The Creature from Jekyll Island
G. Edward Griffin’s The Creature From Jekyll Island: A Second Look At The Federal Reserve will profoundly change the way you view the entire banking and monetary system in the US and abroad. It is a fascinating read.
The title refers to the creation of the US Federal Reserve Bank, which took place at a then-secret meeting in 1910 (later confirmed by the participants), at a resort on Jekyll Island, just off the coast of Georgia.
Most of us grew up thinking of the Federal Reserve as a quasi-government organization that helps stabilize our money supply. How it does that is often a bit of a mystery, although it involves interest rates, and possibly reserve requirements. And it isn’t always clear what the relationship is between the Federal Reserve and the US government.
Posted in Uncategorized | No commentsFDIC Insurance Premiums and Moral Hazard
One of the challenges the insurance industry faces is “Moral Hazard.”
Moral hazard is a the observed phenomenon whereby, because something is insured, it becomes more likely to occur. If a bad event (e.g. breakage or theft) will cost a certain amount, then if that event is insured, it will cost a bit less. This makes the bad event less bad–which is the point of insurance. Unfortunately, it also means that the insured person will not work quite as hard to prevent the bad event from happening, or, in extreme cases, may even cause the bad event to occur.
A silly illustration: if a grocery store could somehow insure every dozen eggs for $1000 against breakage, “Moral Hazard” is the insurance industry’s way of recognizing that there would somehow be a lot of broken eggs.
Posted in Uncategorized | 1 commentHome Ownership vs. Interest and Savings Rates
A friend recently sent me a link to this chart. I think the implied correlation of interest rates to home ownership is questionable. On the other hand, it’s pretty clear that the savings rate and the interest rate are highly correlated.
