I guess the point here is that we are trying to isolate the part of the banking system that must exist for society, as currently configured, to function. And we want that group to be as small as possible, because we want to build a very tall was with a very deep moat, with sea mines and electrified barbed wire around that group of activities. And all else being equal, that's easier with a smaller number of activities.

So I guess what we should be asking is "if this service crashes and burns, and it takes - say - two years to rebuild it, will society survive the transition?" For payment clearing, the answer is clearly "no." For building factories, the answer is clearly "yes. It won't be pleasant, but we'll survive." So project finance goes outside our airlock.

(Although I'm all in favour of building walls between project finance, insurance, real estate and so on and so forth. But they aren't absolutely need-to-have must-be-bailed-out-in-the-event-of-catastrophe parts of the banking system, so I can live with the compartmentalisation being less than completely airtight.)

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.