tag:blogger.com,1999:blog-5908830827135060852.post2293940330428604554..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: The Perplexing Problem Of Credit In MacroBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5908830827135060852.post-39489600877881343632022-07-21T11:41:19.637-04:002022-07-21T11:41:19.637-04:00This comment has been removed by a blog administrator.Visbankinghttps://www.blogger.com/profile/16942015957455740817noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-30544431690261536412022-07-21T11:40:56.982-04:002022-07-21T11:40:56.982-04:00This comment has been removed by a blog administrator.Visbankinghttps://www.blogger.com/profile/16942015957455740817noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-3329302220450835362022-07-04T08:30:12.933-04:002022-07-04T08:30:12.933-04:00This comment has been removed by a blog administrator.gossiphttps://www.blogger.com/profile/06463229386051335989noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-56454135616695418242022-07-04T07:00:02.008-04:002022-07-04T07:00:02.008-04:00"If banks can go bust and their investors jus... "If banks can go bust and their investors just lose everything when that happens won’t that control lending criteria in the same way competition and bankruptcy supposedly controls everything else?"<br />The shadow banks going into 2008 and the crypto leverage system were "market based," and no serious person thinks that lending was "controlled" in any reasonable manner.<br /><br />We know how to regulate traditional banks. The problem in 2008 was that the regulators refused to regulate because they believed that markets would magically self-stabilise. We listened to the free market dogmatists already, and we discovered that they do not understand how credit markets work.<br /><br />" then a bank going bust has no impact on bank accounts or payments" Deposits are already secured. The payments system is another issue. Intra-day exposures within a payments system can be huge, and those exposures are not "deposits." Payments systems can be adapted to reduce the counterparty risk, but that is a different issue than deposit insurance.<br /><br />Banking systems have evolved for centuries. We know how to deal with them, we just need to actually learn from the past when doing so.<br /><br />DeleteBrian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-1335748241880471482022-07-03T17:13:45.234-04:002022-07-03T17:13:45.234-04:00This post is discussing modelling issues, not syst...This post is discussing modelling issues, not systemic problems. The concern is whether a particular default is random, not whether a lender is acting sensibly or not.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-25479358400248821412022-07-03T17:11:45.633-04:002022-07-03T17:11:45.633-04:00The question here is whether we should just let th...The question here is whether we should just let this be determined by the market just like any other investment. If banks can go bust and their investors just lose everything when that happens won’t that control lending criteria in the same way competition and bankruptcy supposedly controls everything else?<br /><br />If depositors are really memorandum accounts on a control account at the central bank, (via a central bank digital<br />Currency construction) then a bank going bust has no impact on bank accounts or payments. Individuals just select another payment provider to replace the failed one, which has access to the full transaction history via the control account.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-2340116454227137742022-07-03T16:17:24.172-04:002022-07-03T16:17:24.172-04:00"scam borrowers are a particular problem. Ima... "scam borrowers are a particular problem. Imagine a scam artist seeking a loan without any plausible business plan of paying it back. Although the credulous lender might view the default as being “random,” the scam artist knows with certainty that they will eventually not be paying their debts in full."<br /><br />Presumably "scam lenders" can likewise create systemic problems; Bill Black's work around the predatory lending and associated lender frauds during the build-up to the GFC comes to mind.eghttps://www.blogger.com/profile/00785993737401518690noreply@blogger.com