Bank Failures Quotes
Sovereign credit substitution is where the government, one way or another, assumes and guarantees the debts of private corporations. This is an elegant way of saying: “taxpayer bailouts”
He was explaining the thinking of several of the economic protesting movements of the time.
Hoovervilles were camps of people who lived in city parks or empty land. Tar paper shacks sheltered some—others lived in boxes. People had no work and no prospects of work; they had no money for rent; they just lived a meager existence as best they could under conditions that today exist only in the third world. They were named Hoovervilles for the President at the time whose ineptness and philosophy simply let things deteriorate. Republicans were critical of many of Roosevelt’s economic policies, but the president would periodically remind them and the nation of what the situation was when the Republicans last ran the country.
4 years after the Great Recession where major banks of America needed government bailouts to prevent failure the Administration and Federal Reserve board wanted to increase the capital requirements to increase the safety of the Banks. Essentially the banks would speculate and gamble with depositors’ money. If their investment paid off, there were large profits and bonuses for the executives. If it did not, they ran out of capital as they had very little of their own at risk. The government bailed them out and the executives got their bonuses anyway. The efforts to make the banks speculate with more of their own money were strongly opposed by the banks and bank executives.
His reference was to economic crises where governments try to restrict outflow of capital, decrease inflationary behavior, invest more money, stop investing money, revaluing the currency, and others—are all hard to do politically and technically as well. Worse, they don’t often work very well.
Banks often lie. The system encourages them to do so. In a crisis, if a bank honestly says that it is not sure that it has enough cash and other liquid assets, others will not lend it any more money and depositors will rush to withdraw their money, thereby almost insuring a failure. The bank that lies, might weather the storm and survive.
