End The FED

A prescient signal ahead of its time on a future in which electronic cash could end the government monopoly on minting money, from the 1999 edition of Spectrum, the journal of the Institute of Electrical and Electronics Engineers.

As a financial economist working primarily in the banking industry from 1983 to 2010, I understand the reason Silvergate Bank and Silicon Valley Bank failed is that government regulation made too many people feel safe depositing large sums without paying attention to the banks’ financial health. When that shallow confidence was undermined, depositors ran quickly.  We need to replace government regulation with a system in which private-sector analysts publish warnings on bank risks, capitalization and portfolio concentration.

• Government guarantees to keep uninsured depositors whole is a needless bailout that will pressure government officials toward further bailouts in the future.  The worst part about bailouts is that they preclude the market from holding banks accountable, which is the only way to keep the system healthy in the long run.
• One big reason these banks were so concentrated in high-tech related assets is that bank regulators discouraged banks generally from getting involved in these areas.  Had regulators not been involved, there wouldn’t be such concentrations in such a small number of banks and the system would be safer on the whole.
• Yes, the cost of Silvergate and Silicon Valley Bank bailouts DO get passed on to individual Americans! Increases in insurance premium rates are borne by retail customers, commercial customers, employees and shareholders.

Bringing monetary policy, bailouts and regulation under control.