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Mats Kaarbö

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Central Banking or Nationalized Banks?

In the aftermath of the bubble burst in '08, Iceland took a radically different path than the United States after their financial crisis and nationalized the banks, threw some people responsible for the crash in jail and bailed out the homeowners instead of worrying about only bailing out the banks. And now they're coming back and their economy is growing again... http://goo.gl/QuKGA

When the banks in Norway declined in 1992, the government simply nationalized them (instead of bailing them out leaving the tax payer to pay the bill) which gave the banking business a breather and was ultimately beneficial for its citizens, because the banking business returned to more traditional banking values, though it only was for a short period of time.

So, in terms of public prosperity is there any merit left to keep the current central banking system, with many private banks and one central bank, instead of nationalized banks?

Topics: banking reform economics education government
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    Fritzie Reisner 100+

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    Oct 29 2012: I agree with Krisztian that it would be fruitful to start with the definitions you propose we use in making the distinction.

    There is a wikipedia article that is flagged as unverified that makes the distinction that a Central Bank is like the Federal Reserve bank that manages currency and lends only to other banks, whereas the term National bank is used less technically or more broadly to include sometimes any commercial bank that operates nationally, any bank owned by a country rather than privately held, or any bank chartered under a national law rather than a state law, whether on not it operates nationally.

    So the term "national bank" can mean many different things. Again, this source flags itself as unverified, but if you could put forward the comparison you want here, the discussion will not quickly veer off into disputes over useful terminology.
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      Mats Kaarbö 10+

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      Oct 29 2012: Yes, I am sorry about the confusion. Hopefully, I've clarified myself now. Or did I completely mix the terms yet again? Governments nationalizing banks means national banks, rights? Thanks for noticing that about the Wiki-article by the way.
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        Fritzie Reisner 100+

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        Oct 29 2012: I am glad you clarified, as I absolutely would never have thought of a central bank or national bank with those definitions! For example, the bank in the US that most would consider the central bank -responsible for matters such as interest rates to other banks, money supply, and so forth- is definitely not a private bank, and the banks in the US that are called national banks are private.
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          Mats Kaarbö 10+

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          Oct 30 2012: John Smith helped me articulate it, so please take a third look at my description. I am so sorry for the big mess!

        • shawn disney 10+

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          Nov 1 2012: Fritzie: In the spiirit of trying to clarify the disc ussion, I hope you were not referring to the "Federal Reserve System " as "the Central Bank,"part of the government?! It pretends to be regulated by the government, but is actually a Private Cartel of Bankers. Any "regulation" that might occur is in the opposite direction, as when its members and ex-members convinced the taxpayers that their favorite banks were "Too Big To Fail" , a real triumph of self serving propaganda. Which, apparently, did not benefit small Main St. banks at all.
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        Fritzie Reisner 100+

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        Nov 1 2012: Here is a description of the Federal Reserve Bank, the central bank in the US.

        http://en.wikipedia.org/wiki/Federal_Reserve_System

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