Shall we break up banks? No, let market forces do it

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  • CLM Draper, UT
    Aug. 19, 2012 8:08 a.m.

    No, we don't have that competition. Legal tender laws make it illegal to use other currencies in the US for the payment of debts. Before those laws were enacted, competing currencies existed in the US. They were eventually prohibited not because they caused too much confusion, but because those in power were not able to manipulate the currencies to their benefit.

    Semi-Strong, we share a deep concern about the state of the economy and the stability of our financial future. I understand your wish to stay with the system you know rather than to venture into something different (but NOT untried!). The central banking system has proven itself to be a failure, it's only a matter of time until it defaults. The euro is in the throes of that very debacle. We will be next.

    My suggestions will not be given much consideration as long as the current system reigns. But if I'm right about the coming default, what then? I hope you'll be open to abandoning our inflationary and monopolistic central banking system and returning the economy to the people who make this country work: the American people.

  • Semi-Strong Louisville, KY
    Aug. 18, 2012 8:46 p.m.

    We have that competition among nations. The dollar is the clear winner internationally. Not that this could not change if we don't keep our house in order.

    But within a country what you describe is simply confusing. We had that in 1800s. It didn't work well enough to try to keep it.

    Does central banking serve those in power? As much as govt. does generally. But those who believe in good govt. are also among the political class and there are VERY few who recommend what you do.

    Surely if it is such a great idea there would be at least a few countries trying it out, right? Or are we supposed to be the guinea pigs?

    Whatever your personal beliefs may be here, you surely must recognize the dangers in putting our entire financial future into an untried system. That is just not smart.

    Until you can show me a model that indicates we can do this without blowing up our economy, I will remain unconvinced. Frankly, so should you. As fascinating an idea as it may be we need a future based on the practical.

  • CLM Draper, UT
    Aug. 18, 2012 8:04 p.m.

    I'll be happy to tell you why nations choose to adopt a central banking system. It's because it's profitable for those in power. It's just that simple. It allows those in power to control the money supply and, consequently, the economy. The extremely wealthy really dislike not being able to stack the deck in their favor. Central banking is the mechanism of choice for making it happen.

    It's true they never explain it like that. The official version is, of course, that it helps to stabilize economies and prevent financial panics. The Great Depression and the Great Recession put the lie to that tale.

    There are historical examples of economies that thrived without central banking or paper money. There's no time or space to go into that here, but here's what I propose: what harm is there in allowing competing currencies to legally exist alongside federal bank notes? Federal laws prohibit such a thing because if there's one thing we know, government hates competition.

    Give everyday citizens the power to determine what they'll use for money and see if federal bank notes can stand up to the competition. Fair enough?

  • Semi-Strong Louisville, KY
    Aug. 18, 2012 5:51 p.m.


    Sorry about the last two paragraphs being repeated from your post. I tend to copy and respond line by line. I didn't eliminate all of your post. Sorry.

  • Semi-Strong Louisville, KY
    Aug. 18, 2012 3:52 p.m.


    It's not just western economies. It's virtually all economies (as you help point out).

    You ask does that make it right? No. But it certainly does lead to a question. If having no central bank is the right thing, why is NO ONE doing it?

    Even more importantly, if NO ONE else (with a modern economy) is going without a central bank, what are guarantees do we have that it will work?

    Does central banking have problems? Sure. But at least we know what they are. If we switch and crash and burn the economy, what do we do then? Say "oopsie"?

    In sum, we should not remake our entire economy based on an untested theory. And, in the modern world, what you advocate is entirely untested.

    Even though all western economies are based on central banking, does it necessarily follow that it's the right thing? Can't they all be wrong? It looks to me like they're on the brink of going down together.

    Semi-Strong: Both backward economies you mentioned have central banks. Cuba, 1997; North Korea, 1947

  • CLM Draper, UT
    Aug. 18, 2012 2:23 p.m.

    The problem with the Fed's dual mandate is that it focuses on an inflationary policy. It can do one thing, and one thing only: expand or contract the money supply. Any time it contracts the supply, it creates a recession. Any time it expands the supply, it sows the seeds of an eventual contraction because permanent inflation is an impossibility. The Fed, therefore, is the source of our 20th and 21st century booms, busts and the longest US depression ever.

    Of course there were wars before the Fed, but they've never been enabled to a such an extent. Politicians are less hesitant to go to war because citizens don't have to pay for them through taxes. There is a fatal disconnect. Wars should be pay-as-you-go.

    Central banking is the fatal flaw in the US economy. Even though all western economies are based on central banking, does it necessarily follow that it's the right thing? Can't they all be wrong? It looks to me like they're on the brink of going down together.

    Semi-Strong: Both backward economies you mentioned have central banks. Cuba, 1997; North Korea, 1947

  • Semi-Strong Louisville, KY
    Aug. 18, 2012 8:28 a.m.


    Over time the Fed has demonstrated they have stuck to the dual mandate reasonably well.

    Greenspan missed the boat. His faith in the self-regulation of markets was his undoing. Of course regulation failed. The govt. chose NOT to regulate the derivatives market. Had they done so, we would all be better off today.

    I seem to recall a few wars in history prior to the Fed and central banks generally. Somehow the politicians found the money.

    Will the dollar ever collapse? Maybe. Certainly there should the US no longer be a viable govt. But in that case, I am not sure my gold holdings will do me much good.

    Please, we just need to deal with reality. No modern economy operates without a central bank. If you don't like the Fed, then we need to replace it with something that may look different but has significant operational similarity.

    If you think we can operate without a central bank, please show me the modern economy that does so. I have looked. The lists I come up with include mostly totalitarian regimes that have backwards economies such as North Korea and Cuba. These are not economies to emulate.

  • CLM Draper, UT
    Aug. 18, 2012 12:46 a.m.

    Twin Lights, your explanation of income disparities seems to site symptoms instead of causes.

    The Fed would never admit they exist to enable speculation or to make the rich richer. They tell us their dual mandate is to maximize employment and to stabilize prices. But what they say and what they do are two very different things.

    Alan Greenspan et al, with the approval of then-president Bill Clinton, conspired together to quash any effort by Brooksley Born of the CTFC to regulate the derivatives market--which happened to be in her job description. She warned of the dire consequences that eventually brought down the giant financial institutions. She was pressured to resign. Would you still blame the regulatory side for not doing their job?

    No one said the Fed invests in wars. As SEY pointed out, the FED enables the government to go to war. Without the Fed, how is it possible to spend hundreds of billions, maybe trillions of dollars on wars of choice? So far, taxpayers haven't had to pay a cent toward the recent wars. Government borrowed it from the Fed.

    Finally, throughout history every fiat currency has collapsed. This time will be no different.

  • Twin Lights Louisville, KY
    Aug. 17, 2012 7:56 p.m.


    No. The Fed’s purpose is not to increase speculation. As to enabling banks to thrive, of course. As to speculators, only if the regulatory side is not doing its job.

    The Fed does not "invest" in wars. That is the govt. for which the Fed is the central bank. If you have a problem with a particular war, you need to take it up with Congress and the President.

    As to where politicians could get funds to pay their cronies. That is as old as the world.

    You want to contain the Fed in order to tie up the politicians? Good luck with that. Politics is power and the powerful will always figure a way to benefit themselves. To use your analogy, drug kingpins will always find a new supplier.

    The income disparities you cite are quite real but are unlikely to have anything to do with gold. We had only the most nominal of gold standards for decades prior to Nixon. It likely has much more to do with globalization, taxation, and our manufacturing policies.

    Reference fiat money not surviving, it has done so since at least the 1930s.

  • SEY Sandy, UT
    Aug. 17, 2012 1:32 p.m.

    Twin Lights: in that case, you are at cross-purposes with the Fed itself. The Fed exists to enable wealthy bankers and speculators to thrive, including the most speculative investor of all: the federal government. What other entity could enable the government to "invest" in fruitless and murderous wars? Where else could politicians get funds for programs to pay back their corporate cronies for their campaign contributions?

    I really don't care if we have the gold standard or not. What we need is some way to tie the hands of the Fed to stop their enabling ways. They are too much like a supplier to drug kingpins. The kingpins get wealthier while the rest of us suffer.

    Income disparities have increased significantly since Nixon closed the window to gold in 1971, so giving up that anchor is not inconsequential. We are now on a totally fiat money system that allows the Fed to create money at will. No fiat money system in history has ever survived. They always end in default. I can't help but think this one will eventually, too. All this because of the existence of the Fed. It's so predictable.

    No more comments left.

  • Twin Lights Louisville, KY
    Aug. 17, 2012 12:57 p.m.



    I have zero disagreement with you on the issue of speculation. I am just no fan of the gold standard and I think the Fed is necessary.

    Banks should be dowdy and predictable places to park money. Speculative ventures should be wholly separate.

  • SEY Sandy, UT
    Aug. 17, 2012 12:04 p.m.

    Twin Lights: I have nothing against regulation. I watched (again) the Frontline episode called The Warning last night. It highlighted what happens when those in charge refuse to enforce the laws already in existence. The failures of banks occur most often when laws and regulations are ignored to the benefit of the wealthy speculators and to the detriment of the rest of us. In the 19th century, for instance, when the gold standard still applied, government would step in and suspend species payments to depositors upon demand. Banks knew government would implement something similar to the 'Greenspan put' when things went sour, and they did.

    Banks should not be in the speculation business. They should be there to make loans based on sound financing only. Again, I have nothing against banks making loans. When they go out on a limb like they did during the 1920's because no one was losing, or in the 1990's because internet stocks were a sure thing, or the 2000's because real estate is "always" a safe investment, they open themselves to failure. When that happens, banks and investors should be allowed to fail. But banks should never enable such speculation.

  • Twin Lights Louisville, KY
    Aug. 17, 2012 11:27 a.m.


    Yes, but I don't agree.

    The money a bank fails with is yours and mine. Where do depositors go to put money safely if the banking system is subject to frequent failure? What about loans for businesses? We have seen just a taste of this recently. If we have banks failing every so many years it makes for a very unstable economy.

    We had it otherwise for about 70 years due to a good mix of regulation and FDIC insurance. We need that still. The answer is reasonable rules of the road with strong oversight.

  • SEY Sandy, UT
    Aug. 17, 2012 9:39 a.m.

    Twin Lights: We've talked about this before. Banks back then failed because they were run poorly. They were not artificially propped up by a central bank. They were allowed to fail, just as it should be. Banks are not sacred, anymore than any other business is sacred. Those banks failed and caused panics because of government interference, not in spite of it. I assume you've actually studied the history of money and banking in the 19th century. Assuming that, you know that banks were foolishly allowed to make loans they shouldn't have, just like during the most recent crisis. They loaned out far more than they had in reserves, again foolishly. When the real estate market crashed (or whatever the bubble was at any given time), borrowers couldn't repay the loans. It happens every time. When banks do stupid things like enabling speculators, they deserve to fail.

    Bottom line is, banks should not enable speculation. That's exactly what our central banking system does. The "wealth" they help create is illusory and is the cause of the growing income disparities and unemployment. Yeah, that's how "helpful" our central banking system is.

  • Twin Lights Louisville, KY
    Aug. 17, 2012 8:05 a.m.


    We had the banking system you describe prior to the Great Depression. That didn't work out so well . . .

  • killpack Sandy, UT
    Aug. 16, 2012 4:32 p.m.

    To me, the government has ZERO credibility. They have proven to me that they are corrupt, immoral and incompetent. I would rather wait for someone with integrity to come along who knows what they are doing before trying to fix the banking system again. Last time that happened, hundreds of billions of dollars of hard earned, taxpayer money was recklessly given away to horribly managed businesses. Please, Congress and White House, if you are listening and have any soul left. Don't involve yourselves any more in matters you are totally and completely unqualified to involve yourselves in.

  • one old man Ogden, UT
    Aug. 16, 2012 2:54 p.m.

    We could all transfer our money to credit unions.

    They do care about their members.

  • atl134 Salt Lake City, UT
    Aug. 16, 2012 2:35 p.m.

    Market forces are the "do nothing" option. We saw it in play when Lehman failed. The Dow fell something like 600 points the next day and fears of runs on banks surfaced. Basically market forces would involve not doing the bank bailout. Do we really want to trust that market forces would've taken care of that without hurtling us towards an even deeper recession? I'm not sure what's wrong with regulation taking care of these things in a more stable (not that we're doing great but we're way better off than Sept 2008), manageable frame.

  • SEY Sandy, UT
    Aug. 16, 2012 1:08 p.m.

    So just what are "market forces?"

    Unquestionably, the biggest player in the market is the Federal Reserve. It controls the money supply and, as Baron Rothschild once said, whoever controls the money supply controls the economy. The Federal Reserve is a legal monopoly supplier of banknotes. So how is it that the main player in the economy is not even considered in this article? It's like fish not being aware of the water they swim in.

    Banks are integral parts of the Federal Reserve Banking System, especially the mega-banks. Without them, the banking system cannot survive. That's why they're too big to fail, at least in their eyes.

    In order to make banks a legitimate part of the market, the banking system can no longer be a legal monopoly. They have to operate on the same business model as any other business. There can be no rescue plan for them any more than there is for any other business. Plain and simple, our banking model is a failure because it's monopoly-based. And they're issuing nothing more than monopoly money (double entendre intended).

  • Midvaliean MIDVALE, UT
    Aug. 16, 2012 12:26 p.m.

    This article was paid for and approved by the Banks.

  • cjb Bountiful, UT
    Aug. 16, 2012 10:49 a.m.

    Let market forces do it? Where were market force
    when the government has to bail out t all the banks
    that were too big to fail?

  • UtahBlueDevil Durham, NC
    Aug. 16, 2012 7:23 a.m.

    As Jefferson was quoted as saying the one thing more threatening to this country more than foreign armies is bankers. The idea that we should turn a blind eye to banks, letting the markets (ie the banks) determine what is right, just after we spent Billions saving them from their own recklessness is one only a Banker could claim without bursting into laughter.

    Whats next, letting people use the free market approach to speed limits.

  • freedomingood provo, Utah
    Aug. 16, 2012 3:17 a.m.

    "Even if Congress was willing to plunge into this issue again — highly unlikely — anything it coughs up would be full of loopholes." Loopholes that banks pays for....

    The "free market" isn't free. Just like other forms of freedom it's always in a knifefight with the tyrany of few that must try to rule the world. Why does anyone think you can just leave ourselves defenseless to the whims of granduer of evil men?

    What we need are special ops accountants that take out the crooks before they cause too much damage.

    "Truuuuuuuuusssssst usssss", they plead.