frank miller

[David Morris]

Yglesias is a really good source for clear analysis about economic
current events and theoretical models.

On Wed, Nov 30, 2011 at 5:44 PM, Robert Mahnke <rpmahnke at gmail.com> wrote:
> Just in case someone isn't tired of this topic yet, Yglesias explained this
> better today:
>
> [S]ome kind of intervention to prevent bank failures is inevitable in a
> modern economy. The important thing to realize is that it's more than
> bankers who have something on the line. Firms accumulate money at different
> times from when they accumulate expenses. That means that to run a business,
> you need someplace to park your funds when you don't need them or someplace
> to get extra funds when you do need them, or both. That place can be a
> formal, regulated bank or it can be a part of a "shadow banking system." But
> either way, a place that's in the business of paying you for the privilege
> of storing your funds there or charging you money to borrow funds is, in
> effect, a bank. And banks are subject to runs and panics. If people think
> that other people are going to pull their money out of the bank, then
> everyone does rush to pull their money out of the bank and the bank fails.
> If the bank fails, then a company that's been storing money to make payroll
> at the end of the month is going to have no money and won't be able to pay
> its workers. If the bank fails, then a company that needs to borrow some
> money to buy supplies in order to meet a big contract won't be able to
> deliver on the contract. Both companies are going to have to shutter their
> doors, which is going to have additional negative consequences throughout
> the economy. No real world government is going to let this happen, nor
> should any real world government let this happen. The real issue isn't "to
> bail out, or not to bail out" it's what kind of supervisory regulation do
> you do in advance and how exactly do you deal with institutions that are in
> need of a bailout.
>
> http://www.slate.com/blogs/moneybox/2011/11/30/the_inevitability_of_bailouts.html
>