Paul Krugman: Ron Paul on Money Market FundsSubmitted by DeMolay on Sun, 09/16/2012 - 16:54
Brad DeLong has a post on Paul Ryan’s hysterical reaction to QE3, which is worth reading just for this:
“Honest money” is a Ron Paul dog whistle: the good productive workers, the bad exploitative usurers, the necessity of a hard-money depression to cleanse the monetary colon–you know the drill.
But the Ron Paul link, in which he condemned fractional reserve banking, prodded me to ask a question I’ve been meaning to ask: How do the Austrians propose dealing with money market funds?
I mean, it has always been a peculiarity of that school of thought that it praises markets and opposes government intervention — but that at the same time it demands that the government step in to prevent the free market from providing a certain kind of financial service. As I understand it, the intellectual trick here is to convince oneself that fractional reserve banking, in which banks don’t keep 100 percent of deposits in a vault, is somehow an artificial creation of the government. This is historically wrong, but maybe the actual history of banking is deep enough in the past for that wrongness to get missed.