In a monetary production economy, when the commercial banking system goes crazy, the worst thing that can happen is that nothing is produced and everyone starves ... since in a monetary production economy, money is the institution that is used by going concerns to claim control of productive resources in advance in order for production to proceed, and banks are responsible for the creation of the majority of the money supply.

Indeed, while the farming sector was already in trouble in 1930, the bank collapses of 1930, 1931 and 1932 certainly made that worse.

Which is why the major reform of the First New Deal that stands with the multiple reforms of the Second New Deal is Glass-Steagall, which did not allow commercial banking to play with the dangerous part of FIRE. The very same FIREwalls that the commercial banking system has been engaged in tearing down ever since.

If Glass-Steagall does not work over the long term in a financial-market dominated system, because of the ongoing efforts of commercial banks to act as middlemen for the financial markets, that seems to imply that a financial-market dominated system itself is untenable.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.