> dangerous experiment
It's also an easily reversed experiment, which suggests that the naysayers may fear success more than failure.
It's also an easily reversed experiment, which suggests that the naysayers may fear success more than failure.
I'm sorry but that is a totally naive perspective. And as somebody from Switzerland maybe putting your lives savings on a 'might work but has no explainable advantages'-initiative is idiotic and that's why people affected by this absolutely destroyed it.
If there´s one lesson we really need to get over to the Economists from Computer Science it´s that they have to stop experimenting with the production system.
[1]: https://twitter.com/ydemombynes/status/985560599248756736
Massive instability in the lending market and a higher average cost of borrowing because of frequent short term credit crunches as the money supply is delinked from borrower demand is.
Borrowing costs may be higher because this proposal removes some "free" money that banks can currently lend out. But maybe interest rates will stay the same and instead checking account fees will rise. This could induce some checking account holders to move some of their money to term loans to the bank which the bank could then lend out. It is not clear that interest rates have to rise.
> the money supply is delinked from borrower demand
The money supply available to meet borrower demand need not be created. It already is partially provided by people lending their money for a term to the bank. This proposal merely says that the bank may not use checking account money to meet borrower demand, i.e., it may not represent to a checking account holder that his money is available when in fact it has been lent out to someone else.
That is why I and everybody I know voted against it, nobody could explain why it would be better. The only explanation was that if it was implemented perfectly it would cause additional problems.
Market makers do not sit around with huge piles of uninvested cash waiting for the day that loan demand to exceed its supply on loanable funds, and consumers with interest-free deposit accounts are not exactly the ideal people to make markets. And of course when loan demand exceeds the amount of cash available to be loaned at that point in time interest rates rise. That's Econ 101.
Because what we have right now is nothing but experiments with the production system, under the guise of "monetary policy".
Central banks are necessary to provide the lender of last resort functionality.
Meanwhile, there are several scientifically based simulations of the banking system out there, that could be used as a basis for developing a testable system to experiment on - this is completely within current technological capabilities to achieve.
If actually read the books by the inventor of the 'lender of last resort' called Walter Bagehot. He wrote on of the most famous monetary books 'Lombard Street: A Description of the Money Market (1873)'.
Modern central banks constantly refer to how they 'follow Bagehot' but actually don't.
In this book he actually makes it quite clear that the 'lender of last resort' is only need in England because he says 'Getting ride of the Bank of England would be as hard as getting ride of the monarchy' (turns out its even harder).
He specifically point out in his books that a better solution would be for England to adopt a banking system like the Scottish had where the 'lender of last resort' was not needed because banks can create their own liquidity.
'Lender of last resort' was his idea how to restrict and give a clear set of rules to the central bank so it would stop causing so many crisis that were all avoid in the free banking system of Scotland.
https://iea.org.uk/wp-content/uploads/2016/07/upldbook115pdf...
Of course, for those to be possible you would need a vast connection infrastructure spanning the globe, and many millions of people willing to participate (perhaps because the world simulations are clothed in cultural common places and so are disguised as "fun"), and something of value that they are willing to trade in earnest. Then you could run all sorts of fun economic experiments there and prove theories via A/B tests.
I wonder if the idea will catch on. I hope it's not held back by a perception that those world simulations are not serious enough for real science to be done.