.David Hillaryhttps://www.blogger.com/profile/12270742541175771322noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-18121900681704084662011-06-19T16:31:24.330-07:002011-06-19T16:31:24.330-07:00"By contrast, Britain had the Bank of England..."By contrast, Britain had the Bank of England in the 19th century and was not subject to financial crises as severely and frequently as America."<br /><br />Oh, please...<br /><br />http://www.iea.org.uk/sites/default/files/publications/files/upldbook115pdf.pdfMHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.com