[HN Gopher] Banking-Crisis Interventions, 1257-2019 [pdf]
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Banking-Crisis Interventions, 1257-2019 [pdf]
Author : monort
Score : 124 points
Date : 2021-10-01 14:15 UTC (8 hours ago)
(HTM) web link (som.yale.edu)
(TXT) w3m dump (som.yale.edu)
| qwertyuiop_ wrote:
| "The Bank "never goes broke." If the Bank runs out of money, the
| Banker may issue as much as needed by writing on any ordinary
| paper. (in the direction of the arrow) the number of spaces
| indicated by the dice. After you have completed your play, the
| turn passes to the left."
|
| Monopoly -
| http://richard_wilding.tripod.com/monorules.htm#:~:text=The%....
| specialist wrote:
| Graeber's book Debt: The First 5000 Years documents that cycles
| of debt crisis and subsequent forgiveness is historically normal.
| And probably necessary. I mean, think about it: What other
| remedies do we have to winner-takes-all? Progressive taxation?
| Government largess?
|
| Made me rethink all the bailouts, etc. Especially with the
| renewed scholarship on Keynesian 2.0 (MMT).
|
| I'd probably be ok with bailouts, jubilees if they were more
| fair, more bottom up.
|
| Financiers gobbling up all the cheddar, abandoning all their
| victim's, really pisses me off.
|
| Insult to injury is lack of consequences, acting aggrieved when
| their malfeasance is examined. Just one example being Jamie Dimon
| clutching his pearls when Obama Admin merely suggesting the
| optics of huge bonuses for execs during a meltdown was a bad
| look.
| rossdavidh wrote:
| "I'd probably be ok with bailouts, jubilees if they were more
| fair, more bottom up..."
|
| I think it is not so much the bailout that bothers me, as the
| "ok, crisis over, back to normal" that happens immediately
| afterwards. If it was something like "bailout, then break up
| into 50 smaller institutions immediately afterwards", I would
| not be so upset about it.
| faustlast wrote:
| I think the course "economics of money and banking" might be of
| your interest. Really good insights there.
| aazaa wrote:
| From the conclusion:
|
| > In the historical record, crises are like fires and the
| government interventions in those crises are firefighting. ...
|
| There's a brilliant quote from James Grant to the effect that the
| US Federal Reserve acts as both firefighter and arsonist:
|
| https://www.bloomberg.com/news/videos/2015-08-27/fed-s-funct...
|
| It's not clear that the paper even considers this perspective.
| Instead it seems to take the position that banking crises
| naturally evolve, rather than get spawned by policy missteps to
| correct the previous crisis.
| HPsquared wrote:
| To extend the analogy, wildfires also evolve naturally but can
| be exacerbated by firefighting policy: extinguishing small
| fires too much, allowing an accumulation of flammable materials
| which eventually lead to a much bigger fire.
| jjoonathan wrote:
| Fires evolve according to fuel availability, wind, water and
| so on. They aren't active, intelligent agents commanding vast
| resources in a constant search for newer and better ways to
| socialize the losses and privatize the gains.
|
| Have you ever known a fire to intentionally cultivate moral
| hazard?
| HPsquared wrote:
| It's not just fire, there is an organic component of my
| analogy: the ever-growing and adaptive forest, which will
| take any opportunity it can to accumulate biomass.
| Aunche wrote:
| The difference is that fires predictable, and you can have
| controlled wildfires. There's no such thing as a controlled
| financial collapse. I agree that the fed intervened too
| heavily during the pandemic, but I think that 2008 struck the
| correct balance of intervention. Several financial
| institutions went bankrupt and most others lost over 90% of
| their market cap.
| throw0101a wrote:
| The James Grant that, in 2010, was one of the co-signers of the
| Open Letter to Bernanke:
|
| > _We believe the Federal Reserve 's large-scale asset purchase
| plan (so-called "quantitative easing") should be reconsidered
| and discontinued. We do not believe such a plan is necessary or
| advisable under current circumstances. The planned asset
| purchases risk currency debasement and inflation, and we do not
| think they will achieve the Fed's objective of promoting
| employment._
|
| * https://economics21.org/html/open-letter-ben-
| bernanke-287.ht...
|
| The same James Grant that, in 2011, thought we should go back
| to the gold standard to head off the looming debt catastrophe?
|
| > _How does America, looking up from the bottom of a $14.3
| trillion sinkhole, claw its way out of debt? For starters, says
| perennial Wall Street bear James Grant, go back to the gold
| standard._
|
| > _In an interview with_ The Fiscal Times, _the editor of
| investment newsletter_ Grant's Interest Rate Observer, _says:
| "No other reform would accomplish so much to hasten the return
| both of growth and fiscal balance. The reserve currency
| franchise, which America uniquely possesses, is a kind of
| global credit card on which the outstanding balance never seems
| to come due and payable. This country needs a debit card--and
| the gold standard is that debit card."_
|
| *
| https://www.thefiscaltimes.com/Articles/2011/06/28/A-Solid-G...
| chollida1 wrote:
| > The James Grant that, in 2010, was one of the co-signers of
| the Open Letter to Bernanke:
|
| Not sure if you are asking but yes that was him, and you can
| make a very good argument that those people were correct that
| QE should have been discontinued back in 2010. Lots of
| economists thought so at the time and yet here we are 15
| years later and that QE is still on going.
|
| At what point do you con sider him to be correct that its
| time to end QE, unless you think that continuous QE is a good
| thing?
|
| I mean, like another poster pointed out, like him or not,
| What he writes get read by some of the most influential
| people on the planet.
|
| If you are in government monetary policy you read his news
| letter, if you work for any sort of macro hedge fund you read
| his news letter. IF you are on the sell side you read his
| news letter for nothing more than to understand what your
| clients are thinking about.
|
| You may not like him, but the top people at investment banks,
| hedge funds and central banks all read(and pay for that
| privilege) what he has to say.
|
| In finance there are alot of people who have limited success,
| those who are good tend to have prolonged success and stick
| around. He's been writing for 4+ decades, in finance where
| the average career is 7 years or so that like 6 generations
| of traders who listen to him.
|
| So if you are asking if its that James Grant then yes, one of
| the single most successful and influential people in finance,
| then yes that guy:)
| OscarCunningham wrote:
| QE is neither a good or bad thing. Low stable inflation is
| a good thing.
| hogFeast wrote:
| The same James Grant that predicted the junk bond meltdown,
| the same James Grant that predicted the dot-com bust, the
| same James Grant that predicted the housing crash, the same
| James Grant that predicted the meltdown in Chinese resi...if
| you have experience in markets, you will learn two things:
| everyone makes wrong predictions, and you can be wrong
| now/right later.
|
| Also, you appear (for some reason, have you ever read
| Grant's?) not to mention any of the numerous calls on
| individual stocks they have got right. The macro is only part
| of what they do.
|
| When you are read by pretty much every hedge fund manager in
| the world, when they will pay $2.5k to come to your
| conference, and $1.3k/year for a subscription...you are doing
| something right (also, as someone who studied economic
| history, his book are first-rate...compare his books to
| Philip Coggan, a columnist at the Economist who has written
| books on economic history, it is night and day...Grant's
| books are academic tier quality, people who work in finance
| today still read books he wrote three decades ago).
| throw0101a wrote:
| > _The same James Grant that predicted the junk bond
| meltdown, the same James Grant that predicted the dot-com
| bust, the same James Grant that predicted the housing
| crash, the same James Grant that predicted the meltdown in
| Chinese resi.._
|
| He's a permabear. When you predict (for possibly years)
| that things will go down, and then they _finally_ do...
|
| > _The macro is only part of what they do._
|
| Macro/monetary is the focus of this discussion.
|
| > _When you are read by pretty much every hedge fund
| manager in the world, when they will pay $2.5k to come to
| your conference, and $1.3k /year for a subscription...you
| are doing something right_
|
| Robert Kiyosaki (of _Rich Dad, Poor Dad_ ) also charges
| quite a lot and is financially successful. Is he doing
| something right? :)
| hogFeast wrote:
| He isn't. And the standard of proof in finance for claims
| is slightly higher than that...he isn't predicting
| "things will go down", he is making specific predictions
| that occurred (again, you seem to have these very
| specific views about someone whose work you have never
| read...interesting).
|
| No, it isn't. Bank stocks aren't macro. There are macro
| consequences but Grant's wrote extensively about
| individual stocks pre-08.
|
| How many hedge fund managers are paying Kiyosaki for
| resarch? :)
| alexpotato wrote:
| From the movie Margin Call:
|
| "So you think we might have put a few people out of business
| today. That its all for naught. You've been doing that everyday
| for almost forty years Sam. And if this is all for naught then so
| is everything out there. Its just money; its made up. Pieces of
| paper with pictures on it so we don't have to kill each other
| just to get something to eat. It's not wrong. And it's certainly
| no different today than its ever been. 1637, 1797, 1819, 37, 57,
| 84, 1901, 07, 29, 1937, 1974, 1987-Jesus, didn't that fuck up me
| up good-92, 97, 2000 and whatever we want to call this. It's all
| just the same thing over and over; we can't help ourselves. And
| you and I can't control it, or stop it, or even slow it. Or even
| ever-so-slightly alter it. We just react. And we make a lot money
| if we get it right. And we get left by the side of the side of
| the road if we get it wrong. And there have always been and there
| always will be the same percentage of winners and losers. Happy
| foxes and sad sacks. Fat cats and starving dogs in this world.
| Yeah, there may be more of us today than there's ever been. But
| the percentages-they stay exactly the same. "
| arthurcolle wrote:
| Legendary movie + Jeremy Irons is a treasure. "It's just money,
| it's made up!" one of my favorites.
|
| https://www.youtube.com/watch?v=IAqAl292ozs
| cs702 wrote:
| The authors compiled data for 1886 interventions in 20 categories
| across 138 countries going back to the 13th century. Fabulous
| work. Looking forward to reading it.
|
| In the meantime, please do yourself a favor and take a look at
| Figure 6 on page 31, which shows that the number of interventions
| to rescue financial institutions around the world _has been
| increasing consistently since the 1600 's_.
|
| As the authors put it in their abstract, "intervention
| frequencies and sizes suggest that the crisis problem in the
| financial sector has indeed _reached an apex during the post-
| Bretton Woods era_ - but that such trends are part of a more
| deeply entrenched development that saw global intervention
| frequencies and sizes gradually rise since at least the late 17th
| century. "
|
| And it's not only the frequencies and sizes of interventions that
| have increased, but also their _scope_. From the abstract: "The
| data shows a gradual shift over the past centuries from the
| traditional interventions of a lender-of-last-resort, suspensions
| of convertibility, and bank holidays, towards a much more
| prominent role for capital injections and sweeping guarantees of
| bank liabilities."
|
| In short, over the course of at least five centuries, the
| financial system has grown more and more dependent on
| governmental support.
| dannyw wrote:
| My interpretation is that society has been increasingly
| dependent on the financial system. Who keeps cash anymore? It's
| almost illegal on many jurisdictions.
|
| It's no longer something you can opt out of, especially since
| the covid pandemic.
| bserge wrote:
| So fucking nationalize them when they fail. Resell them after
| instating jail time for all the chief executive gamblers.
|
| Would it really be worse than bailing them out with public
| money?
| soperj wrote:
| It wouldn't be such a long build up if that were the case.
| waihtis wrote:
| > In short, over the course of at least five centuries, the
| financial system has grown more and more dependent on
| governmental support.
|
| More like: over the course of the last five centuries,
| financiers have grown more and more adept in outsourcing their
| losses to the government.
| tehjoker wrote:
| True, but you also have to ask if they can actually function
| without government support in the current environment. The
| masters of the universe are the walking dead.
| cudgy wrote:
| Why do they need to function if they are inherently
| dysfunctional? Poor decisions should not be rewarded with
| top heavy bailouts.
| elliekelly wrote:
| > In the meantime, please do yourself a favor and take a look
| at Figure 6 on page 31, which shows that the number of
| interventions to rescue financial institutions around the world
| has been increasing consistently since the 1600's.
|
| Is this necessarily a bad thing? I mean that as a genuine
| question. The number of interventions to rescue people having
| asthma attacks has probably increased significantly over the
| same period.
|
| If a financial institution is about to go under isn't it better
| to have a process by which we can mitigate the pain it causes?
| To be clear, there is definitely a lot to be desired with the
| way a lot of bank bailouts have been handled (where Main Street
| absorbs the downside on behalf of Wall Street) that I think is
| largely down to politics and "elite" connections but I really
| don't think the frequency of intervention is an accurate metric
| by which to judge the effectiveness of the outcome.
| crisdux wrote:
| I think it's bad from a moral hazard point of view. These
| institutions increase their exposure to risk. The
| interventions exacerbate inequality and other issues. These
| centralized intuitions are resistant to reform. Reform that
| does happen increase government reliance.
|
| I don't think serious people are advocating for zero
| interventions. We want a more resilient and fair system by
| design. Our centralized financial system has made
| interventions more common and larger in scale. Centralized vs
| decentralized is a cost/benefit and risk trade off. I
| personally think we've gone too far in centralizing our
| financial system.
| lottin wrote:
| What do you mean by centralised? The financial system is
| not centralised. It's regulated and overseen by a central
| authority, but the financial system itself isn't
| centralised.
| throw0101a wrote:
| > _In short, over the course of at least five centuries, the
| financial system has grown more and more dependent on
| governmental support._
|
| Governments have become a more and more important part of
| people's lives. Back in the day your contact with "government"
| would be the local squire/sheriff.
|
| Nowadays you have general defence by a standing army, coast
| guard, air traffic control, health inspectors, health care,
| actual police officers / law enforcement (which only came into
| being as a standing bureaucracy in the 1800s IIRC).
|
| Is it any surprise that they've grown into financial fields as
| much as they have in other areas of society? As civil society
| and civilization has grown bigger and complex so has the
| infrastructure around it.
| hyperion2010 wrote:
| That dip centred around 1954 in figure 6 is one of the clearest
| examples of just how exceptional the experience of the boomer
| generation is compared to all the rest of human history.
| throw0101a wrote:
| One of the co-authors, Paul Schmelzing, published a paper on how
| interest rates have been on a general downward trend for a few
| centuries:
|
| * https://www.bankofengland.co.uk/working-paper/2020/eight-cen...
|
| Interviewed recently on the _Finance & History_ podcast:
|
| * https://twitter.com/FinanceHistory1/status/14351707554326241...
|
| * https://anchor.fm/carmen-hofmann/episodes/Interest-Rates-e16...
|
| His hypothesis (23m) is that capital stock is fairly long
| lasting, so except for (mostly) wars and revolutions (and
| plagues), there isn't much demand: people want to rebuild after
| disasters, and so demand for capital goes up. When things are
| quiet then there's more just sloshing around with not much to do.
|
| The oil shock of 1970s, which caused the most recent spike in the
| last 40 years (which is tapering), was a fairly unique event for
| rates.
| nonameiguess wrote:
| I would think there has to also be some trend whereby lending
| to untrusted third parties has actually become cheaper and less
| risky. As in, creditors have recourse to a court system and
| police they don't have to personally fund, rather than paying
| enforcers to find people and break knees. And wages these days
| are far more stable than hundreds of years ago, so whoever you
| loaned money to is a lot less likely to suffer drastic life-
| changing events that leave them unable to pay in a way you
| didn't anticipate. We also have better data and better
| predictive models. Insurance is more widespread. Some insurance
| is directly provided by the government with nearly zero chance
| of not paying. All of these factors should be expected to make
| it cheaper to borrow money.
| dnautics wrote:
| I agree with everything except the courts and police: they
| don't really do any debt-related enforcement activities
| anymore.
|
| On the other hand I suppose you can cynically note that the
| police make discriminating between a high credit risk and a
| low credit risk "easy" by having a (possibly unfair)
| ultrafilter: "did you spend time in jail"
| bserge wrote:
| In some smarter countries. The rest of the world goes to
| prison for unpaid debt.
| lotsofpulp wrote:
| I have never seen a credit application ask if you have been
| incarcerated, nor have I heard of lenders searching
| people's criminal records.
| dnautics wrote:
| even so, incarceration makes servicing recurring payments
| much harder, not to mention bail... So (cynically
| speaking) it's even better because if you are rich you're
| likely to have your credit unhurt by going to jail.
| pvarangot wrote:
| It's definitely there on some mortgages and I saw it a
| few months ago on a friends car loan.
| xyzzyz wrote:
| That interest rates were on downward trend for centuries has
| already been observed by Adam Smith in "Wealth of Nations" in
| 1776. He claimed that governments can borrow at 2%, and private
| borrowers of good repute at 2.5%. Considering that inflation at
| the time was almost 0%, these were basically real rates, and
| would today correspond to nominal rates of 4-4.5%. Point here
| is that in England, rates were already very very low in 18th
| century.
| shrubble wrote:
| British baron, industrialist and prominent banker Josiah Stamp...
| https://en.m.wikipedia.org/wiki/Josiah_Stamp,_1st_Baron_Stam...
|
| A quote attributed to Stamp is:
|
| "Banking was conceived in iniquity and was born in sin. The
| bankers own the earth. Take it away from them, but leave them the
| power to create money, and with the flick of the pen they will
| create enough deposits to buy it back again. However, take away
| from them the power to create money and all the great fortunes
| like mine will disappear and they ought to disappear, for this
| would be a happier and better world to live in. But, if you wish
| to remain the slaves of bankers and pay the cost of your own
| slavery, let them continue to create money."
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(page generated 2021-10-01 23:01 UTC)