Monetary Fragility with out Banks: Classes from 18th century

Stein Berre and Asani Sarkar within the blogpost on NY Fed’s Liberty Avenue Weblog:

Proponents of narrow banking have argued that lender of final resort insurance policies by central banks, together with deposit insurance coverage and different authorities interventions within the cash markets, are the first causes of monetary instability. Nevertheless, as we present on this submit, non-bank monetary establishments (NBFIs) triggered a monetary disaster in 1772 though the monetary system at the moment had few banks and deposits weren’t insured. NBFIs profited from funding dangerous, longer-dated property utilizing low-cost short-term wholesale funding and, once they ultimately failed, authorities felt compelled to rescue the monetary system.

With or with out banks, monetary fragility will all the time be there in some kind or the opposite…

This entry was posted on April 17, 2023 at 5:44 pm and is filed underneath Academic research & research papers, Blogs to Read, Central Banks / Monetary Policy, Economics – macro, micro etc, Financial Markets/ Finance. You may comply with any responses to this entry via the RSS 2.0 feed.
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