That’s okay, we already had that experiment in 1929 and 2008. Consenting legal adults can crash the economy for everyone.
Hell, just from 2008 Dodd-frank, banks are not allowed to invest without having very specific amounts of collateral (eg you better have a billion before you speculate with your customer’s billion).
Why would the rules for highly regulated, specially-privileged-under-the-law banks have to do with what individual consenting adults should be allowed to invest in?
Because those consenting individuals can break the economy for everyone, which happened in 1929 and 2008.
Yes, this is exactly what the GP said, but really it says everything that needs to be said. If I don’t have any involvement in the financial market, a few consenting adults can still force the company I work for to shut down due to liquidity issues.
What can they break that normal corporate investors couldn't?
Requiring a percentage of collateral doesn't do anything to stop stupid investments. If the investment itself is harmful, then 10% reserve means you're still doing 90% as much damage.
The banks were going to become insolvent in both scenarios. Coinbase is proposing you lend them Bitcoin, not other individuals. If they don’t put up the collateral and leverage hard and manage to fail for whatever reason, they pretty much screw everyone out of their coin.
This is a fairly well accepted lesson everyone digested by this point.
I don't think the SEC would say everything is fine if they changed the plan to have 10% more collateral. So I still don't understand this particular complaint.
The rule after Dodd-frank is closer to 100% collateral. But sure, the discussion really doesn’t start until we enter this realm, no point over discussing.
And which economists make the case that regulatory prior restraint of individual investor choices is how to avoid a recession/depression? (Rather than, say, fiscal or monetary policy?)
Hell, just from 2008 Dodd-frank, banks are not allowed to invest without having very specific amounts of collateral (eg you better have a billion before you speculate with your customer’s billion).