When socialists held up Venezuela in the 2000s, the message was, ‘See, we told you so; socialism works!’ but when failure happened, the message changed to, “No, wait — that’s not real socialism!’
The repo crisis — and it is a crisis — is telling us that liquidity providers are aware that the price of money, the assets used as collateral and the borrowers’ ability to repay are all artificially manipulated.
Block and Barnett on whether the Hayekian triangle—the popular device used to illustrate how artificially low interest rates lead to an unsustainable boom—can be salvaged or should be abandoned altogether.
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