2023 Mar 18

• Watched The Age of Easy Money documentary from PBS

  • Told the story of the fed from 2008 to now.

  • The fed can’t be responsible for everything, and many things are out of their control

  • The fed did a lot of things that ended up incentivizing banks and large shareholders to play riskier because over and over the fed would never hold strong and instead responded to the whines of the markets

  • Initially the fed would inject money, and it would mainly end up going to the rich

  • Incentives at some point got super misaligned, where money was being lended to businesses, but instead of investing in things to improve the productivity of the company, they would just “buy back” their stock and pump their shareholder’s bags because that’s all anyone cared about.

  • There seems to be a lack of regulation on the risks that banks are able to take.

  • Notes on this to be continued…

• Generally understood today what fractional reserve banking is. Didn’t realize even checking accounts weren’t full backed by cash. Whenever you put any money in a bank, they are only required to hold a fraction of that money as reserves, i.e. at minimum the reserve ratio which could be say 10%, and take the rest of your money and lend it or invest it. The thing about this though, is whoever the money is lent out to then purchases something or invests it somehow and the receiver of the cash stores it in a bank again. This bank does the same thing, and so 1/reserve-ratio times your amount of money can actually be used and circulate in the economy at one time.

  • I could sort of see how this could help people grow their businesses or productivity quicker, but it seems so risky. It seems like it creates a huge bubble, and once there’s any sort of downturn or failure and someone can’t pay back the debt in time, a whole chain of command loses money.