Great thread on why Swiss voters were right to reject the Sovereign Money proposal.https://twitter.com/csissoko/status/1005541557888434176 …
Thanks for sharing this. I’m trying to learn here, and genuinely confused re the strengths and weaknesses of modern banking. Q: what incentive does a central bank have to say “no” when banks ask for last-resort loans? What’s the Schelling fence (if that phrasing makes sense)?
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As far as I can tell there's not one. Legislative rule might work in principle, though the distinction between illiquid and insolvent isn't always clear, especially in a crisis.
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I do think that problem could make up a big part of an argument against central banking, but not against fractional reserve banking. Given the benefits of the latter, I'd say FRB is worthwhile even with a lot of moral hazard.
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