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A new gold standard?
Tuesday, February 16, 2010
Former CEO of and acting Chairman of BB&T, one of the nation's largest banks, John A. Allison talks about the current monetary system, debt, the Federal Reserve, and the possibility that we'll eventually move back to a system of private banking with gold backed money.
Spotted over at The Big Think via Wall Street Cheat Sheet and more evidence that you don't have to be crazy to think that there is something very wrong about the combination of big government, a powerful central bank, and a system of pure fiat money.
6 comments:
I am surprised that Mr. Allson doesn't understand the true factors that caused the finacial collapse of 2008, those being (1) the elimination of traditional lending standards i.e. mortgage lending for the purpose of securitization, in order to flip those loans to Wall Street in 90 days (2) the fraudulent AAA rating, by the rating agencies, of those mortgage-backed securities (3) massive, unregulated, and highly-leveraged speculation in derivatives, for the purpose of rewarding partners with huge bonuses based on short-term paper profits (4) the notion that Wall Street knew there would be no real downside to the huge derivative bets if they should go bad, thanks to the idea that the Fed always steps in to help when things get ugly (like LTCM in 1998),(5)institutions allowed to get "too big too fail" thanks to the repeal of Glass-Steagall. He wants LESS regulation? He must be kidding! Properly regulation would have substantially lessened the severity of this crisis. The only reason for the Wall Street bailouts was for their losses caused by their unregulated, losing derivatives trades.
I believe he has a full understanding of those products considering that BB&T was very limited in its exposure to all of them. If the Fed would've let the TBTF fail, I guarantee you that BB&T would have bought most of their assets and would have been standing at the top. In fact, Chris Whalen at IRA had them at the top of his list as well:
http://www.americanbanker.com/issues/174_161/stress_test_profile_bbt-1001188-1.html
If you pay attention to Allison's reasoning, his suggestion goes much further than trying to address the symptoms.
Tim,
You've said in the past that someday you're going to read Atlas Shrugged.
You might like to know that John Allison considers Atlas Shrugged his favorite book and the best business book ever written.
http://www.youtube.com/watch?v=RDAn51D_YxY
Go to 01:03:47
Thanks for that - I'll have to pick up a copy.
It's laughable that people such as 'acai' think they know the answers (more regulation) when Allison's bank has performed flawlessly, didn't need TARP and is one of the strongest in the nation.
The idea that more regulation is needed ignores the fact that there were plenty of regulatory powers available before the latest bubble burst but NO ONE would use them. Just recall, for example, in a related case of regulatory failure, how Bernie Madoff's scam was uncovered and reported to the SEC numerous times yet the SEC did NOTHING! That's what you get with regulators. It doesn't matter how many rules you have is no one is enforcing them.
As long as you look to people to 'do the right thing' you'll be disappointed. That's why smart people (like Allison) prefer to rely on the market.
Please keep in mind that we haven't had a free market in America for a VERY long time. So, please don't whine that the 'free market got us into this mess' because that's just not true.
Allison's answer of private banking with gold backing recognizes this fact and uses the market as the regulator, as he said in his 'discipline' comments.
But, weak thinkers will always want their big brother, the federal government, to exercise its "magical" powers and make everything right for them. It's like believing in Santa Claus. People REALLY need to grow up.
Until people can get off the government tit and start taking personal responsibility, we'll continue to have major problems.
I know this comment is utterly wasted on people like 'acai' but for others who can still think, it might help to remember the old adage:
"That government is best which governs least."
The ultimate "regulation" is knowing that you'll go broke if you do stupid things. Government regulation coupled with the TBTF notion guarantees risky behavior and sloppy policy (i.e. more of the same ).
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