You are proposing something different — that the FDIC insure bank assets without zeroing out capital and bondholders first. This is completely at odds with the purpose of the FDIC, which is to protect depositors, not bank capital or bank debt.

These all need to be in a first loss position, before any FDIC funds are deployed. The risk is that the algorithms and VAR models are incorrect — by bearing this risk, banks are entitled to pay dividends and give out bonuses, etc. You cannot allow banks to mint money by guaranteeing their assets and making sure that banks cannot lose money by using a certain algorithm.

so far the rise in the price of gold has been a shift in relative value, and not ‘inflation’

it does reflect views of those who believe inflation is coming, but that’s another story

and functionally it is the ‘bad bank’ in the case of a member bank failure as it takes over that bank and one way or another liquidates it, etc.

The central bank was doing everything it could to provide liquidity to the economy including by keeping interest rates very low, he said.

“When demand itself is weak, prices won’t rise just through liquidity provision,” Mr. Shirakawa said.

AGREED!!! QE DOES NOTHING CONSTRUCTIVE FOR DEMAND

also in the ‘literature’ I point out the lack of focus on distribution of consumption vs distribution of issue, which I suggest
is of more consequence

1. an employed bufferstock is a far superior price anchor/more liquid than an unemployed buffer stock.

2. the private sector, with increased demand, hires from the ‘top down’ while govt hires from the ‘bottom up’ to full its ‘presumed desire ‘ of employing those it removed from the private sector with its tax liabilities.

take another look at ‘full employment and price stability’ on this site

with a payroll tax holiday competitive pressures will likely cause business to cut prices medium term with its savings

so it adds to demand as well as cuts supply side costs to contain prices

Don’t mean to interrupt Scott - he is the expert. You may have to check out the US government (and all other govts too) policies’ impact on the society. One would have loved to have a system in which the government does not inteerfere but unfortunately modern money works the way it does. We have debated on other things at Billy Blog and you have shown me good data (e.g., households expenditures vs income) but just think about how the data is what it is in the first place. Governments all over went into fiscal austerity for many years now and this has deeply impacted our societies in a negative way. It has hurt the lower class more than the upper class. The severity of the fiscal austerity has been really high. At Zeroth order, the government has to spend much more and tax much less. This is necessary condition! No way out - matter of simple accounting done with stock-flow consistency. And of course as Scott says its not a bailout. Always good to keep in mind: The government ‘debt’ has to such that the private sector saving desire is fullfilled.