My letter to the Wall Street Journal re: Get Government Out of Money and Banking

Re: Bailout Strains European Ties

Dear Sirs:
This disgusting farce of a week of backroom squabbling by incompetent and clueless politicians and irresponsible bureaucrats over the future of the Cypriot banks should spur a public outcry to get government completely out of money and banking. The public has too long harbored an inflated opinion of the expertise of government officials that is completely unwarranted, as the Cypriot banking crisis has revealed. After creating the conditions for massive wastes of resources by manipulating the money supply and interest rate through their central banks, these same politicians and bureaucrats barter with one another like Arab rug merchants, giving no consideration to the legality of their actions or the rights of the parties involved. Were banks subject to normal commercial law, the courts would appoint receivers to liquidate and/or restructure problem banks in an orderly fashion. Politicians would have nothing to do with it. It is the politicization of money and banking that has created one money and banking crisis after another all over the world. Banks should be required by normal commercial law to keep one hundred percent reserves against demand/current accounts. Such accounts are bailments and not loans to the banker; as bailments, the bankers must be able to satisfy withdrawal demands from all depositors en mass. Savings are another category of bank liabilities, whereby the public loans its money to the banker for a set period of time. The banker re-loans this money at interest. The only possible security for the saving public is the banker's capital account and his reputation for good banking practices. If his losses become too great, the public can force him into bankruptcy. Were banks subject to these completely normal requirements of commercial law, there would be fewer problem banks, because bad bankers would be driven from the market.