Sir, Rana Foroohar writes “Americans still fundamentally accept the idea that the private sector always allocates resources more efficiently than the public sector. It is a truism that dies hard” and she uses John Kenneth Galbraith… “concept of countervailing power”, put forth in his 1952 book American Capitalism… a critique of the “market knows best”, as back up. “
Old economists can teach us new tricks”, June 3.
Indeed but for a different perspective she should also read John Kenneth Galbraith’s ““Money: Whence it came where it went” 1975.
I quote: “For the new parts of the country [USA’s West]… there was the right to create banks at will and therewith the notes and deposits that resulted from their loans…[if] the bank failed…someone was left holding the worthless notes… but some borrowers from this bank were now in business…[jobs created]…
The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is… Bad banks, unlike good, loaned to the poor risk, which is another name for the poor man.”
So, what would Galbraith had said about current regulator’s risk weighted bank capital requirements? Those that favor credit going even more to those who perceived as safe are already favored, and less to those perceived as risky who already have to pay higher interest rates and get less credit? That which guarantees especially large bank crises, from especially big exposures to what’s perceived as especially safe, against especially little capital?
Sir, I believe Galbraith could very well have joined me in a “Let’s impeach those regulators”.
And for the why these regulations are not sufficiently questioned, let me also quote Galbraith: “If one is pretending to knowledge one does not have, one cannot ask for explanations to support possible objections”
PS. More than forty years ago, in Venezuela, John Kenneth Galbraith autographed my heavily underlined pocketbook version of “Money”
@PerKurowski
Source:
http://teawithft.blogspot.com/2019/06/john-kenneth-galbraith-could-very-well.html
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