I always remember what Milton Friedman used to say, he was amazed be people who see failure of regulation and propose a fix by seeking to introduce even more regulation.
"well this time it will surely work!"
"if only we had the right kind of regulation/people in charge!" they say.
That's never gonna happen. Breaking the system in chunks artificially will not work, because it will consolidate again and buy up the regulators. The true solution here is Bitcoin, precisely because it is not controlled by anyone.
You see this as a "failure of regulation"? I see it as a failure of deregulation. We passed laws and made interpretations which reduced the effect of structural safeguards in the financial system. We didn't pass laws which strengthened those safeguards or improved oversight.
> For years the Federal Reserve was concerned about the ever-growing size of our largest financial institutions. Federal Reserve research had been unable to find economies of scale in banking beyond a modest size (Berger and Humphrey 1994, p. 7; see also Berger 1994). A decade ago, citing such evidence, I noted that "megabanks being formed by growth and consolidation are increasingly complex entities that create the potential for unusually large systemic risks in the national and international economy should they fail" (Greenspan 1999). Regrettably, we did little to address the problem.
> ... However, should contingent capital bonds prove insufficient, we should allow large institutions to fail and, if assessed by regulators as too interconnected to liquidate quickly, be taken into a special bankruptcy facility, whereupon the regulator would be granted access to taxpayer funds for "debtor-in-possession financing" of the failed institution. Its creditors (when equity is wholly wiped out) would be subject to statutorily defined principles of discounts from par ("haircuts"), and the institution would then be required to split up into separate units, none of which should be of a size that is too big to fail. The whole process would be administered by a panel of judges expert in finance.
This is based on issuing contingent capital bonds, which funds a "living will" "in which financial intermediaries are required to offer their own plans to wind themselves down in the event they fail."
Extending this theory to the world of software it would make it foolish to update or iterate or anything, because thanks to the passage of time, you're just going to have to update and iterate all over again again.
On the other hand, rejecting idiocy like this gets us from Astrology to Astronomy, from Alchemy to Chemistry, and the Magna Carta to the US Constitution, and further, the amendments to it.
I used to be an Austrian but it's been almost a century now and it's become clear to me that the Keynesians are actually correct. Even after the GFC things bounced back very quickly. The power to inflate away old debt is too useful to sacrifice.
But you're not explaining your claim. How can possibly printing money can make society as a whole richer? It can make certain individuals better off, for sure (the ones who receive the newly created money first while the prices are low). But how does it make the economy as a whole better off? No additional value gets created.
The well known part of Keynesian thinking is about the output gap. So if you give money to a formerly unemployed guy to dig a hole, you create the value of the hole in addition to all the other value the economy would create anyhow. This applies of course only if that guy is unemployed in the first place.
And as a rule of thump, every time I read a Austrian argument, I try to find the hidden assumption of markets working at full capacity. ( And every time I read a Keynesian argument I try to find the hidden assumption of an output gap.) Usually this is a nice way to understand the argument better.
I think the point is inflation increases the money supply, while debt remains the same. Individuals make more money with less buying power, but can pay off debt easier.
Well that's good for people with debts. It's bad for people without debts and those who loaned them money. Debtors are basically paying off their debts more easily at the expense of all the others (even those who are not involved in the deal of loaning).
In the mean time the average real salary has been dropping since 1969, because of inflation, and because the government and companies didn't bother to increase the minimum and average wages to keep pace with the inflation.
So I really doubt most of the population benefits from inflation.
"well this time it will surely work!" "if only we had the right kind of regulation/people in charge!" they say.
That's never gonna happen. Breaking the system in chunks artificially will not work, because it will consolidate again and buy up the regulators. The true solution here is Bitcoin, precisely because it is not controlled by anyone.