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An Antidote to Corporate Media
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justme
2009 Mar 1, 2:44pm
Headset,
No, actually it was halfway serious. It could be a useful and profitable experiment. But I like your version also, for other reasons :-).
What is the problem with banks? They take your money, supposedly keeping it safe, but then instead they leverage it and lend it out in all kind of crazy schemes and sometimes lose lots of it, all the while giving you crappy interest rates (and even crappier interest after the Fed starts bailing them out by forcing interest down).
What are the alternatives to bank deposits? Well, you could invest in assets, but given the bubble economy, no asset is safe.
The problem is that there is no alternative to banks and assets. What we need is a bank that will safe-keep your cash for a small fee, while promising to keep it out of any sort of circulation such as lending or as capital.
If enough savers simply pulled their cash from circulation, interest rates would be forced upward, and speculation would be curtailed. Of course this assumes that the Fed does not provide "liquidity" on demand for the banks.
Think of it as one necessary component of a free market in interest rates. In the present world, savers have no way of expressing their non-confidence in all markets at the same time. You always have to park your cash somewhere, and the banks and brokers will use your own deposits to screw you.
Mattressbank.com is just like your mattress, only safer, for a small fee.
You can also think of it as a method for fixing the asymmetric power of depositor and deposit-taker in the current system.
It's not so much about the asset prices as the debt.
Stock bubbles are pretty harmless so longs as they are not fueled by debt, like pre-1929 where 1x10 leverage was allowed. Had there been no debt, there would be no long lasting fallout.
When the music stopped from the 20's stock bubble, some people were deeply in debt, and the "lucky" ones were filthy rich, since they were the ones owed that debt. Just like today.
The last capitalist we hang shall be the one who sold us the rope.
--Karl Marx
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Two questions:
1. Should asset prices be managed?
2. Are depressions necessary to the business cycles?
If depressions are necessary, then fighting them is a mere exercise of populist reaction. If depressions can safely be avoided, should it be done through artificial support asset prices? Or should we focus on frequent and substantial technological or productivity gains?
Peter