4 ms·

You can create money, it just exerts an inflationary pressure that is commensurate with the rate at which it is spent (minus the offsetting effect of industrial

You can create money, it just exerts an inflationary pressure that is commensurate with the rate at which it is spent (minus the offsetting effect of industrial slack). Issuing more public debt and spending it is (in a low interest environment) not so very different to printing cash and spending it. The creation of highly liquid assets backed by cash that don't pay interest = might as well be cash. The "sovereign wealth fund" idea is weird though. I don't see the point of the UK creating one - it's not like it has vast quantities of oil wealth it needs to sequester.

zeth___ 9y ago
There hasn't been inflationary pressure in the last 20 years. We can print money till the cows come home and we'll still be stuck in this economic nadir.
- fodanshi 9y ago
  No... we will sink further
- crdoconnor 9y ago
  There have been significant inflationary pressures in housing and most other financial asset markets. Printing money isn't really the issue - it's what is done with it once printed that matters.
  - zeth___ 9y ago
    Inflation is different to speculation.
    - crdoconnor 9y ago
      It is indeed. Not really relevant here though.
djrobstep 9y ago
What's weird about sovereign wealth funds? It's very straightforward. Wealth should be shared more equally and that's what building a sovereign wealth fund achieves.
- crdoconnor 9y ago
  There's nothing weird about them per se, it's just that the UK really has no reason to build one. It's simply a way of taking a country's wealth and instead of spending it on infrastructure, public services, industry or welfare - it gets spent on assets (usually foreign). The good parts: * It lets a small country (e.g. Singapore) exert a stabilizing influence on its economy when it is buffeted by large external economic forces outside of its control. * It lets a country that has natural resources (e.g. Norway) both A) set some of that wealth aside for the future and B) mitigate the massively damaging effects of dutch disease (a seriously underrated economic effect). This is termed "sterilization". The bad parts: * If you buy overseas assets they can be seized. I think this is why Venezuela isn't really capable of building a sovereign wealth fund. If they bought a shopping mall in New York state 10 years ago with their oil wealth it is likely it would simply have been seized. * If you're putting money into a sovereign wealth fund you're not spending it on the welfare of your citizens. I used to live in Singapore and the contrast between the way it treated its poorest citizens and the amount of money pushed into Temasek is disgusting and shameful. * Sovereign wealth funds attract corruption like flies on shit and the management of it is where the principal/agent problem reaches its nadir because it's so easy to surreptitiously suck wealth out if you exert control or influence over it. I think Norway's is probably the only sovereign wealth fund in the world that is free from corruption. Even then I wonder. Since the UK is not a small economy and can absorb external shocks more easily than Singapore and it's not going to suffer from dutch disease what's the point? Creating yet another entry point for financial parasites in the City of London to extract taxpayer wealth?
inopinatus 9y ago
The growth in money supply that already happens is on this order of magnitude per capita. Most of this money creation is, as we know, by the commercial banks simply magicking it into being as loans. That's topped up by central bank activities. This is offset by money being destroyed e.g. by repayment of loans (otherwise the money supply would simply explode in a catastrophic inflationary fountain), but overall, it's not impossible to imagine money being created directly into everyone's bank account instead. Not claiming I can see how to get to that scenario from here, of course.
- crdoconnor 9y ago
  Commercial banks create money with private loans continuously but that money is also extinguished when those loans are paid back - which also happens continuously. When there is a lower demand for private debt - usually because people already feel overindebted - money creation is throttled. Politicians often balance the competing desires of their rich donors (who, however liberal, still want the money supply throttled to preserve their wealth) with that of the electorate (who want a healthy economy that can only be driven by spending) by stimulating the creation of ever more private debt. This isn't a sustainable compromise and the consequent systemic and societal risks of a huge overhang of unpayable private debts are pretty terrifying. Economic humiliation correlates strongly with a societal attraction to charismatic "strong man" leaders and, ultimately, fascism. I believe we're watching the beginning of this story and it's about to get a whole lot worse.

zeth___ 9y ago

There hasn't been inflationary pressure in the last 20 years. We can print money till the cows come home and we'll still be stuck in this economic nadir.

fodanshi 9y ago
No... we will sink further
crdoconnor 9y ago
There have been significant inflationary pressures in housing and most other financial asset markets. Printing money isn't really the issue - it's what is done with it once printed that matters.
- zeth___ 9y ago
  Inflation is different to speculation.
  - crdoconnor 9y ago
    It is indeed. Not really relevant here though.

djrobstep 9y ago

What's weird about sovereign wealth funds? It's very straightforward. Wealth should be shared more equally and that's what building a sovereign wealth fund achieves.

crdoconnor 9y ago
There's nothing weird about them per se, it's just that the UK really has no reason to build one. It's simply a way of taking a country's wealth and instead of spending it on infrastructure, public services, industry or welfare - it gets spent on assets (usually foreign). The good parts: * It lets a small country (e.g. Singapore) exert a stabilizing influence on its economy when it is buffeted by large external economic forces outside of its control. * It lets a country that has natural resources (e.g. Norway) both A) set some of that wealth aside for the future and B) mitigate the massively damaging effects of dutch disease (a seriously underrated economic effect). This is termed "sterilization". The bad parts: * If you buy overseas assets they can be seized. I think this is why Venezuela isn't really capable of building a sovereign wealth fund. If they bought a shopping mall in New York state 10 years ago with their oil wealth it is likely it would simply have been seized. * If you're putting money into a sovereign wealth fund you're not spending it on the welfare of your citizens. I used to live in Singapore and the contrast between the way it treated its poorest citizens and the amount of money pushed into Temasek is disgusting and shameful. * Sovereign wealth funds attract corruption like flies on shit and the management of it is where the principal/agent problem reaches its nadir because it's so easy to surreptitiously suck wealth out if you exert control or influence over it. I think Norway's is probably the only sovereign wealth fund in the world that is free from corruption. Even then I wonder. Since the UK is not a small economy and can absorb external shocks more easily than Singapore and it's not going to suffer from dutch disease what's the point? Creating yet another entry point for financial parasites in the City of London to extract taxpayer wealth?

inopinatus 9y ago

The growth in money supply that already happens is on this order of magnitude per capita. Most of this money creation is, as we know, by the commercial banks simply magicking it into being as loans. That's topped up by central bank activities. This is offset by money being destroyed e.g. by repayment of loans (otherwise the money supply would simply explode in a catastrophic inflationary fountain), but overall, it's not impossible to imagine money being created directly into everyone's bank account instead. Not claiming I can see how to get to that scenario from here, of course.

crdoconnor 9y ago
Commercial banks create money with private loans continuously but that money is also extinguished when those loans are paid back - which also happens continuously. When there is a lower demand for private debt - usually because people already feel overindebted - money creation is throttled. Politicians often balance the competing desires of their rich donors (who, however liberal, still want the money supply throttled to preserve their wealth) with that of the electorate (who want a healthy economy that can only be driven by spending) by stimulating the creation of ever more private debt. This isn't a sustainable compromise and the consequent systemic and societal risks of a huge overhang of unpayable private debts are pretty terrifying. Economic humiliation correlates strongly with a societal attraction to charismatic "strong man" leaders and, ultimately, fascism. I believe we're watching the beginning of this story and it's about to get a whole lot worse.