From the Project 2025 chapter (#24) of the Federal Reserve:
> As in the Suffolk System, competition keeps banks from overprinting or lending irresponsibly. This is because any bank that issues more paper than it has assets available would be subject to competitor banks’ presenting its notes for redemption. In the extreme, an overissuing bank could be liable to a bank run. Reckless banks’ competitors have good incentives to police risk closely lest their own holdings of competitor dollars become worthless.[Fn24]
[…]
> [Fn24] Reforms should also strengthen the incentives of bank depositors (customers) and bank shareholders (owners) to monitor bank portfolios. Deposit insurance undermines the former, as even President Franklin Roosevelt recognized. Bailouts and last-resort lending undermine the latter.
Reading the entire chapter, I got the impression that they want to take the entire US banking system back to the 1800s, including references to free banking:
> In this way, free banking leads to stable and sound currencies and strong financial systems because customers will avoid the riskier issuers, driving them out of the market.
What every fan of removing protections ignores is that we have already tried the version without the regulation and collectively chose (imperfectly, to be sure) the current system. It is much harder for them to make an argument that we should return to the glory days of bank runs, child-labor, rivers that caught fire, tainted food, and childhood mortality.
> It is much harder for them to make an argument that we should return to the glory days of bank runs, child-labor, rivers that caught fire, tainted food, and childhood mortality.
This is one of the things about Bitcoin-as-currency that makes no sense to me: it's basically gold-standard-but-digital. We've tried the gold standard and got rid of it for good reason:
> The idea behind a gold standard is that a currency becomes tied to a commodity with a stable value. The great problem with this is that gold does not have a stable value. Like any other commodity, its relative value goes up and down. For instance, in September 2022, US dollar milk prices were rising over 16%. In gold terms milk prices were rising over 23%—dangerously high inflation.
And it was only after leaving it that countries started to recover:
> In the end, recovery from the Great Depression does not begin until countries give up on the combination of the Bagehot Rule and of commitment to sound gold-standard finance. Those countries that have central banks willing to print up enough money so that people are willing to spend it--it is when you adopt such policies that your economy begins to recover. If you don’t, you become France, which sticks to the gold standard all the way up to 1937, and never gets a recovery. When World War II begins, Nazi Germany’s production--equal to France's in 1933--had doubled between 1933 and 1939. French production had fallen by 15%.
> As in the Suffolk System, competition keeps banks from overprinting or lending irresponsibly. This is because any bank that issues more paper than it has assets available would be subject to competitor banks’ presenting its notes for redemption. In the extreme, an overissuing bank could be liable to a bank run. Reckless banks’ competitors have good incentives to police risk closely lest their own holdings of competitor dollars become worthless.[Fn24]
[…]
> [Fn24] Reforms should also strengthen the incentives of bank depositors (customers) and bank shareholders (owners) to monitor bank portfolios. Deposit insurance undermines the former, as even President Franklin Roosevelt recognized. Bailouts and last-resort lending undermine the latter.
* https://static.project2025.org/2025_MandateForLeadership_CHA...
Reading the entire chapter, I got the impression that they want to take the entire US banking system back to the 1800s, including references to free banking:
* https://en.wikipedia.org/wiki/Free_banking
In one place stating:
> In this way, free banking leads to stable and sound currencies and strong financial systems because customers will avoid the riskier issuers, driving them out of the market.
Which, AFAICT, is contrary to the history record:
* https://en.wikipedia.org/wiki/File:US_Historical_Inflation_A...
* https://en.wikipedia.org/wiki/The_Great_Deflation