I was there when the secretary and the chairman of the Federal Reserve came those days and talked to members of Congress about what was going on... Here's the facts. We don't even talk about these things.
On Thursday, at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two.
The Treasury opened up its window to help. They pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks.
They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic and there. And that's what actually happened.
If they had not done that their estimation was that by two o'clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.
Now we talked at that time about what would have happened if that happened. It would have been the end of our economic system and our political system as we know it.
I´m just reading a book by John Maynard Keynes. You think it was written last month, not 80 years ago.
I've just read "The living money" from this guy while backpacking in Ireland... which opened up some new perspectives for me. He introduces some nexuses between the hierarchy of biology, psychology and the monetary economy, all related to Darwin's evolution theory.
I wouldn't get into this much but there are some interesting points:
Limited resources. The less resources are present, the more the market evolves and specifies, although only if resources keeps up a balance. If there are more resources, the market expands; if resources drop, more participants will extinct.
Struggle for survival. Better liquidity has better chances to survive.
Reproduction. Diverse, replicators are a combination of knowledge and money.
EDIT: I just realized that Darwin was born exactly 200 years ago, on 12th February, 1809. :)
Read this. Very interesting insights on how ancient civilizations suddenly vanished, e.g. the Vikings in Greenland, the Mayas, the Polynesians on Easter Island, the Aborigenes in Tasmania and various others.
ahhh libertarian economics... 'gubment is teh bad'
the austrian argument against keynesian economics is based around bad policy, not the existance of economic policy itself. of course doing nothing is better than doing something wrong when it comes to economics! laissez faire economics is, strictly speaking, impossible. governments exist, and they act and ANY action will have an effect on the economy. thats the reality of the situation.
that said, state micromanagement of an economy is a recipe for disaster, for the most part, the state should set the conditions and let the market look after itself.
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