That Krugman quote is wildly out of context if memory serves. Regardless, many predicted the housing bubble (Roubini foremost), they just didn't know how to wind it down. Paul's set of policies (deregulation of the financial sector) would have probably massacred the whole crisis. I'm reminded of a Lord of the Rings quote... "Long has he foreseen this doom!" "Foreseen, and done nothing." He would have let the system fail...which LOLrificially would not make a lick of difference in financial history if he took over and deregulated even further, and abolished the Fed (???????). We had responsible rules and regulations in place since the 1930s, and that was the biggest private market failure of capitalism...and it only took 50 years for Reagenites and Paulite-like thinkers to dismantle that system (and only a few years after for the consequences to be felt). People who advocate letting everything fail and letting people suffer for a decade or so to imprint a "lesson" need their skulls checked.
Paul's calling for an end to fractional reserve banking is stronger than any regulation you or any other Keynesian I know is calling for...
A 100% reserves system won't work for the modern economy, Period. In fact, I'm probably one of the biggest advocates of regulation on all sorts of nifty bank maneuvers, but I regard the reserve requirements the Federal Reserve has as quaint and antiquated. You don't need a 100% reserve rate for a "safe banking system", a FDIC-supplemented system of heavy auditing and regulation works too without destroying completely the creation of credit. All the Paulites are usually about "letting the market work its' magic!". You want to constrain private banks to a 100% reserve ratio? Lol, you're like an extreme leftist and rightist all wrapped into one. I think you chose the wrong candidate.
On second thought, I see Paul's position on this, which technically makes no sense. He's against SEC regulation because it might constrain the markets, but he wants private 100% reserve requirements? LOL good luck with that train of thought
This would not have done anything for 2008, because you realize the investment banks that failed did not take deposits, right?
From what I understand, he against SEC regulation because the regulators are usually bought out by the big banks...
And the people who regulate 100% reserve ratios, they're presumably uncorruptible angels? (And not from the abolished Fed?)
Seriously? A 100% reserve requirement actually sounds appealing to you? Every single bank would no longer be able to lend, effectively turning them into simple money storage facilities. You'd probably have to pay them a monthly fee to safeguard your money. Eventually, banks would cease to exist because most people would choose to stuff cash underneath their mattresses. Businesses would be unable to get loans for investment. People would be unable to get mortgages for homes. Price levels start plummeting, followed by wages/salaries. You're advocating a massive deflationary spiral...and for what purpose? To regulate the banking industry? I'm pretty sure there are better ways to do that (ahem...look up "Basel Accords").
Or if we didn't dismantle Glass-Stegall, or allowed China to buy massloads of Treasuries that depressed the yield curve, or if the shadow banking system had more than near-zero regulations on them.
Banks would offer term CDs to make loans and millions of Americans who are saving for retirement will invest in them (instead of the unpredictable stock market). Believe me, they will still make a ton of money...
I don't know, I feel like Ron Paul is like a drama queen when it comes to this kind of stuff. These are problems that have been tackled with a variety of reasonable solutions. Bank runs, reserve ratios and confidence in the financial sector (for retail banking with deposits at least) were assuaged with deposit insurance and the FDIC. It's like Ron Paul took a look at that and said, hey, why don't we go 5 steps further for s**ts and giggles, and ABOLISH THE FRACTIONAL RESERVE SYSTEM. (???) Or moral hazard. We can go all capital ratio and Basel Accord, or we can ABOLISH THE FED. * *You can assume that every time Ron Paul has an idea in economics, I append ??? to every one.
I would actually be in favor of re-instating Glass-Stegall. And even Paul - the less government guy - didn't vote for the repeal of it...
So um, quick question. What about say investment banks that became bank holding companies...if they implement this rule, won't they go back to the shadow banking sector of no rules? That's kinda a huge push in that direction if you'll force them to go 100% on their reserves.
Far too much risk, and I have severe doubts about such a policy's effectiveness. You're talking about vastly reducing the lending pool all for the sake of demand deposit "security" even though it's already in place via FDIC and the discount window at the Fed. You're making an assumption that people would be more than willing to put their money in term CDs. Get rid of the Fed and it's mandate to stabilize banking, and what goes next? The FDIC as well? Suddenly, that term CD with 0% reserve requirement and no deposit guarantee becomes extremely unattractive. It's now basically a corporate bond for a company whose ability to profit depends on your very purchase the bond. Who in their right minds would put their money in the CD then? There are a lot of things I like about Ron Paul, but his economic "reforms" are always drastic changes with some rose-tinted, best-case outcome, all the while ignoring the massive amounts of risk.
Wait. Did Paul himself ever actually endorse the destruction of fractional reserve banking? Did he, or was that just his lunatic supporters? I mean, good god, forget throwing us back into the Gilded Age, that's throwing us back into the 1600s where the nobles thought that if you owned all the gold, you owned all the wealth.
You're very good at being unable to answer fairly basic questions about what you post and then moving on and posting ridiculous nonsense. I suspect when you are unable to answer the details of why you believe what you believe on this topic, you'll pretend it never happened and again just post new quotes from Ron Paul and repeat. It's amusing that you seem more interested in regurgitating his nonsense than actually analyzing why you might have no idea what you're actually talking about. I'm still awaiting answers to a number of fairly basic questions I posed to you about your claims.
I can't wait to return to the gold standard. An ex-girlfriend left an old ring somewhere around here that I'm pretty sure I'll be able to buy a couples houses and a new car with.
