My most right wing views

I recently saw someone on twitter asking people for their most right wing opinion. It’s hard to say how I’d answer that question. Abolish the minimum wage? Abolish the FDA? Possibly, but lots of other libertarians hold those views. Instead, I’d point to my belief that FDIC should be abolished.

Even many conservatives approve of government deposit insurance. Some believe that without FDIC the financial system would be susceptible to runs. That might have been true under the gold standard (although the Canadian experience suggests otherwise), but I doubt it is true to day. The Fed can and likely would provide almost unlimited liquidity if there were a run on the banking system.

Others worry that consumers are unable to discipline banks, as they are too uninformed about bank liabilities. I’d respond to that in two ways. First, people were far better informed before deposit insurance. Second, the market would provide safe assets for small savers, and large bank depositors would allocate funds between banks in much the same way that bond buyers allocate funds between Treasuries, AAA bonds, and junk bonds. Where people want safety, the market will supply safety—for a price.

In any case, the worry about small depositors is about to become a moot point. This is from the Fed’s new 40 page paper on CBDCs:

As a liability of the Federal Reserve, however, a CBDC would not require mechanisms like deposit insurance to maintain public confidence, nor would a CBDC depend on backing by an underlying asset pool to maintain its value. A CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk.

People who wanted a perfectly safe and convenient way to store money could hold CBDCs. The Fed envisions private firms providing customers with this option:

The Federal Reserve Act does not authorize direct Federal Reserve accounts for individuals, and such accounts would represent a significant expansion of the Federal Reserve’s role in the financial system and the economy. Under an intermediated model, the private sector would offer accounts or digital wallets to facilitate the management of CBDC holdings and payments. Potential intermediaries could include commercial banks and regulated nonbank financial service providers, and would operate in an open market for CBDC services.

Even if the bank fails, the money is perfectly safe. There would no longer be any legitimate excuse for FDIC. Here’s John Cochrane:

Thus, a practical CBDC really will likely be limited to a wide array of non-bank financial institutions, who then handle the consumer-facing details, for a small fee. But having stated it that way, we are essentially rediscovering narrow banks: financial institutions that take deposits and 100% back those deposits with reserves at the central bank, and provide high-speed electronic transactions services. 

Narrow banks are a wonderful idea, as they simply cannot fail, and they simply cannot suffer runs and crises.  If our regulators stipulate that all deposits must be in narrow banks, and regular banks must raise funds by selling equity or long-term debt, we would have a financial system forever immune from crises, and the regular banks would need next to no regulation. 

Of course FDIC would persist, because bankers don’t want to lose this important subsidy. They would lobby hard for the program to continue, and I believe they would win out over taxpayers. Here’s Cochrane:

Why do we not have narrow banks already — either regular banks or money-market funds that offer debit cards? The paradoxical answer is simple: The same central banks and government regulators that are thinking about issuing CBDC ban narrow banks. 

They offer reasons, echoed by Lea Zicchino in a previous article in this series

First, people might run away from bank deposits in a crisis. But people, and more importantly financial institutions, already can run to cash, money market accounts, mutual funds, commercial paper, repo, and many other securities.  The heart of a run is what people are running from, not what they might run to. Substituting CBDC for bank deposits would stop, not enhance runs. 

Second if people hold more CBDC in place of bank deposits, then banks will lose a cheap source of funds, and they might raise lending rates. 

Once we have CBDCs, my anti-FDIC view will no longer be my most right wing opinion. And after Covid, I’m not sure my abolish the FDA view is all that right wing. Abolish the public school system? The teachers unions are already hard at work on that objective. Abolish zoning laws and allow nuclear waste dumps right next to residential housing? Heck, even Matt Yglesias seems sorta OK with that idea. Abolish the minimum wage? Some of the Nordic countries don’t even have one. Privatize fire departments? Denmark got there first.

It gets harder and harder to find views outside the Overton window.

PS. Check out George Selgin’s excellent discussion of the Fed’s CBDC paper. Also, David Beckworth’s interview of Selgin on CBDCs.



53 Responses to “My most right wing views”

  1. Gravatar of Chun Chun
    30. January 2022 at 19:30

    A quick thought about CBDC of any sort. It would end the existing banking system so central banks and existing financial institutions will never allow it.

  2. Gravatar of Matthias Matthias
    31. January 2022 at 02:26

    Just because a country that’s coded as left wing in an American context implements a specific policy, doesn’t make that policy not right wing in an American context, or does it?

    Politics ain’t logical like that, I’m afraid.

    Americans like the idea of Scandinavia, but they don’t necessarily like the actual neoliberal policies prevalent in that part of the world.

    Btw, the Overton Window depends a lot on who you talk to.

  3. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    31. January 2022 at 06:53

    re: “FDIC should be abolished”

    Or deposit insurance should conform to Japan’s, by limiting it to transaction’s deposits. But we just muddied the water:

    The distinction between transaction accounts and savings accounts has become increasingly blurred. The prospect is that we will know less and less about money, FED policy, and the economy.

    Before Powell removed the distinction, “the limit was six withdrawals per month if the funds remained within the same institution (e.g., transfer to checking), but was only three drafts where the funds left the institution (e.g., check, ACH Network, or card-based purchases).”

    Powell: “Over this time period and going forward, the release items “Savings deposits” and “Other checkable deposits” are no longer applicable and have therefore been deleted from the H.6 statistical release as a matter of housekeeping” H.6 release

    Powell: “This change means that savings deposits have had a similar regulatory definition and the same liquidity characteristics as the “TRANSACTION ACCOUNTS” reported as “Other checkable deposits” on the H.6 statistical release since the change to Regulation D.”

    Powell did this without seeking public comments in the FEDERAL REGISTER

    So, the increase in M2, in time/savings deposits in the 4th qtr. of 2021 could represent an increased turnover of new money.

  4. Gravatar of Michael Rulle Michael Rulle
    31. January 2022 at 07:31

    Another very interesting and original little essay, and persuasive too.

    I actually thought this might have been a guest author. I was not aware you had such libertarian (“right wing?”) “Hayekian style” opinions.

    One critique——Given that it appears none of these ideas are politically viable (I believe that is part of your message—-perhaps that is an incorrect reading on my part) I am not sure why you think these ideas are “inside” the Overton window.

  5. Gravatar of Michael Rulle Michael Rulle
    31. January 2022 at 07:37

    PS. Given the Fed’s support of the idea of CBDCs, my Overton comment is not quite correct.

  6. Gravatar of w d w w d w
    31. January 2022 at 08:30

    the market dosent supply any saftey, even for a price (a high one even). and while folks probably did know more (or thought they did) before FDIC, but i suspect it we looked back to the time before the FDIC i think we see that bank runs were very common. and there might have been more than one bank in town. today, many dont have any bank in town, they have to leave to find one. and most times there is a very limited number of choice, which doesnt help create a market. and many dont trust the internet banks even as much as their physical competitors (see Wells Fargo…among others).

  7. Gravatar of ssumner ssumner
    31. January 2022 at 10:24

    Matthias, Yes, but isn’t Scandinavia within most Overton windows?

    Michael, You said:

    “I actually thought this might have been a guest author. I was not aware you had such libertarian (“right wing?”) “Hayekian style” opinions.”

    Umm, haven’t you been reading me for almost a decade? I’ve done about 1000 libertarian posts.

    wdw, How do you explain Canada, which didn’t have deposit insurance until 1966?

  8. Gravatar of steve steve
    31. January 2022 at 11:48

    “How do you explain Canada, which didn’t have deposit insurance until 1966?”

    When you eat lots of peameal bacon and fatback with no veggies you dont get bank runs, or any kind of runs for that matter.

    Back to the US, that is where I live, how do you explain all of the banks runs in US history if people were well informed? Is our perception wrong and they just didnt happen?


  9. Gravatar of Harry Harry
    31. January 2022 at 13:35

    Sen. Ron Johnson poured over public DOD medical record data, and it showed a 300% increase in miscarriages, 300% increase in cancer, and 1000% increase in nuerological damage.

    Over 1M adverse events have now been reported in VAERS, with over 21000 deaths. Of those deaths, 30% occured on either the first, second, or third day after vaccination.

    Japan’s “KOWA” said on Monday that anti-parasite drug ivermectin showed and “anti-viral effect against Omicron and other variants”.

    Sumner needs to apologize profusely for his misinformation and anti-science. He is either a paid actor, or a dummy that regurgitates what he hears on T.V..

    You propagated nonsense that injured nearly a million people, and killed 20,000. Your liberal hospitals still refuse to provide ivermectin, despite 24 independent studies pointing to its effectiveness – not to mention, real world evidence by countless front-line doctors (who you silenced) and an entire city in India.

    You need to apologize for your biotyrannical fascism NOW!

  10. Gravatar of Rinat Rinat
    31. January 2022 at 14:13

    Scott, you are not a libertarian.

    The truth is that your beliefs are a discombobulated array of thoughts that exist somewhere between Bentham and Rawls.

    You can call yourself whatever you want, but it doesn’t make it true. Indeed, the Chinese Communist Party calls themselves “Communist”, while deploying capitalism as their mode of production.

    You told us a few months ago that you admired China for their handling of the pandemic, which means you support boarding people up in their homes, digital passports for occassional supermarket visits, arbitrary anti-scientific mandates determined by a small group of “experts”, and the silencing of anyone who disagrees.

    You wrote an extensive article back in June, of 2020, supporting BLM Marxism, which means you support Anti-white and Asian hatred such as CRT, the end of policing that keeps our communities safe, permitting thugs to roam the streets harrassing hardworking people, and the destruction of family values. You refused to aknowledge any of the looting, burning, and deaths. You even stated ANTIFA didn’t exist, which of course countless videos show to be untrue. No libertarian backs a neo marxist totalitarian mob, over the rule of law.

    You consistently support digital passports, forced injections through coercive mandates, and cross border restrictions on freedom of travel. You ​deride people who take ivermecting and hydroxcloquine, and refuse to believe that any of the VAERS reports (99% of which are submitted by doctors and nurses) is actual data. Libertarians believe that people have a right to determine what to place in their bodies, Scott!

    You wrote a lengthy article supporting “packing the court” and “removing the electoral college” which, incidentally, the framers designed to avoid a “tyrannical majority” which can be worse than a dictator. There a countless historical examples, but perhaps the best modern example is Duterte. Duterte has 80% support. Filipinos love him. Does 80% support mean that killing people is suddenly moral? Is he not violating the Filipino constitution, which gives everyone the right to due process? Has the majority not become tyrannical to the minority? The framers were worried about a majority of people on the coast, or the heartland, imposing their will and interests (often conflicting between urban and rural) upon the other; hence, the electoral college. And packing the courts is such partisan quackery that one must simply laugh loudly. Libertarians don’t believe in destroying liberty, or politicizing the court because you aren’t getting your way.

    You wrote an article saying “words don’t matter”. But every libertarian knows words mean EVERYTHING. Free Speech is the backbone of a nation. You cannot regulate its pronouns and create lists of hate speech, and expect to uphold the inalienable. Free speech is the right to offend. The constitution is written with words. The bill of rights are written with words. Words are not just words!

    Call yourself what you want! You have that right. But you are not one of us. You are not libertarian.

  11. Gravatar of Nick Nick
    31. January 2022 at 14:35

    Not going to work Sumtard. Try again.

    You want to fight? hehe. I love fighting. Tell your friends at WEF to bring it on. We love destroying SCRAWNY COMMIES!

  12. Gravatar of Jayne Jayne
    31. January 2022 at 17:03

    All I hear is “blah blah, I’m a dictator”.

    Do you want to retract your covid mandate statements yet, or will you wait for the global gallows?

    Your global narrative is clearly collapsing, and your puppets are on the run.

    If you want a civil war, I think there are many folks who are happy to oblige.

    And the person who predicted the Trudeau covid narrative was 100% correct. As expected, he somehow caught covid in his hidden bunker this morning.

  13. Gravatar of Ken P Ken P
    31. January 2022 at 17:20

    My most right wing view is freedom of speech, which curiously was my biggest left wing view in the 80s – 00s.

  14. Gravatar of Ken P Ken P
    31. January 2022 at 17:43

    Chun wrote:

    “A quick thought about CBDC of any sort. It would end the existing banking system so central banks and existing financial institutions will never allow it.”

    I agree that crypto is disruptive to the banking system. If you read the paper, banks would be the intermediary for CBDCs. This tool is a stealth handout to banks.

    Scott wrote:
    “People who wanted a perfectly safe and convenient way to store money could hold CBDCs.”
    Depends on your definition of safe. One of the touted benefits is that the Fed would be able to block you from selling you financial assets if the market is tanking. On page 18, the Fed doc says in times of financial crisis “…it could limit the amount of CBDC an end user could accumulate over short periods.” (Stop you from selling your assets as they sink).

  15. Gravatar of Ankh Ankh
    31. January 2022 at 18:29

    This officer seems to destroy the propaganda today from the Wests mainstream media. First these people are a “fringe minority”, then when millions descend on Ottawa they change that narrative to a “covert Russian ploy” – as if Russia cares about Canada – then when some of the moderate liberal outlets laugh at the Russia theory, they pivot to the “Nazi narrative”. If people cannot see the neo-marxist propaganda by now, I don’t think they ever will. Too obtuse, I suppose.

    I doubt this will end well for Trudeau.

  16. Gravatar of MichaelM MichaelM
    31. January 2022 at 19:47

    “Narrow banks are a wonderful idea, as they simply cannot fail, and they simply cannot suffer runs and crises. If our regulators stipulate that all deposits must be in narrow banks, and regular banks must raise funds by selling equity or long-term debt, we would have a financial system forever immune from crises, and the regular banks would need next to no regulation. ”

    Depending on whether ‘deposits’ in this means just demand deposits or also time deposits, I’m having trouble seeing this as anything other than ‘the Rothbard Austrians win’.

  17. Gravatar of Matthias Matthias
    31. January 2022 at 20:21

    Scott, Scandinavian policies are in the Overton Window of Scandinavian countries. The idea of Scandinavia is within the yoverton Window of the US. Many actual Scandinavian policies, like privatising firefighters, would get you ostracized in the US. (As far as I can tell.) Btw, the US has twice as many firefighters per capita as other rich countries. (Including other sparsely populated rich countries.)

    Steve, what makes you think there were lots of bank runs in the US? Especially panic induced bank runs?

    See for some information on US bank runs. (Basically, runs were almost universally well informed. It’s not even clear whether panic based runs occured at all.)

    Btw, if you want fewer banks runs and more stable banks, the obvious first regulatory step would be to remove the tax subsidy that debt financing receive relative to equity financing:

    In most jurisdictions companies pay interest with pretax money, but pay dividends from posttax money. If you want to treat the two cases different at all, we should be preferring equity financing. But it’s simplest to just tax them the same.

  18. Gravatar of msgkings msgkings
    31. January 2022 at 21:29

    @Matthias…I suspect the US has disproportionately more police, just like we do firefighters.

    It’s a governmnent jobs program, which beats the dole by a long shot.

  19. Gravatar of David S David S
    31. January 2022 at 23:31

    Scott, I think your argument here is far too sophisticated to be considered right wing but I do appreciate your efforts to resurrect the “party of ideas.”

    With respect to a CBDC replacing the FDIC my main question is what benefit accrues to a person like me? My banking needs have been purely pedestrian—savings/checking account and getting a mortgage. I deal with a small institution, and I’ve never considered that I should investigate their loan portfolio. It’s my assumption that if they are making investment risks like a Trump golf course or Bitcoin mining, then they’re governed by a rigorous set of federal regulations as to how much of that they can do.

    The FDIC does feel like an artifact of the Depression, but it is convenient that they keep a list of bank failures-which makes me grateful to be a New Englander. As for Florida in 2007, wow, just wow….

  20. Gravatar of MKG MKG
    1. February 2022 at 00:49

    “It gets harder and harder to find views outside the Overton window.“

    I think that’s the most non-sarcastic optimistic thing you’ve said in years!

  21. Gravatar of Nick Nick
    1. February 2022 at 02:18

    Do you feel the power slipping from you sumtard?

    Are your ECON and Globalist WEF thugs a little nervous?


  22. Gravatar of Tacticus Tacticus
    1. February 2022 at 02:38

    Definitely agree with all of your suggestions. As always, people’s lack of financial history is depressing. People seem to think banks were extremely risky institutions and were collapsing left and right before FDIC.

  23. Gravatar of bb bb
    1. February 2022 at 05:18

    As a lefty, I think your most right wing views either involve equality or public schools.

  24. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    1. February 2022 at 05:54

    @W D W RE: “but i suspect it we looked back to the time before the FDIC i think we see that bank runs were very common”

    In the GD, the US banks lacked eligible collateral in which to discount with the Reserve Banks, and the Reserve Banks lacked the hard currency issued during bank runs. I.e., bank runs were an operational problem.

  25. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    1. February 2022 at 06:14

    @Matthias RE: Selgin

    “Yes, I hold that commercial banks are credit intermediaries and not just credit creators”

    Selgin needs to read COMMERCIAL BANKS AND FINANCIAL INTERMEDIARIES: FALLACIES AND POLICY IMPLICATIONS – a comment and a rejoinder. Journal of Political Economy, Vol. LXVIII No 5 October 1960

  26. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    1. February 2022 at 06:27

    Look at this RRR reduction explanation: “The reduction will also lower the fund costs for financial institutions by around 15 billion yuan per year, according to the PBOC calculation.”

    Economists are a bunch of pseudo intellectuals.

  27. Gravatar of Janice Janice
    1. February 2022 at 07:16

    Jingle bells,
    sumner smells,
    he hates our countries truckers

    they steer the wheels,
    drop off your meals,
    while you sit behind the desk and mess our economy up, eh..

    Jingle bells,
    Sumner smells,
    like an egotistical maniac.

    His group of academic lards
    say bad things about the farm
    because the people work hard with their hands, eh.

    Jingle bells,
    Sumner smells,
    he believes he’s better than you.

    he is a stiff
    a boring tard,
    and an arrogant prick, oh hey hey

    Jingle bells,
    Sumner smells
    he hates Donald Trump

    he prefers Biden’s mandates
    because he’s a gay
    and wants to destroy our country, eh

    Jingle bells,
    sumner smells
    he’s outsourcing all our jobs

    he likes to sell our assets
    while our country runs up a deficit,
    so that he can get richer, eh, hey!

  28. Gravatar of gurevise gurevise
    1. February 2022 at 07:31

    Abolishing minimum wage is fine if country has strong labor laws and safety net. Both are lucking in United States.
    I thought that most zoning laws are local. So no way to abolish them through federal government actions. Am I wrong ?
    Units (teachers or police) are fine but they authority / actions have to be limited to work conditions / wage / benefits bargaining.

  29. Gravatar of Tuesday assorted links – Marginal REVOLUTION Tuesday assorted links - Marginal REVOLUTION
    1. February 2022 at 08:55

    […] 1. Scott Sumner’s most right-wing views. […]

  30. Gravatar of Michael Michael
    1. February 2022 at 08:59

    Why abolish the FDIC, as opposed to drastic reduction in the covered amount? Is it $250K now? I’ve never come close to holding that much in a savings account. Make it $50K, or charge a premium for the protection.

  31. Gravatar of ssumner ssumner
    1. February 2022 at 09:57

    Steve, How do I explain the US bank runs? The same way other well-informed economists explain the bank runs, a combination of unit banking laws and unstable NGDP. (Other regulations were also important factors, and I’d encourage you to look at the research of Larry White and George Selgin.) Canada never had unit banking.

    Harry, You said:

    “Sen. Ron Johnson poured over public DOD medical record data . . .”

    LOL. That’s like starting a blog post “A monkey sat at a typewriter. . . ”

    Rinat, You said:

    “You told us a few months ago that you admired China for their handling of the pandemic”

    No, I didn’t.

    “You wrote an extensive article back in June, of 2020, supporting BLM Marxism,”

    No, I didn’t. And don’t.

    “You consistently support digital passports, forced injections through coercive mandates, and cross border restrictions on freedom of travel. You ​deride people who take ivermecting and hydroxcloquine,”

    No, I didn’t.

    “You wrote a lengthy article supporting “packing the court””

    I have numerous blog posts on the Court, 100% opposing court packing.

    Ken, Yes, that would be a bad idea and would not help to stabilize the economy. Not sure why the Fed proposes that option.

    MichaelM, Cochrane is not suggesting that all banks become narrow banks, just that that option be available to replace deposit insurance.

    Matthais, But all you have to do is to point out to a leftist that Denmark does it, and then it moves within the Overton Window. They can’t very well accuse you of being a Bad Person for supporting Nordic policies, can they? Not once they’ve been informed of reality.

    Obvious I agree on the debt tax subsidy.

    msgkings, Yup, it’s a jobs program (at least for firefighters.)

    David, You benefit as a taxpayer. FDIC is a costly tax on cautious New Englanders.

    bb, I’m not that far right on equality. I favor the amount of redistribution that maximizes aggregate utility. That’s not Ayn Rand. And doesn’t Sweden have a 100% school voucher system?

    guruvise, Not only do I oppose strong labor laws, I oppose almost all labor laws. As far as a safety net, we have the EITC. So abolish the minimum wage and bump up the EITC.

    States like Texas effectively have no minimum wage law (it’s so low it’s basically non-binding.) So why are mobs of working class people moving from California where they are “protected” to Texas, where firms can pay $7.25/hour? And why are market wages in Texas far above $7.25/hour?

    Michael, De facto, isn’t the coverage even above $250,000? The problem is that investors game the system by putting $250,000 deposits in 100s of different banks.

  32. Gravatar of Ray Lopez Ray Lopez
    1. February 2022 at 10:03

    Sumner: “Steve, How do I explain the US bank runs? The same way other well-informed economists explain the bank runs, a combination of unit banking laws and unstable NGDP.” – wait, what? Canada never had a major bank run, since they lack unit banking, so does it follow that Canada has a stable NGDP? What are the Canucks doing right that the USA is not, vis-a-vis stable NGDP? Once again Sumner exposed as a charlatan.

    OT, I’d like to know Sumner’s most Left Wing view. I see a grown man trying to hug a panda…which has razor sharp teeth and claws and decidedly is not cuddly.

  33. Gravatar of Some Guy Some Guy
    1. February 2022 at 10:08

    Would you replace the FDA with anything? ‘Abolish the FDA’ seems as reductionist as ‘Defund the Police.’

    It seems reasonable to consider relaxing the FDA’S stringent requirements for new drug approvals, and that allowing for experimentation and lowering the cost to take a drug to market would increase innovation and potentially provide better societal health.

    But a reformed FDA that retains rigorous minimum quality standards and provides objective medical guidance would still be an important public good.

    I don’t think we would be better off as a society if the pharmaceutical market was as unregulated as nutritional supplements. A lot of people would be drinking brain elixirs laced with lead and chemotherapy drugs for weight loss because they were endorsed by the Kardashians.

  34. Gravatar of Aladdin Aladdin
    1. February 2022 at 10:31

    So, I am a chemical engineer by trade, and a big problem in engineering is that sometimes plants blow up. Not because people are greedy. A great way to lose all your money in business is to have a chemical plant accident, a single thing goes wrong and you are bankrupt.

    However, even at top level organizations, most people underestimate tail risk. So we have these agencies that propose rules and mostly they are ineffective and we end up with large trusted companies like Dow following private rules that do actually work and smaller less sophisticated companies mostly ignore them.

    And so one proposal that is sort of policy already is that, well, lets just require everyone carry insurance. That way companies pay monthly premiums based upon their tail risk, so they must account for it. Insurance companies will do inspections and everyone is happy.

    And what’s so bad about that? A similar conversation happens with cybersecurity, which I also do (I don’t know what I am doing with my life, as is probably apparent).

    So why not require banks carry insurance too? And so what if said insurance is provided through private companies vs the FDIC?

  35. Gravatar of ssumner ssumner
    1. February 2022 at 11:16

    Ray, Where did I say that Canada had stable NGDP?

    Some guy, I’d expect some sort of private FDA alternative to develop. Perhaps insurance companies would only reimburse expenditures on drugs approved by a “UL” type organization. But I’d be OK with an FDA that merely offered recommendations, with no regulatory powers. Thus they might have recommended not using that new Alzheimer’s treatment, without formally banning the product.

    Your other worry seem to miss the point that even today people who develop cancer can choose between the drugs recommended by their doctors and the (unregulated) nutritional supplements recommended by someone like the Kardashians. So how does that change? If the drug contains poisons such as lead then they still face the risk of lawsuits, even with no FDA.

    Aladdin, Private companies would probably charge much higher premiums to risk-taking banks than to less risky banks. That’s the problem with FDIC.

  36. Gravatar of Some Guy Some Guy
    1. February 2022 at 14:21

    Thanks for the answer, Scott!

  37. Gravatar of Some Guy Some Guy
    1. February 2022 at 14:42

    I guess my issue is that I think lawsuits are a poor substitute for proactive regulatory standards.

    Lawsuits are expensive and time consuming, but most importantly if often really difficult to prove causality and direct responsibility. Lead is a well known toxin, but it can take years for negative health impacts to develop, and when they do it’s usually unclear where it came from. Many people will not even know it was the supplement that caused their problem.

    Lawsuits are also retroactive, after the damage is done. As they say, an ounce of prevention is worth a pound of cure. It seems a regulator that enforces minimum manufacturing safety standards and accurate disclosure are broadly beneficial and prevent negative externalities.

  38. Gravatar of Bob Bob
    1. February 2022 at 18:35

    The key to a working CBDC that is actually accessible to the general public though is for it to have nothing to do with a blockchain, and therefore being able to use human mechanisms to handle the very large shortcomings of digital security.

    Digital-only assets with no recovery are terrifying. When a private key is the sole proof of asset ownership, you have to deal with both the risks of losing said key (grandpa dies, nobody knows his password, his savings account is gone), and the key being obtained fraudulently (grandpa is scammed of his credentials directly, his computer gets hacked, etc). We have all kinds of complicated techniques to try to minimize those risks in many digital services, and we still fuck it up from time to time: An individual is just playing with fire.

    That’s the real risk of crypto-bros: A centralized CBDC, with serious KYC requirements, run by the Fed, is not all that hard a problem: It’s a subset, not a superset, of what, say, Stripe or Paypal already do, just blessed by the Fed: Take away the credit cards and the loans. The limitation there is political will.

  39. Gravatar of MichaelM MichaelM
    1. February 2022 at 21:06

    “MichaelM, Cochrane is not suggesting that all banks become narrow banks, just that that option be available to replace deposit insurance.”

    So there would still be banks that also take regular demand deposits (and, presumably, someday, pay interest on them)?

    I guess that’s better.

  40. Gravatar of steve steve
    2. February 2022 at 05:26

    The FDA does provide a kind of safe harbor when we use drugs they have approved. I would expect that to go away and provide a lot of uncertainty. We could end up with private ratings agencies which drug companies would pay to evaluate drugs. However, the ratings agencies in the run up to the mortgage crisis did not perform well giving out AAA ratings that were clearly unfounded. What would keep that from happening? Just out of curiosity has anyone asked the drug companies what they would prefer?


  41. Gravatar of Student Student
    2. February 2022 at 07:18

    Interesting post, however, I am not sure these are right wing views anymore. They are certainly not left wing views but I am not sure anymore what right wing views are. They seem to be whatever the dear leader says they should be. Sad. The right wing has lost their balls somewhere.

  42. Gravatar of Michael Rulle Michael Rulle
    2. February 2022 at 07:27

    Yes, Scott, I know you are a libertarian.

    But I am virtually positive you have never mentioned eliminating the FDA, eliminating public schools, being open on nuclear waste dump sites, pro CBDCs, privatizing fire departments. Some of these are perceived as radical.

    But yes, you have said —-no FDIC, no zoning laws, no minimum wage.

    I was expecting you to say no FED. I am now surprised you did not.

  43. Gravatar of Student Student
    2. February 2022 at 07:32

    And interesting follow up post would be to attempt to define today’s right wing views.

    I think by today’s standard, my most right wing views are that abortion should be illegal in all circumstances (murdering ones offspring is murder, plain and simple) and that feminism is as wrong as racism.

    Those are probably right wing views today. I am not sure right wingers today care a lick about things like minimum wage or zoning laws (in fact today’s right wingers probably favor zoning rules more than left wingers), FDIC or the FDA.

    Libertarians are becoming more and more centrists today.

  44. Gravatar of Stefan Stefan
    2. February 2022 at 07:53

    There already is a risk free asset that pays above market rates and were it allowed to, could provide 100% protection (or any selected level) against all runs/losses on those deposits. No new CBDC needed.

    Under the current monetary framework, only regulation, arbitrarily implemented, creates any need for FDIC insurance. No consumer would need any knowledge of broader bank liabilities were there deposit secured by this asset, that pays more than they earn on their deposit.


    2. February 2022 at 08:50

    I jumped up and down when Fed Digital USD (D$) paper came out. It’s going to be programmable. As in smart contracts. This 100% MEANS GOVT HOSTING.

    See when taxpayers pick up the tab for hosting – it becomes a PUBLIC PARK. But in digital space – there is no tragedy of the commons. And Nazis get to march in Illinois – it’s a matter of free speech, left to SCOTUS.

    I have been waiting for Govt paid hosting since 2008.

    It’s only after private companies started canceling cons, that my Economic theories about Atomic Capitalism, Digital Socialism began to get real purchase. Now it’s becoming part of GOP policy.

    Anything that can be copied should be free for bottom half. There is MORE MORAL ARGUMENT for giving the bottom half every song from every band, every book, every article from newspaper, every movie, every 3D printing script…. than there is for the first dollar of taxation.

    If we could copy food and oil, there would be riots in the streets if everyone didn’t get as much as they want.

    Govt hosting + No code open source software = digital civil rights (note I have a bunch of patents on this stuff)

    Not just you have a right to it, BUT now that you are a digital citizen of Texas we can discuss the level of privacy you have in your public-hosted DMs.

    Red State Govt NEEDS you to feel secure in your private messages, so it legally will not access those DMs in any civil case or any felony warrant except rape, murder, sedition, etc.

    Anyway, thats the coolest part about D$. Banking the unbanked and getting rid of FDIC is nice…

    But Scott, Govt being replaced by software. And hosting / software being free for citizens to build (and copy each others code) and run their lives – THIS is what D$ means.

    D$ is the first step to ending bureaucracy and making “the state” a software platform with almost no publicly paid employees.

  46. Gravatar of ssumner ssumner
    2. February 2022 at 09:56

    Some guys, Some studies suggest the FDA ends up costing more lives than it saves, by keeping useful drugs (and vaccines) off the market for far too long.

    Michael, I would think that as long as there is a demand for loans, there will be banks providing loans.

    Steve, You said:

    “However, the ratings agencies in the run up to the mortgage crisis did not perform well giving out AAA ratings that were clearly unfounded.”

    I don’t see why this has implications for the FDA, unless you are suggesting that a government security rating agency would have done better than the private ones we had, which hardly seems plausible. The government was cheerleading the subprime bubble. But I’m not really opposed to an FDA that competes with private drug rating agencies. As long as we have Medicare and Medicaid we’ll need the government to decide what drugs they plan to pay for. Call that unit the “FDA” if you like.

    Student, Yeah, the modern right wing is obsessed with things like stealing elections, keeping immigrants and Chinese goods out of America, and keeping poor people out of the suburbs. And spreading anti-vax propaganda.

  47. Gravatar of Todd Kreider Todd Kreider
    2. February 2022 at 10:21

    Scott wrote: “…can choose between the drugs recommended by their doctors and the (unregulated) nutritional supplements recommended by someone like the Kardashians.”

    Supplements are regulated, just not to the extent of drugs.

    “For example, in January 2020, based on “significant violations of current Good Manufacturing Practices,” the FDA conducted a nationwide recall of all lots of all supplements produced between January 2013 and November 2019 by ABH Nature and and marketed under dozens of individual brands.”

  48. Gravatar of DK DK
    2. February 2022 at 11:05

    I agree that CBDC would obviate the need for the FDIC. It would also suck a great deal of deposits out of the banking system, forcing banks to shrink and reduce lending and otherwise cause a great deal of disruptions. It would also undermine what I believe to be a key asset of the current highly distributed US banking system: private allocations of capital across the US by 5,000 separate banking institutions, rather than having that power concentrated in a few banks.

  49. Gravatar of bb bb
    2. February 2022 at 14:56

    @Scott, @some guy,
    I’m with some guy. We could do a lot to reform the FDA, starting with accepting authorizations from the EU, Canada, and other advanced countries. That alone would fastback lots of medications and save a ton of money for the US Gov and pharmaceutical companies.
    And I too am very skeptical of some form of private regulations. The nutritional supplement sector hasn’t developed one. Maybe insurance companies would force the issue, but insurance companies have proven terrible at controlling costs, so why would we think they would be great at controlling quality.
    And what about food? Is yelp going to regulate food safety? Pass.
    I have a hard time understanding how libertarians can be so confident about solutions that have not been implemented anywhere successfully.

  50. Gravatar of bb bb
    2. February 2022 at 15:10

    We don’t live in Sweden. Abolish public schools is a very right wing view. And, while I agree that you support many redistribution programs, you are also very dismissive of income equality, which most folks would perceive as a right wing view.
    And I’m hesitant to characterize your comments on racial inequality, but I believe you skew in a direction of John McQuorter, which definitely isn’t left wing.
    I absolutely acknowledge that your views on police reform, judicial reform, and redistribution, are targeted at reducing inequality. I just think most folks would characterize many of your positions on inequality as right wing, while I don’t feel that abolish FDIC is an argument that galvanizes either side.
    My most right wing view is probably that the SALT deduction is bad, or something involving corporate taxes. I’m not very right wing I guess.

  51. Gravatar of ssumner ssumner
    3. February 2022 at 09:05

    Todd, Ok, i stand corrected. In that case Some Guys was wrong in the assumption behind his question.

    DK, I doubt it would have much effect on the size of the lending market, and in any case we should not be subsidizing banking with FDIC.

    bb, You said:

    “but insurance companies have proven terrible at controlling costs,”

    In the US we basically have 99% socialized medicine, so I would not look at any aspect of our current system as proving any indication at all as to what a truly free market would look like. Private insurance companies are basically an arm of the government bureaucracy. They are private in name only.

    “you are also very dismissive of income equality”

    I wouldn’t say I’m dismissive, rather that I have a better understanding of inequality than most progressives. I understand that international inequality is 1000 times more important than inequality in the US (making immigration the best solution), and that wealth and income inequality in the US is a much smaller problem than other types of inequality in the US.

    If that makes me “right wing”, so be it. And yes, my views are race are similar to those of John McWhorter and Glenn Loury. I’d call them moderates.

  52. Gravatar of Sergey Sergey
    4. February 2022 at 10:11

    Scott, Please do the “my most left wing views” post for the balance sake.

  53. Gravatar of ssumner ssumner
    4. February 2022 at 10:46

    Sergey, Probably foreign policy and social issues. But I’m not sure exactly what is “left” any longer. Is an anti-Puritan stance on sex still viewed as left wing these days? Is it still OK to date co-workers? Is prostitution OK with the left? I honestly don’t know.

    How about legalize all drugs?

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