Tuesday, January 27, 2009
Don't nationalize the banks (any more)
I'm not sure whether the idea of outright nationalizing banks is a dead letter now (though the idea has been in the air, or on the Net) or whether the banks are so close to being nationalized now that it doesn't matter much if the government takes the formal step or not. Anyway, it's a bad idea. I enjoyed talking to Lawrence White, at U. of Missouri-St. Louis to prepare for the Register's editorial denouncing the idea. Larry, who got his doctorate at UCLA (after my time), has made the economics of banking something of a specialty. His latest book is "Theory of Monetary Institutions." We didn't have time to discuss just how we might get all the way to free banking from here. As most freedom-oriented reforms like privatization and deregulation, it will likely come only after all the lousy alternatives have been exhausted, grounded in desperation rather than because of the impeccable arguments of scholars like Larry White. But he has laid intellectual groundwork.