Krugman: If Banks Are Outlawed, Only Outlaws Will Have Banks

[ProSense]

If Banks Are Outlawed, Only Outlaws Will Have Banks

Yglesias tells us that some Occupy Wall Street protesters have picked up Ron Paulish monetary ideas — although some know better. I thought I’d say a word about one particular idea that sounds plausible to some people but is actually quite wrong: banning fractional reserve banking.

I know that’s a popular theme among some Austrians. But it’s actually neither a good idea nor even feasible.

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First of all, you would be trying to ban a genuinely productive activity. Dick Fuld banking may have been a bad thing, but Jimmy Stewart banking was very much a useful profession.

Second, you would run smack into the problem of defining what constitutes a bank.

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[GeorgeGist]

1. Without capitalism ...

his argument falls apart. Just saying.

[ProSense]

2. No

"Without capitalism ... his argument falls apart. Just saying."

...I don't think it does. After all, even if the banks were nationalized they would still be banks and wouldn't run into the problem of "defining what constitutes a bank."

Also, are you saying that if the banks were nationalized, the government would be considered an "outlaw"?