1. Choose someone you disagree with and start a dialogue. Make friends even if neither of you changes your mind.

2. Find common ground, avoid epithets, and presume goodwill on the part of others unless and until their actions suggest otherwise.

3. Embrace America as an imperfect, unfinished product—and one whose future depends on a respect for those principles that made it largely free and exceptional in the first place. No country is without flaws, and few countries in world history have accomplished as much for life and liberty as America.

4. Think twice before using political connections and influence to get something you can’t secure voluntarily from others in the marketplace. Cronyism diminishes respect for both you and for the free enterprise system it corrupts.

5. Judge every individual by “the content of his character” and the merit of his actions, not by the group to which he was assigned by birth, origin, faith, color, or politics.

6. Elevate the importance of personal character in your life. No society can flourish if it denigrates virtues such as honesty, humility, patience, responsibility, tolerance, courage, gratitude, self-discipline, and respect for the lives, rights, property, and choices of others.

7. Choose liberty over power, persuasion over force. Find ways in which you can leave the world not only a better place, but a freer one as well, for life without liberty is both unthinkable and unlivable.

8. Live your life as though politics is but a corner of it, not consumed by it. Recognize the incalculable value of intact families, vibrant and voluntary associations, community engagement, loving relationships, and institutions created and sustained outside the divisive realm of politics.

9. Ask yourself every day, “Am I good enough for liberty?” Then dedicate yourself to self-improvement if you can’t honestly answer “yes.” Reforming the world starts with reforming oneself.

10. Defend the free speech of all people. If you catch yourself attempting to intimidate, shut down, or frighten others into submission, shake it off before the impulse turns you into an antisocial monster. “Cancel” nobody except those who insist on canceling others.

11. Revere truth and the honest search for it. Never let truth be obscured or destroyed by claims that it doesn’t matter or that it is nothing more than a subjective whim of the moment. There is no such thing as “his truth” or “her truth,” only “the truth.”

12. Seek diversity of opinion. Minds that try to stigmatize or close the minds of others, or that pretend that color, sex, and religion are all that matter, are enemies of the “diversity” that matters most.

13. Love peace more than you love force, conflict, compulsion, and intolerance. Work toward a society in which individuals choose to do right because they want to, not because they’re forced to.

14. Reject nihilism, cynicism, and pessimism. People of goodwill and character can shape the future for the better. It’s never too soon or too late to start.

15. Learn from history; don’t rewrite it. Lessons from the past can make us better people in the future. Don’t twist your underwear into a knot over an old statue. Never allow the poison of “presentism” to corrupt your perspective.

16. Celebrate the “uncommon.” It is the uncommon to whom we owe the greatest debt—those who speak truth to power, invent and innovate, turn failure into success, and add value to society. No one should encourage a child, for example, to aspire to nothing more than “commonness.” Respect and encourage the exceptional.

The former U.S. Senator from Maine, George Mitchell, once said, “I believe there’s no such thing as a conflict that can’t be ended. They’re created and sustained by human beings. They can be ended by human beings. No matter how ancient the conflict, no matter how hateful, no matter how hurtful, peace can prevail.”

I hope he’s right. But in any event, no peace of any kind can prevail so long as we nurture conflict within and between ourselves. No peace of any kind can long be imposed from the outside in. It must begin on the inside, as a matter of conscience, one conscientious individual at a time, and then grow outward into a course of action.

These sixteen suggestions constitute a course of action for each reader to consider.

Can you explain how commodity-backed currencies, like the gold standard, work with regards to saving and lending? As I understand it, with fiat money, if A deposits $1,000 in the bank, which then lends $800 to B, there’s now $1,800, but with a gold standard there’s still only $1,000. Would A only have access to $200 + whatever B has repaid? Where would the extra money for interest paid by B to the bank and by the bank to A come from? If B skips town, is A out $800?

Also, can you explain what would make a good commodity to back a currency? Would a plutonium standard, a distilled water standard, or prime rib standard work as well as a gold standard or silver standard?

To tackle the first question, we need to highlight the differences between a currency system and a banking system. Let’s start there.

Commodity vs. Fiat Money

So does commodity money, like a gold-standard, conflict with how banks operate today? Not really. To understand why, we need to get to the fundamental difference between commodity money and fiat money—redeemability.

A commodity money is redeemable for some quantity of a physical commodity. For example, we can imagine a paper currency which could be redeemed for one ounce of silver, gold, plutonium, or prime rib. If you can, in principle, take the note to a bank or government office (depending upon the specifics of the system) and have it redeemed for gold, the currency is a gold-backed currency.

Fiat currency, on the other hand, is only redeemable in itself. In other words, if you take your currency to a bank or government office in a fiat system to redeem it, they are going to hand you back different fiat currency. If you redeem your five dollar bill, the only thing you’re promised is five slightly different colored bills with Washington’s face rather than Lincoln’s.

This is the difference between fiat and commodity systems.

So, is a commodity-based monetary system compatible with banking as we know it today? Sure. Let’s run through an example to see why.

Let’s say you deposit $1,000 worth of gold at a bank. In exchange you receive $1,000 of redeemable gold-backed notes, which you can use to purchase products. If the notes are transferred, the person who receives them can redeem them for their portion of the gold. The bank has the gold it would be required to give for redemption.

In some historical government money systems, the government offers the right to gold redemption rather than the private bank, but there’s no reason we couldn’t imagine banks or private gold redemption businesses taking this on. For our purposes, we’ll just assume that the banks store gold for redemption and allow customers to save their notes. This system is maybe overly simple compared to reality, but it makes our example a bit easier.

You decide that instead of spending your gold notes, you’d prefer to save them, and you deposit the notes in the bank as well.

Someone comes along and borrows notes from the bank. The bank gives the borrower $800 worth of gold-backed currency from the $1,000 you deposited in the bank. So now, your bank account balance is $1,000 (recorded on the bank’s ledger), and the borrower has $800 in physical cash. This sort of banking system where the bank only keeps a fraction of the money deposited and lends out the rest is known as fractional reserve banking.

At this point, you may have noticed the problem that Kyle noticed. The bank essentially created new money when it loaned your money out to someone else. There is now $1,800 worth of promises to redeem currency in gold out there, but the amount of gold hasn’t changed. There’s still only $1,000 worth of gold. So is this an issue?

Well, it’s only an issue for the bank if everyone decides to redeem their currency for gold at the exact same time. In that case, the bank would be unable to meet its obligations, and it would go under unless something changed.

You might take this possibility as evidence that commodity-backed money is incompatible with fractional reserve banking. There’s two reasons why this isn’t necessarily the case.

First of all, this potential problem is not unique to commodity money. If banks hold fractional reserves in a fiat money system the same issue still applies. If every depositor runs to the bank and demands their fiat money, a bank will be unable to fulfill that obligation if they only kept a fraction of the fiat and lent out the rest.

In other words, this risk associated with fractional reserve banking is not specific to a commodity or fiat system. The risk of too many customers trying to secure funds exists in both systems. The type of money (commodity or fiat) is a separate question from the type of banking system (fractional or full reserves).

Second of all, as long as the bank keeps enough gold on hand to meet the actual redemption requests, then there is no issue for the bank. It’s possible in theory for a bank to not hold enough gold, just like it’s possible for all businesses to fail to meet their obligations if things go sufficiently wrong, but there is incentive to avoid this result.

To answer some specifics, Kyle’s original inquiry included several questions based on a hypothetical scenario. Let’s consider each.

“…if A deposits $1,000 in the bank, which then lends $800 to B, there’s now $1,800, but with a gold standard there’s still only $1,000.”

In both a gold and fiat standard, the depositor has an account balance that reflects the bank’s obligation to give them $1000. In both standards, the borrower has notes worth $800. If the depositor requested all their currency notes back, the bank would be unable to issue them unless the bank had deposits from other customers, because $800 of A’s deposits is in the hands of B. This is an issue, but it isn’t an issue unique to the commodity system.

“Would A only have access to $200 + whatever B has repaid?”

How much money A has access to depends on the situation. Does the bank have other customers with partial deposits? If not, the bank might have a problem if A wants more than $200. Again, this is true in both the fiat and gold-backed system.

“Where would the extra money for interest paid by B to the bank and by the bank to A come from?”

The interest money paid by B would come from the wealth created by B in the process of paying back the loan. For example, if B started a business and the business sold a product to a customer in exchange for the customer’s gold-backed currency, that’s the money B would use.

“If B skips town, is A out $800?”

Again, that depends on the particulars. A bank could buy deposit insurance or sell bank assets if it wanted to eat the cost of the failed loan (assuming there is no way to cancel those redeemable notes). We could also imagine a bank that tells customers they’re on the hook if borrowers skip town, though I have a tough time imagining many customers would be interested in that arrangement.

You might be tempted to think the theft of the redeemable notes doesn’t hurt the bank because the bank didn’t lose any of the $1,000 in gold. The problem is, when B skips town and spends the notes, the person who accepted the notes has the option of redeeming them. In other words, when the notes are stolen the gold is as good as gone too (again barring some fancy note-canceling technology).

What Makes for Good Commodity Money?

So now we know the difference between commodity money and fiat money. Commodity money should be redeemable for something. But can it be redeemable for anything? We could imagine the commodity that backs a money being anything at all, but in reality certain features of commodities make them better or worse for money.

The economist Carl Menger (1840-1921) provides one of the seminal accounts on how money developed. Menger highlights how the system of barter suffers from several shortfalls including the very important double coincidence of wants (which you can read about here).

As a result of this and other issues, people in barter economies will tend to discover goods which are universally accepted. These universally accepted goods then evolve into being a medium of exchange for most transactions.

So what sorts of qualities do these medium-of-exchange goods have? I don’t claim that this is an exhaustive list, but these goods tend to be: universally enjoyed, portable, durable, divisible, fungible, and recognizable. There’s one final quality that’s hard to put into a single word. Sometimes people say “scarcity”, but I think this is a bad label because it confuses some concepts. I think there are two concepts that this gets at. First, the supply of the good should not be able to grow too quickly. Second, the good should have a high value per unit of weight/space (value density).

Let’s think of some examples to see why some commodities succeed while others fall short. Let’s take copper, for example. Copper has all the first six qualities listed above, however, copper is pretty heavy relative to its value. Copper hovers for around $4 per pound. That means if you wanted to buy a $400,000 house in a copper standard, you’re going to have to somehow transfer ownership of 100,000 pounds of copper. That’s not exactly impossible, but that doesn’t make it ideal. Not only that, the copper supply is so large it lends itself to rapid supply expansion. You’d probably need a rarer and more valuable metal to pair with copper for a working system.

Kyle mentioned a standard with a pretty similar problem to copper—a distilled water standard. Water is similar to copper in a lot of ways as it relates to our qualities. It’s universally enjoyed, portable, durable, divisible, homogeneous, and recognizable. Technically proving it’s distilled maybe makes it a little less recognizable or homogeneous, but the main problem with water (like copper) is it’s pretty cheap per pound (between $1-$4 in stores near me).

The prime rib standard is an interesting proposal because it helps us see some problems. The glaring issue is that prime rib is not very durable. Banks would have to have a lot of freezer space to support that commodity standard.

Admittedly, the list of qualities is not a perfect predictor of what flies as money. We can find historical exceptions to the qualities on the list. But it seems consistent that high-value metals like gold and silver rise to the top on average.

Ask an Economist! Do you have a question about economics? If you’ve ever been confused about economics or economic policy, from inflation to economic growth and everything in between, please send a question to professor Peter Jacobsen at pjacobsen@fee.org. Dr. Jacobsen will read through questions and yours may be selected to be answered in an article or even a FEE video.

Additional Reading:

• In Defense of Fiduciary Media by Drs. George Selgin and Larry White
• On the Origins of Money by Carl Menger

For months we tried sharing the one fridge in the house. It was not pleasant. We had to have regular negotiations about how to allocate the limited space. These negotiations were complicated by the fact that everyone had an assortment of short and tall objects they wanted to store in the fridge, and with the layout of the fridge tall space was especially scarce.

The issue got particularly pressing when multiple members of the household, each on their own schedules, would happen to do groceries on the same day. On those days, putting our food in the fridge felt like playing a game of Tetris. We eventually started shifting our diets so we would need as little fridge space as possible. Creating big containers of leftovers also became quite risky, so we had to pivot away from large meals.

Frustrated at the situation, one of my housemates finally came up with an ingenious solution: buy a mini fridge. His motives were purely selfish—he made it clear that the mini fridge would be for his food only. Yet the increased supply in the face of scarcity was a clear benefit to us all, so we eagerly approved the decision. The minor increase in our electricity bill and the reduction of space in the living room were negligible costs compared to the immense practical benefit.

Of course, once there is a little more breathing room, things lower on the priority list start to become viable contenders for fridge space (leftovers, alcohol, etc.). As such, the main fridge was still rather crowded. But with the idea of increasing supply as a solution to high demand now in our heads, we knew what to do next. A few months later, a second housemate got a mini fridge, and a few months after that a third housemate got one as well.

So yes, our house now has a main fridge and three mini fridges. I’m pleased to report that fridge space is now very plentiful. We have so much of it that we have now put everything in our fridges that we would ever want to, and we still have more space left.

Artificial Scarcity

Our household’s creative solution to our fridge-space problem got me thinking about another shortage-of-space problem: the housing crisis.

It’s no secret that housing affordability is becoming a serious issue. The median house price in the US was $417,700 in Q4 of 2023 compared to $329,000 in Q1 of 2020, a 6.8 percent increase after adjusting for inflation ($417,700 in December 2023 is $351,282 in January 2020 dollars). Rents have likewise outpaced inflation, increasing from a median of $1,600 in early 2020 to $1,964 in December 2023—a 3.2 percent increase in 2020 dollars.

And prices were already high in 2020.

Younger people in particular feel the weight of these trends. In a 2022 study by Freddie Mac, 34 percent of Gen Z adults said homeownership at any point seems out of reach financially, up from 27 percent in 2019.

How does fridge space relate to the housing crisis? Well, we simply need to recognize that fridge space is a kind of real estate, and the parallels quickly follow.

In the housing market, like the fridge-space market, real estate is scarce. There are more people who want a house than there are houses. This means there will be a lot of competition for a relatively small number of properties.

To address this problem, the resources need to be rationed in some way, that is, allocated to various individuals. In our household fridge, we rationed it by giving everyone roughly a quarter of the space. In the housing market, rationing takes place using the price mechanism, with houses for sale going to the highest bidder.

In both cases, more scarcity means more dire circumstances. If we had an additional housemate or a smaller fridge (assuming no mini fridges), fridge space would have been even tighter. Likewise, a housing market with more people or fewer houses would result in higher prices. This is the basic logic of supply and demand.

But the parallels don’t stop there.

Let’s say our landlord has a prejudice against mini fridges for some reason. Maybe he doesn’t like the way they look, or he doesn’t like them taking up space in the living room. To dissuade us from adding mini fridges, he could make an elaborate set of rules about their use. “You’re allowed mini fridges, of course. I care about you having fridge space,” he might say. “But I need to have some oversight here. The rule is, you can only put mini fridges outdoors or in your bedrooms. Also, you need to receive a permit before you add a mini fridge.”

What would this do to our household fridge economy? Clearly, it would be detrimental. While we would certainly appreciate the right to put mini fridges outdoors or in our bedrooms, those aren’t very convenient places for them. It would almost be better to go without. And the paperwork adds yet another barrier which makes us think twice before bringing in a mini fridge. If someone was on the fence about adding a mini fridge (“on the margin” in economic terms), these rules might well be the deciding factor. That is, they would decide against adding a mini fridge, even though they would have decided for a mini fridge if the rules hadn’t been in place.

While it’s true the landlord hasn’t prohibited mini fridges outright, and has even expressed his concern about limited fridge space, it’s clear that his actions are getting in the way of a solution to the fridge-space issue. Whereas the freedom to add mini fridges empowered us to deal with our scarcity problem, the restrictions mean fridge space will continue to be hard to come by. And if we had another person come live with us—if the “population” of the house grew—the scarcity would become even worse.

The analogy to housing should be obvious. When a government places restrictions on the development of new housing, such as with land-use regulations and cumbersome permitting schemes, they are making it harder to add new supply to the market. “You can’t put a mini fridge in the living room, only in your bedroom” is like saying “you can’t build housing in this conveniently located greenbelt area, only way outside of town where the inconvenience likely outweighs the benefit.” Zoning a certain neighborhood for low-density housing is like zoning the living room to only allow one mini fridge instead of three. Demanding that a laundry list of permits and licenses be acquired for new developments is like giving the housemates tons of paperwork for adding a mini fridge.

If the population of a region increases even slightly with all these supply restrictions in place, is it any wonder why housing prices get out of control? Just as more people competing for a limited amount of fridge space necessitates more stringent rationing, fiercer competition for a limited amount of housing also necessitates more stringent rationing—which translates to higher prices when we’re talking about a good on the market.

Identifying the Culprits

Note that the housing problem would be solved quite easily in the absence of government land-use regulations, just like our fridge problem was easily solved because our landlord wasn’t micromanaging how we use the space in the house. When people perceive that a resource is especially scarce, they act to increase its supply. It is only when increasing the supply is artificially restricted that scarcity remains a significant problem.

To put it another way, the problem is not so much that there is scarcity, but that the forces which would normally reduce scarcity are being interfered with.

Once we understand this, it becomes clear who the real culprits are for the housing crisis: the very politicians and bureaucrats who market themselves as the “solution” to this problem.

This is hardly a new insight. Economists and other scholars have been making this point for decades, and in recent years there has been a growing cross-ideological consensus on the matter. As the left-leaning economist Paul Krugman has said regarding zoning, “this is an issue on which you don’t have to be a conservative to believe that we have too much regulation.”

The appeal of this issue to left-leaning economists begins to make more sense when we recognize that zoning laws confer a kind of monopolistic privilege on certain landowners. Edward Facey cites a penetrating book review making this point.

If several real estate developers agreed together to restrict the number of apartment buildings in a community so as to give themselves a monopoly advantage, the public would be scandalized. But if these same developers were to go to the local zoning board and suggest that good urban planning, protection of property values, (whose? theirs?) and preservation of the existing pattern of community life called for such restrictions, then this would be civic responsibility of a high order and applauded by all right-thinking people. This is because we persist in thinking that monopoly is bad but zoning is good. Tunnel vision like this keeps us from seeing zoning for what it is—an agency of monopoly and government granted private advantage.

Landlords are often vilified for high rents. But the people who really deserve the blame are those who advocate for stringent zoning laws, greenbelts, permits, and the like. Of course, sometimes those advocates are landlords, especially since homeowners are the main beneficiaries of restrictionist land use policies. But it’s important to conceptually distinguish landlords qua landlords from those lobbying for housing restrictions.

The true villains in this story are not the people bringing more supply to a market characterized by artificial scarcity. It’s the people imposing that artificial scarcity in the first place who need to answer for the crisis they’ve created.

About the Author

Patrick Carroll is the Managing Editor at the Foundation for Economic Education.

“If a creator’s off-platform behavior harms our users, employees or ecosystem, we take action to protect the community,” YouTube said in a statement.

Mr. Brand, a former self-confessed sex addict, was accused of sexual and emotional abuse that allegedly took place several years ago by four women in an investigation by the Times of London, The Sunday Times, and Channel 4 “Dispatches.”

The 48-year-old actor denied the charges in a video he shared with his 6.6 million YouTube followers over the weekend.

“These allegations pertain to the time when I was working in the mainstream, when I was in the newspapers all the time, when I was in the movies. And as I’ve written about extensively in my books, I was very, very promiscuous,” Mr. Brand said. “Now, during that time of promiscuity, the relationships I had were absolutely always consensual.”

A day after the allegations were reported, police in the UK said they had received a report of a sexual assault allegedly involving Mr. Brand in September 2003.

The Rise of Financial Deplatforming

The accusations against Mr. Brand are serious, and could eventually lead to criminal charges, both in the United States and the UK. But at this point, they’re just that: accusations. This is one of the problems with #MeToo trials in the court of public opinion. The accused are presumed guilty and prematurely punished.

Consider another celebrity who famously found himself accused: Johnny Depp. In 2018, the “Pirates of the Caribbean” star was summarily dropped by Disney following accusations of domestic violence made by his ex-wife, Amber Heard. It didn’t matter that Mr. Depp said the allegations were untrue, or that he had served without incident for more than a decade as the lead actor in a franchise that had generated more than $3 billion for Disney.

Though nearly ruined, Mr. Depp would go on to win a defamation suit against Ms. Heard, receiving a multi-million-dollar settlement. (The actor appears to have taken Disney’s betrayal personally, evidenced by his decision to not return to the popular “Pirates of the Caribbean” franchise.)

YouTube and Disney, of course, have the right to associate with whomever they choose, but taking actions that destroy people’s livelihoods on mere accusations is a serious business, one that creates a dangerous incentive.

In her new book You Will Own Nothing, the bestselling author Carol Roth writes of a new financial world that’s emerging in which governments and corporations increasingly decide what behaviors are good and what behaviors are bad.

While the First Amendment prohibits the government from taking criminal actions against people for sharing “bad” opinions, the government can encourage corporations to take direct actions against citizens that inflict serious social and—more importantly—financial harm.

YouTube demonetization, which is relatively common, is just one example. Bank account deplatforming, a method that’s increasingly common in the United States and Canada, is another.

“Financial deplatforming, or banking censorship, will be a common lever governments and companies reach for when it comes to censorship of political opinions,” said Annelise Butler in a 2022 Heritage Foundation article.

Ms. Butler said companies acquiescing to government requests to demonetize and censor users are “mirroring those of China’s social credit system.”

Interestingly Ms. Roth makes the same comparison in “You Will Own Nothing,” adding that she would have laughed off such a thing 10 years ago.

“Given that we are so close to social credit, with the social acceptance of moral judgment outside the legal system and the technical means to collect and analyze information at scale, the Chinese system provides a frightening road map,” Ms. Roth wrote.

This is what makes the government’s incestuous relationship with Big Tech and other companies so dangerous. Government officials can lean on companies to coerce them to punish dissent and Wrongthink, something it has done with great enthusiasm.

None of this is to say Russell Brand is guilty or innocent of the accusations against him, of course. We don’t know.

What we do know is that during the pandemic, Mr. Brand emerged as one of the leading voices against the government’s COVID regime, and he later became one of the most outspoken anti-war voices on YouTube. (We also know the FBI has a long history of using sexual indiscretions to control and silence powerful people.)

Protecting Its Own Interests

There’s no evidence that Mr. Brand, who managed to survive the 2017 #MeToo movement with his reputation intact despite his promiscuous history, became a target for his outspoken views. But the Twitter Files revealed that both the White House and federal agencies spent considerable effort and resources attempting to influence social media companies to shape public opinion and silence critics of government policies.

In some cases, individual influencers were targeted, including independent journalist Alex Berenson, who is suing President Joe Biden and Pfizer executives who, according to his lawsuit (pdf), “specifically targeted Mr. Berenson for removal. The conspirators did not simply ask Twitter to remove a specific post Mr. Berenson made. Rather they pushed Twitter to ban him entirely, an unconstitutional prior restraint on his speech.”

This shows the great lengths the state will go to to punish those who threaten their agendas, something the economist Murray Rothbard once observed, noting that the state inherently is an institution “largely interested in protecting itself rather than its subjects.”

All of this is made possible by the state’s expanding influence over Big Tech and the centralization of the global financial system.

Mr. Brand’s case shows that mere accusations are all it takes to leave someone suddenly demonetized.

“This is the informal social credit system that I talked about in ‘You Will Own Nothing’, coming after your sources of income at their discretion,” Ms. Roth wrote on X following Mr. Brand’s demonetization. “You are not ‘innocent until proven guilty’ in the big tech sphere or the court of public opinion.”

What few seem to realize is that this is likely a feature of the emerging financial order, not a bug.

About the Author

Jonathan Miltimore is the Editor at Large of FEE.org at the Foundation for Economic Education.

Not only do prices inform consumers about scarcity, they also influence consumption habits. Consumers defer their consumption when they perceive goods to be “too expensive.” They subjectively value the money they would have to spend more highly than the goods themselves. All this seems obvious, yet most people do not realize its implications.

Participants in the market convey their evolving preferences and conditions to one another by either making purchases or abstaining from buying at specific price points. Prices thus serve as a mechanism for coordinating the allocation and use of resources across a market. By accurately reflecting the relative scarcity of resources, they incentivize producers and consumers to use resources more efficiently.

In a capitalist system, prices are signals to entrepreneurs and consumers, determined by supply and demand. High prices due to resource scarcity restrict consumption and encourage savings and investment.

As its name suggests, capitalism is primarily about accumulating capital and capital growth. Notably, one cannot achieve this by consuming wealth. To the contrary, it is forgoing consumption that allows one to save and invest and thus accumulate capital.

So, if capitalism systematically discourages consumption, what causes consumerism? First, I should highlight that consumerism is a cultural attribute, distinct from the economic system in place. A capitalist society is free to be as consumerist or non-consumerist as the individuals living under it wish to be. Likewise, nothing necessarily prevents a communist society from being consumerist. People under communism are under the whims of the central planners, and one should not assume that could never lead to a consumerist society. At least capitalism does not rob the choice of the people!

Interestingly, the people who criticize capitalism for promoting consumerism tend to be the ones who argue consumption “drives the economy.” So, they are literally the ones arguing for more consumption. I am referring to the Keynesian, and unfortunately, all too popular argument that “consumption is the key to a healthy economy.” In reality, production precedes consumption and is thus responsible for driving the economy and creating wealth.

In 2010, as mainstream economists chastised the rich for not spending enough, Lew Rockwell succinctly summed up this point:

“The trouble is that spending is not the cause of economic growth. Investment, which begins in saving, is the root of economic growth. It doesn’t matter that consumption makes up a certain percentage of economic activity. That’s only the surface you are looking at. Spending and consumption without saving and investment is a prescription for devouring the prospects for prosperity down the line. In this case, the best thing that the rich can do for a future of economic growth is not to spend but to save toward investment.”

One reason for the existence of a consumerist society could be simply that its people like to buy material things as it gives them a sense of comfort or pride. A lack of financial literacy likely contributes to their materialist tendencies. However, governments can contribute to this trend by weakening the market-based reliable signals previously mentioned.

To “boost” economic activity, for instance, the government artificially lowers interest rates that guide consumers on whether to save or spend. High interest rates lead to less discounting of the future and more savings, while low rates promote immediate consumption of goods. To induce consumer spending in the short run, the government disrupts this equilibrium by forcing down interest rates. That leads to unsustainable consumer spending due to the distortion of these vital price signals.

Ironically, behavior induced by government intervention gets labeled as “consumerism,” yet the blame often erroneously falls on capitalism and free markets.

This article was originally published on FEE.org. Read the original article.

The first part of Sagan’s warning touched on humanity’s growing ignorance of science, which Sagan attributed largely to the failure of modern schools. Sagan saw this as a clear danger to humanity, especially in a society built on science and technology.

The second part of Sagan’s warning was even more profound. The University of Chicago-trained astrophysicist pointed out that science is not simply “a body of knowledge, it’s a way of thinking,” one based on skepticism and questioning. It was imperative, he said, not just that people be educated in the sciences and grounded in healthy skepticism, but that people be allowed to question and challenge those in authority.

“If we are not able to ask skeptical questions to interrogate those who tell us something is true to be skeptical of those in authority, then we’re up for grabs for the next charlatan—political or religious—who comes ambling along.

…It’s a thing that Jefferson lay great stress on. It wasn’t enough, he said, to enshrine some rights in the Constitution and the Bill or Rights, the people had to be educated and they have to practice their skepticism and their education. Otherwise, we don’t run the government, the government runs us.”

Covid and the Corruption of Science

Sagan’s warning was eerily prophetic. For the last three-plus years, we’ve witnessed a troubling rise of authoritarianism masquerading as science, which has resulted in a collapse in trust of public health.

This collapse has been part of a broader and more partisan shift in Americans who say they have “a high degree of confidence in the scientific community.” Democrats, who had long had less confidence in the scientific community, are now far less skeptical. Republicans, who historically had much higher levels of trust in the scientific community, have experienced a collapse in trust in the scientific community.

John Burn-Murdoch, a data reporter at The Financial Times who shared the data in question on Twitter, said Republicans are now “essentially the anti-science party.”

First, this is a sloppy inference from a journalist. Burn-Murdoch’s poll isn’t asking respondents if they trust science. It’s asking if they trust the scientific community. There’s an enormous difference between the two, and the fact that a journalist doesn’t understand the difference between “confidence in science” and “confidence in the scientific community” is a little frightening.

Second, as Dr. Vinay Prasad pointed out, no party has a monopoly on science; but it’s clear that many of the policies the “pro science” party were advocating the last three years were not rooted in science.

“The ‘pro science’ party was pro school closure, masking a 26 month old child with a cloth mask, and mandating an mrna booster in a healthy college man who had COVID already,” tweeted Prasad, a physician at the University of California, San Francisco.

Today we can admit such policies were flawed, non-sensical or both, as were so many of the mitigations that were taken and mandated during the Covid-19 pandemic. But many forget that during the pandemic it was verboten to even question such policies.

People were banned, suspended, and censored by social media platforms at the behest of federal agencies. “The Science” had become a set of dogmas that could not be questioned. No less an authority than Dr. Fauci said that criticizing his policies was akin to “criticizing science, because I represent science.”

This could not be more wrong. Science can help us understand the natural world, but there are no “oughts” in science, the economist Ludwig von Mises pointed out, echoing the argument of philosopher David Hume.

“Science is competent to establish what is,” Mises wrote. “[Science] can never dictate what ought to be and what ends people should aim at.”

Even more importantly, however, to shut down discussion and censor political opponents is the antithesis of the spirit of science, which has experienced major breakthroughs only by challenging and tearing down previously accepted scientific assumptions and orthodoxies.

Carl Sagan understood this, which is why he said it was so important to “ask skeptical questions” and “to be skeptical of those in authority.”

If we fail to do this, or if we are not allowed to do this, Sagan warned what will happen: we will no longer be running the government; the government will be running us.

This article originally appeared on the author’s Substack.

This article was originally published on FEE.org. Read the original article.

In a previous article for FEE, I highlighted how student loan forgiveness has already been happening and started under president Trump due to the freeze on interest accumulation. Although this may not be as visible as a $10,000 lower balance, frozen interest means the real cost of taking a loan out became smaller than the initial terms suggested.

This highlights a simple truth about student loan forgiveness—the Biden administration has already and can continue to forgive student loans in spite of this ruling. In fact, they already have plans to do so.

Almost immediately after the Supreme Court decision was announced, the Biden administration announced their response.

Perhaps the most important announcement by the Department of Education was the introduction of a new student loan repayment plan—the SAVE plan.

The SAVE plan is a modification of the current REPAYE plan. Both of these plans are considered income-driven-repayment (IDR) plans.

IDR plans are complicated, but essentially they limit the size of a borrowers monthly payment based on income. The payment calculations depend on the borrower’s income relative to the poverty line.

Under the new guidelines by the Department of Education, someone making 225% of he federal poverty rate will now have their income completely protected from payments according to Fox Business. That means borrowers earning $32,805 or a family of four with income of $67,500 will be required to make payments of $0.

Even borrowers who make more than those amounts who qualify for a SAVE plan will see lower payments.

But wait, won’t low or zero dollar payments mean the interest on these loans will grow out of control? Nope. The administration is capping interest rates to make sure loan balances don’t grow. So how much do we expect someone to pay on a student loan with a required payment of $0 and no interest accumulation? It’s not hard to see that this is just shadow forgiveness.

It doesn’t end here either. IDR plans already offered loan forgiveness to borrowers who made payments for 20-25 years. So borrowers who have a small payment under Biden’s new SAVE plan will see their balances disappear eventually based on already existing rules.

So, if a borrower qualifies for a $100 monthly payment, and they pay that over 20 years, that’s a total repayment of $24,000 (not even including the fact that the present value is lower). So if someone has a $50,000 student loan, that means they got forgiveness of $26,000. That dwarfs Biden’s $10,000 forgiveness promise struck down by courts.

Not only that, borrowers can get even more forgiveness if they take jobs in the government or non-profits. The Public Service Loan Forgiveness (PSLF) program grants forgiveness after just 10 years of payments to those who work for qualifying public and non-profit jobs. Using the previous example, that would increase forgiveness to $38,000 of the $50,000

The Cost of Our Student Loan System

It would be nice if the cost of this convoluted shadow forgiveness program was limited to the dollar value of the forgiveness (which ultimately is borne by taxpayers). But that isn’t the full cost.

Perhaps an even worse aspect of this system, is it distorts the incentives of future generations in making career decisions. The current system, exacerbated by the Biden Administration’s new plans encourages and rewards those who take out massive student loans to pursue jobs which consumers do not value highly.

Even more damaging, the new repayment program exacerbates the use of PSLF which encourages workers to avoid value creating private sector jobs, and, instead, pursue wealth-extracting public sector jobs.

What world-improving things would have been created had individuals been left to become educated at their own expense? Those forgone benefits will go largely unseen a la Bastiat.

On the other hand, many will experience direct benefits from these programs which are very visible, making the programs very hard to end.

So while some have celebrated the Supreme Court decision as defeating loan forgiveness once and for all, I’m not nearly so optimistic. So long as the Department of Education has administrative control over the country’s student loan system, loan forgiveness is just a few bureaucratic tweaks away.

At this point, the only way the Supreme Court would be able to do anything about it is if they declared the Department of Education itself unconstitutional. But I doubt this will ever happen. Unfortunately, the administrative state seems to always be forgiven.

About the Author

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education at George Mason University.

Article cross-posted from FEE. Image Credit: Gage Skidmore via Wikimedia|CC BY SA 2.0

As most people already know, the world’s most popular light lager has seen a collapse in sales following a boycott prompted by a March Madness ad campaign featuring transgender influencer Dylan Mulvaney. The Journal’s chart depicting the fall in Bud Light sales speaks for itself, and the company’s delayed and tepid response to the uproar only seemed to make matters worse.

WSJ chart showing Bud Light's collapse after celebrating "day 365 of girlhood."https://t.co/2IcoNG8uQT pic.twitter.com/rdETbA0Bnl

— Phil Kerpen (@kerpen) May 22, 2023

This isn’t Anheuser-Busch’s first foray into controversial social issues.

The Journal’s Jennifer Maloney points out that the company has been engaging in social equity-themed advertising for years, including a 2021 Michelob Ultra ad featuring transgender track star Cecé Telfer and a 2022 Bud Light Canada campaign for Pride Month displaying various pronouns .

What Maloney fails to mention in her article is why beer companies — not just Bud Light — are suddenly courting controversial social issues such as nonbinary gender, transgenderism, and third-wave feminism.

The answer is simple: The rise of environmental, social, and corporate governance as the dominant strain of “stakeholder capitalism” has incentivized corporations to curry favor with ESG rating firms , even if it means alienating their consumers.

Unlike traditional capitalism, which seeks to maximize profits by serving consumers, the ESG model seeks to “improve” capitalism by considering other stakeholders besides investors and consumers. Publicly traded corporations are graded on how well they achieve socially desirable metrics, such as combating climate change, advancing diversity and inclusion, and creating a more “equitable” society.

What was intended to be a kinder, gentler form of capitalism has morphed into a kind of economic fascism that places the arbitrary interests of a small cabal of people — asset managers, bureaucrats, global financiers — ahead of consumers.

As the Austrian economist Ludwig von Mises pointed out , consumers are the true bosses in a capitalist system. They ultimately decide what products are created and purchased, who becomes wealthy, and who becomes poor.

As the Bud Light fiasco shows, ESG places consumers in the back seat. The social equity campaigns are not designed to appeal to Bud Light consumers, but to the ESG rating agencies, which have the power to downgrade companies that fail to dance to their tune.

This is a great deal for the ESG puppeteers. They can make multi-billion corporations move by the mere threat of a bad score, which gives them immense economic and political power.

Elon Musk found this out when Tesla was kicked off the S&P 500 ESG Index in May 2022, even though Tesla is an icon of sustainability. By January, Tesla’s stock, which had been trading at $248 a share, had fallen by roughly 55%.

To what extent Tesla’s collapse in share price stemmed from the company getting booted from the index is unclear, but the point is mostly moot. What matters is the threat of being singled out for an ESG transgression.

What few people seem to realize is that Bud Light’s collapse in sales is not just a threat to Anheuser-Busch. It’s a threat to the entire ESG model.

Up until this point, ESG has thrived because the perceived costs of not participating outweighed the costs of participating. Bud Light’s implosion stands to change that perception, which is precisely why the ESG overlords are striking back.

On Friday, USA Today published a leaked letter showing the Human Rights Campaign had informed Anheuser-Busch “that it has suspended its Corporate Equality Index score — a tool that scores companies on their policies for lesbian, gay, bisexual, transgender, and queer employees.”

“Anheuser-Busch had a key moment to really stand up and demonstrate the importance of their values of diversity, equity, and inclusion and their response really fell short,” said Eric Bloem, HRC’s senior director.

One can almost feel bad for Bud Light. The brand is caught in the middle of a larger war being fought by global anti-capitalists and the bosses of capitalism: consumers. Publicly traded companies should be allowed to go back to serving their real bosses — consumers — which is why the rotten ESG model should be dismantled.

This article was originally published on FEE.org. Read the original article.

“Hold my beer, Budweiser! Miller Lite’s new feminist spokeswoman is here to cuss at you and explain why men are evil,” wrote Not the Bee.

“Miller Lite apparently wants the Bud Light boycott treatment too,” said Rogan O’Handley, a Hollywood lawyer turned conservative commentator and supporter of former President Donald Trump. “Newsflash: After a hard day’s work, working-class beer drinkers don’t want to be lectured like they’re in a gender studies class at SUNY-Oswego.”

The ad features Ilana Glazer, a comedian who claimed women were the first brewers in history but were betrayed by corporate America.

“From Mesopotamia to the Middle Ages to colonial America, women were the ones doing the brewing,” Glazer said. “Centuries later, how did the industry pay homage to the founding mothers of beer? They put us in bikinis.”

To make amends, Miller Lite is buying up vintage ad art featuring women in swimwear, which it will turn into compost to support female brewers. “That good s*** helps farmers grow quality hops,” one woman explains.

Many accused Miller Lite of following the “woke” path of Bud Light, which witnessed a collapse in sales following a March Madness ad campaign featuring transgender influencer Dylan Mulvaney that prompted Anheuser-Busch to issue an apology .

“We never intended to be part of a discussion that divides people,” wrote CEO Brendan Whitworth.

What many on social media failed to realize is that Miller Lite’s ad was released before Bud Light’s implosion. It had just received little attention. It’s not clear if Miller Lite’s ad will have the same effect on beer sales as Bud Light’s. Some commentators on Twitter said they appreciated the ad.

“I actually think that Miller Lite got it a lot more right than Bud Lite in how it approached a female demo,” wrote Emily Zanotti of Fox News.

That’s the nature of commercials, of course. They are subjective. What might make one person feel uncomfortable might appeal to someone else.

I’m apparently a Neanderthal who likes the old-school Miller Lite commercials, whether they feature women in bikinis or Bob Uecker masquerading as Rodney Dangerfield at a costume party. I don’t like feeling lectured. That’s just me.

People naturally have different preferences and tastes in commercials, and that’s OK. The thing is, I’m actually Miller Lite’s target demo: a 40-something male beer drinker.

This invites questions. Why are Bud Light and Miller Lite making commercials that alienate their own consumer base? More importantly, why are they wading into controversial matters such as transgenderism, third-wave feminism, and nonbinary gender at all?

The primary answer is the rise of environmental, social, and corporate governance, a term coined during a 2004 United Nations initiative (“ Who Cares Wins ”) that grades companies on social performance.

ESG was born from the idea that traditional capitalism needs to be replaced with a more caring, socially conscious capitalism that serves other “stakeholders.” And what started as “guidelines and recommendations” have become explicit standards set by ESG rating agencies that impose steep costs on publicly traded companies, especially those that don’t comply.

The thing is, companies are not jazzed about having to dance to the tune of a small cabal of central bankers and asset managers. A 2022 CNBC survey showed that while executives support ESG publicly, privately, they harbor serious concerns. Yet not playing ball is not an option.

“If a company has to do disclosures, and it has some executives who are ‘not into ESG,’ it should be thinking about the cost of not becoming more concerned,” Eileen Murray, a former executive of Bridgewater Associates, the largest hedge fund in the world, told CNBC .

Miller Lite and Bud Light drinkers have every right to be annoyed by ads they don’t like. But they should understand these publicly traded companies are playing a balancing act on who they risk alienating, their consumers or ESG puppeteers.

This article was republished with permission from the Washington Examiner.

This article was originally published on FEE.org. Read the original article.

The failure of SVB is the second-largest bank failure in U.S. history, behind only the failure Washington Mutual in September 2008. So, are the failures of SVB and Signature only isolated problems without systemic contagion, or do they represent the proverbial canary in the coal mine, warning of greater systemic troubles ahead? Here is a summary of the causes behind the failures of both banks, the response by the federal banking regulators, and the potential consequences.

Impact of Federal Reserve Policies

The Fed’s policy of artificially low interest rates and massive purchases of U.S. government debt since 2008, especially since 2020, has encouraged banks and businesses to engage in speculative activities that have not been driven by true market forces. This macro-financial environment can lull banks into a false sense of acceptable market and interest-rate risk.

With interest rates near zero from March 2020 to March 2022, along with an extraordinary 41 percent increase in the M2 money supply during that time period, the Consumer Price Index (CPI) reached a 41-year high in 2022. This prompted the Fed to abruptly change course in March 2022 with rapid increases in its Fed Funds Rate from 0.25 percent to 4.75 percent in February 2023. Such a swift increase in interest rates over the past year would require banks to adjust their asset-liability management to protect against interest-rate duration mismatches between assets and liabilities, known in banking terms as “duration risk.”

In the case of SVB, it was guilty of gross mismanagement of its duration risk over the past year, as it reported an abnormally high 41 percent of its total assets in Held-to-Maturity (HTM) securities, amounting to $91 billion at the end of 2022. These HTM securities, while mostly long-term U.S. government securities with little or no credit risk, had substantial duration risk in a rising-interest-rate environment, as fixed-rate securities fall in price when interest rates rise. This is how SVB got hammered, as it was forced to sell its HTM securities at big losses to cover the run-on-cash withdrawals by its deposit customers in the days leading up to its closure.

Flawed Regulatory Ratios for Assessing Bank Capital

Thomas Hoenig, a former head of the Federal Reserve Bank of Kansas City and former vice chair of the Federal Deposit Insurance Corporation (FDIC), made insightful comments in a March 17 article in the Wall Street Journal. He said that the use of the government-derived “risk-weighted capital” in evaluating a bank’s capital position is a major problem because it does not describe real, tangible capital. In the case of SVB, Hoenig notes in a March 10 article that SVB’s regulatory risk-rated “Tier 1 Capital Ratio” was around 16 percent, a presumably safe capital position, but the more market-realistic “Tangible Capital-to-Asset Ratio” was only around 5 percent. Hoenig is concerned that the use of risk-weighted capital ratios, adopted by bank regulators around the world in 2014, will lead to more problems in the banking sector. Hoenig makes this point in his Wall Street Journal article.

“The other thing about risk weight,” Hoenig said, “is that it’s a political process. It’s not a market process. The market no longer determines capital in the banking, industry. It’s now politicians, lobbyists and the regulators who have to battle it out among themselves. Therefore, you get these nonmarket solutions like risk-weighted capital. And banks are incentivized to increasingly leverage their balance sheets.”

Questionable Bank Regulator Oversight

The deposit runs that occurred with both SVB and Signature Bank raise serious questions about the competence and/or possibly even the corrupt complicity of the regulators with oversight responsibility for the two banks. While the management of the two banks appropriately deserve blame for their failures, the relevant bank regulators also need to be held accountable for missing obvious regulatory red flags from such large banks well in advance of their failures.

In addition to the asset-liability duration mismatch at both banks, other red flags included abnormally high growth rates and concentrations in risky business sectors (green energy technology startups at SVB and crypto exposures at Signature) and extraordinarily high amounts of uninsured deposits.

Looking at data for the end of 2022, SVB had only 12.5 percent of its total deposits within the FDIC-insured limit of $250,000 per deposit account, which indicates that a whopping $151.5 billion of its total deposits of $173.1 billion were uninsured. A similar situation existed at Signature Bank, with only 10.3 percent of its total deposits of $88.6 billion under FDIC deposit insurance, indicating $79.5 billion in uninsured deposits. Thus, the combined uninsured deposits of both failed banks amounted to $231 billion, which should have alerted the banking regulators of duration risk and potential liquidity risk.

It is unclear at this point how these regulatory red flags were missed by the relevant regulators. The primary financial regulators for SVB and Signature Bank were their respective district Federal Reserve banks, i.e. the Federal Reserve Bank of San Francisco (SF Fed) for SVB and the Federal Reserve Bank of New York (NY Fed) for Signature. The FDIC was also involved in its traditional role as regulatory supervisor over the banks’ deposit insurance. The state banking regulators in California and New York also conduct bank examinations.

Because of the unexpected large-scale deposit run on Silicon Valley Bank that resulted in its failure, Federal Reserve Chair Jerome Powell announced on March 13 that the Fed’s vice chair for supervision, Michael Barr, would lead a six-week review of the Fed’s regulatory supervision surrounding SVB. The Fed has committed to releasing Barr’s report by May 1.

Concerning Reactions by Federal Banking Regulators

The response to the failures of SVB and Signature Bank, and more recently to the troubled First Republic Bank, is extremely concerning for several reasons.

• Bailout of Uninsured Deposits: The decision of federal regulators (the U.S. Treasury, the Federal Reserve, and the FDIC) to guarantee funds for all depositors of both failed banks makes a mockery of the FDIC’s $250,000 deposit-insurance limit and signals a new acceptance by the federal regulators to bail out all depositors in any bank failure. This effectively means that the FDIC will now be expected to cover all of the deposits in the U.S. banking system.

At the end of 2022, the FDIC’s Deposit Insurance Fund (“DIF”) was $128 billion in comparison to the $17.7 trillion in total bank deposits in the entire U.S. banking system. The total deposits of SVB alone ($173 billion on Dec. 31, 2022) are enough to wipe out the entire balance of the DIF. So, how will deposits in excess of the Deposit Insurance Fund be funded? On March 12, a joint statement by U.S. Treasury Department, the Federal Reserve, and the FDIC announced that any losses to the DIF would be recovered by a “special assessment on banks.” Such a special assessment means that the entire U.S. banking system will need to raise fees and/or charge higher interest rates on its customers in order to cover the cost of the newly mandated special assessment to cover the mismanagement of failed banks.

• Creation of a New Emergency Lending Program for Banks: On March 12, the Federal Reserve announced the creation of a new emergency lending program for banks, the “Bank Term Funding Program” or “BTFP.” This new program will allow banks to obtain cash from the Fed’s discount window with one-year term loans backed by collateral comprising U.S. government securities. In addition to providing yet more government support to the banking system, the BTFP also allows banks to pledge their collateral at par. This is another misguided Fed policy action, as it allows banks to offload securities with below-par market values onto the Fed at par value. This will not only encourage less prudent risk management by banks, but will also likely result in further expansion of the Fed’s already massive $8.6 trillion balance sheet.

Within the first three days of its start, banks had already borrowed $11.9 billion from the new BTFP. For the week ending March 17, banks had borrowed another $148.2 billion from the Fed’s 90-day discount window, the largest weekly amount since September 2008.

• Inability to Sell the Failed Banks: Typically, the FDIC will have a buyer lined up ahead of the closing of a failed bank, typically another bank in good standing, but, as of Monday, the assets of neither bank have been sold. The market rumors indicate that the FDIC has, in fact, received several expressions of interest from legitimate institutional buyers, but they have been rejected by the FDIC Board. It is unclear why the FDIC has been rejecting interest from apparently legitimate buyers. Some market observers have speculated that it is due to the political ideology of the current FDIC Board, as it opposes mergers or acquisitions that lead to larger banks.
• Evidence of Political Corruption: When the FDIC initially announced the closure of SVB on March 10, it stated that uninsured depositors would not be covered in accordance with standard FDIC practice. However, just two days later on March 12, the FDIC did a complete reversal, stating that all uninsured depositors would be covered. The federal regulators justified taking this abrupt action by calling it a “systemic risk exception,” despite neither SVB nor Signature Bank having been designated as systemically important banks by the Federal Reserve.

This has led to scrutiny over the profile of the uninsured depositors at both banks and is revealing some noteworthy political connections. For example, the Intercept reported that Democratic California Gov. Gavin Newsom has been a client of SVB for many years and is associated with at least five bank accounts at SVB, including the accounts of three winery companies he owns. As for Signature Bank, it could not be more ironic that former Rep. Barney Frank (D-MA), coauthor of the largest banking reform bill in history, the Dodd-Frank Act of 2010, has been serving on the board of directors of Signature since 2015 and has earned compensation of over $2.4 million. Multiple media reports indicate that both SVB and Signature have been heavy donors to the Democrat Party and that uninsured depositors at both banks include other high-profile names that have been big donors to Democrats. Thus, evidence of possible political corruption behind the uninsured depositor bailouts of both banks needs to be thoroughly investigated (but don’t hold your breath).

Consequential Impact on Moral Hazard

The unprecedented bailout of $231 billion in uninsured deposits at two large regional banks, plus a new Federal Reserve emergency bank lending program with weak collateral requirements, will lead to yet more moral hazard in an American financial system already accustomed to being bailed out by the federal government. It also throws out the much-heralded objective of the 2010 Dodd-Frank Act to eliminate “Too Big To Fail” government bailouts in the U.S. financial system.

Contagion Outlook

It remains to be seen whether the failures of SVB and Signature will result in any significant financial contagion into other banks and financial institutions. However, the two failures clearly affected New Republic Bank, which subsequently suffered $70 billion in deposit withdrawals. This triggered the collaboration of 11 of the largest U.S. commercial banks to transfer $30 billion in deposits to New Republic to save it from the same bank-run failure that SVB and Signature experienced. An important banking sector metric of concern is the explosive growth in unrealized losses in 2022. At the end of 2022, the U.S. banking sector held $620 billion in unrealized losses. This may indicate that more turmoil lies ahead for the U.S. banking sector. Stay tuned.

This article originally appeared on the American Spectator.

This article was originally published on FEE.org. Read the original article.