The Most Redeeming Feature of Capitalism is Failure

'Few blame the root cause of all these failures: Loose money, fractional reserve lending, and government interventions to promote housing, solar energy, etc.'

'The Most Redeeming Feature of Capitalism is Failure

There is an interesting interview in Barron's with two hedge fund managers called Shorting the Economic Recovery.

Here are some interesting .. snips pertaining to capitalism and fractional reserve lending..

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Misguided Blaming of Capitalism

Duffy hits the nail on the head when it comes to regulation and intervention: The interventionists never see the bust coming, then blame it on "capitalism."

Intervention created Fannie Mae, Freddie Mac, and the "AAA" rating of pure junk via government sponsorship of Moody's, Fitch, and the S&P.

Furthermore, FDIC regulation designed to prevent bank failures and runs on banks did nothing of the kind. Instead, the FDIC created a false sense of security for decades, followed by a massive collapse of banks, including the largest bank failures in history.

In 2009, 140 banks failed..

FDIC is a moral hazard as well as Ponzi scheme of immense proportion. It allows marginal banks to raise needed funds by offering above market government guaranteed CDs. Such guarantees helped fund ridiculous condo projects by Bank United, Corus Bank, and others. Indeed, many regional banks jumped on board with enormous leverage in commercial real estate.

Very few understand how destabilizing FDIC is to the banking system.

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Moral Hazards of Intervention

But every intervention is a moral hazard that promotes more intervention. And at increasing cost.

Few blame the root cause of all these failures: Loose money, fractional reserve lending, and government interventions to promote housing, solar energy, etc.

Meanwhile, the excesses and speculation have piled up an amazing amount of tinder in search of a match.

A match will be found. Then everyone will scream for more Fed tinder to save the day.'

- Mike "Mish" Shedlock, The Most Redeeming Feature of Capitalism is Failure, January 21, 2020



Context

(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'