Apr 2, 2009

Without Comment

by Liberty and Power

Merrill Lynch understates losses by $500m .

"The first and most effective line of defence against fraud and insolvency is counterparties' surveillance. For example, JPMorgan thoroughly scrutinises the balance sheet of Merrill Lynch before it lends. It does not look to the Securities and Exchange Commission to verify Merrill's solvency." -- Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin Press, 2007).

Now read John Kay on how Greenspan could have found a cure at the pharmacy .

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More Comments:

Mark Brady - 3/2/2009

"With respect to point (2), do you believe that it is possible with fiat money to have a non-inflationist policy? If so, what would that look like?"

In theory, along the lines of Milton Friedman's proposal in his essay "The Optimum Quantity of Money" (1969). In practice, I find it difficult to imagine a government today would not pursue an inflationist policy, at least a mildly inflationist one. Indeed a non-inflationary policy is now routinely defined as two percent price inflation, which implies a significantly higher rate of inflation of the money supply.

Jeffrey Rogers Hummel - 2/28/2009

With respect to point (2), do you believe that it is possible with fiat money to have a non-inflationist policy? If so, what would that look like?

Mark Brady - 2/28/2009

Yes, but with the caveats that (1) the law should allow the victims of fraud to sue for damages, and (2) insolvency is much more likely to arise under a fiat money system and a government that pursues an inflationist policy.

Jeffrey Rogers Hummel - 2/27/2009

But wouldn't you also agree that the first sentence in the Greenspan quotation is completely unobjectionable: "The first and most effective line of defense against fraud and insolvency is counterparties' surveillance"?

Mark Brady - 2/27/2009

A brief response. For the record, I'm not seeking to "tarnish Greenspan" -- whatever that might mean -- although you won't find me defending any central banker, least of all those who preside over a fiat money system. That said, so long as we have a fiat money system and a government that pursues an inflationist policy, I find it plausible that some constraints on what bankers can do might not make the situation a wee bit better.

Jeffrey Rogers Hummel - 2/27/2009

I must agree with Dresner. I find it peculiar, Mark, that in your effort to tarnish Greenspan you would send us to an article favoring greater regulation, and a stupid one at that.

Jonathan Dresner - 2/25/2009

How unlibertarian of you!