Money and Banks

Despite the soothing hot air from the White House and Fed officials, the financial system is becoming increasingly fragile and unstable. Maybe all of that intervention the past decade was not wise.

Canada created its central bank during the Great Depression, ostensibly to stabilize the currency and protect the banking system. Today, that system is falling apart, thanks to inflationary central bank policies.

By any conventional measures of finance, the Federal Reserve has negative equity. In the long run, cooking the books only puts off the day of reckoning.

The combination of higher rates and declining optimism about the economy, plus slumps in equity, private investments, and bond valuations, is going to inevitably lead to a massive crunch in access to credit and financing.

The current banking crises have deep roots in US financial history. Monetary authorities have engaged in inflationary behavior for more than a hundred years.

Walter Bagehot, as Jim Grant writes, believed that bankers and central bankers should exhibit financial discipline. He would not recognize today's banking world.

If the Fed is serious about bringing down price inflation, it's difficult to see how the Fed can do that while also guaranteeing more liquidity to an obviously fragile banking system.

Even when currency is backed by gold, governments have many political reasons to pursue national, territorial currencies. Now there are hundreds of national currencies. It didn't have to be this way. 

While the Fed and the Biden administration try to assure Americans that their banks are safe and secure, the numbers tell a different story.

Despite all of the supposed safeguards to prevent bank failures, banks still fail. Perhaps the so-called safeguards are causing much of the trouble.