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Tag Archives: lender of last resort

Brian Romanchuk — Why Lender-Of-Last-Resort Operations Are Inevitable

Lender-of-last-resort operations by central banks (or "bailouts of the financial system") are deservedly unpopular across the political spectrum. Malcontents have argued that risky lending ought to be handled by markets, and that deposits should be fully backed by reserves or Treasury bills. Unfortunately, the believers in these theories never bother to look at the economics of short-term lending. The money markets have the structure that they have for a reason, and they only will function...

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