The provision of deposit insurance should be provisional on banks not inflating the money supply. There is no reason not to prevent the banks from inflating the money supply by threatening to remove the insurance of their deposits. The government should threaten to remove it (the deposit insurance) from bad banks, whilst continuing to provide it for existing deposits, it should not guarantee any new deposits.
It doesn’t make sense that we are continuing to guarantee these bad banks, if people hate them so much, (we should) let them fail (not only in the past but now). Perhaps ‘we’ should take away deposit insurance.
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