I certainly wouldn’t bet against that prediction. Modern (say, since 1980) finance definitely seems to be a series of conspiracies to engineer public risks for private profit. In theory, every transaction has two parties, so if someone loses a bunch of value, someone else gained it. In the case of inflation changes, those gains went to debtors, especially to long-term debtors who didn’t immediately have to refinance at higher rates. The Treasury is one of them—their long-dated bonds went way down in value, but they didn’t have to give back any of the purchase price.
Unfortunately, guarantees create a ratchet effect—there’s no clawback for past years’ bonuses, dividends, or un-justified expenses, so the taxpayers eventually end up paying for all the value extracted.
I wish we could just do away with the guarantees—have the fed offer retail post-office-like banking services, fee based and at a loss, with strong guarantees and no profit motive nor ability to seek risk/alpha. And un-insured (or partly-insured) higher-paying investment collectives, with some spread between interest and services to depositors and return on investments.
It won’t happen, of course, until the US government really comes to grip with it’s debt problem, and the firehose of money to the private sector has to dry up.
I certainly wouldn’t bet against that prediction. Modern (say, since 1980) finance definitely seems to be a series of conspiracies to engineer public risks for private profit. In theory, every transaction has two parties, so if someone loses a bunch of value, someone else gained it. In the case of inflation changes, those gains went to debtors, especially to long-term debtors who didn’t immediately have to refinance at higher rates. The Treasury is one of them—their long-dated bonds went way down in value, but they didn’t have to give back any of the purchase price.
Unfortunately, guarantees create a ratchet effect—there’s no clawback for past years’ bonuses, dividends, or un-justified expenses, so the taxpayers eventually end up paying for all the value extracted.
I wish we could just do away with the guarantees—have the fed offer retail post-office-like banking services, fee based and at a loss, with strong guarantees and no profit motive nor ability to seek risk/alpha. And un-insured (or partly-insured) higher-paying investment collectives, with some spread between interest and services to depositors and return on investments.
It won’t happen, of course, until the US government really comes to grip with it’s debt problem, and the firehose of money to the private sector has to dry up.