4 ms·

I’m really surprised this piece was almost entirely about public opinion, only using economics to discuss the likelihood of a recession soon and the effects of

by npo9 7y ago

I’m really surprised this piece was almost entirely about public opinion, only using economics to discuss the likelihood of a recession soon and the effects of inequality. The levers our governments have been pulling to steer the economy are reaching their maximum. The system where we reduce interest rates to spur spending to stimulate the economy (probably) don’t work when interest rates negative.

toomuchtodo 7y ago
The fundamental problem is that you can't use interest rates to set fiscal policy, only monetary policy. Central banks do what they can, but it's like chemo: low or negative interest rates create asset bubbles while attempting to start the economy back up (and if wages disconnect preventing the ability to acquire inflated assets, you aren't going to try to acquire assets; Central Banks can keep those asset values inflated artificially forever though). Who have assets? Older and wealthy people [1]. If your government won't act with policy to fix fiscal (not monetary policy), you encounter the Populism response (which should surprise no one but apparently still does [2]). The Federal Reserve chair Powell has come out and said as much ("we have exhausted our toolkit"). TLDR It's time for the government to tax and spend. [1] https://www.brookings.edu/blog/up-front/2019/06/25/six-facts-about-wealth-in-the-united-states/ https://www.brookings.edu/blog/up-front/2019/06/25/six-facts... [2] https://www.theguardian.com/business/2019/jan/30/historian-berates-billionaires-at-davos-over-tax-avoidance https://www.theguardian.com/business/2019/jan/30/historian-b...
adventured 7y ago
> The system where we reduce interest rates to spur spending to stimulate the economy (probably) don’t work when interest rates negative. Sure it will. We're just in the early stages of the government abusing the Fed & USD for spending expansion, they've yet to begin getting truly outlandish on what could be done. They'll pump up the government spending projects, directly funded (subsidized) by the Fed's policies. It will continue to work at least for a while yet. 30 more years at a minimum, based on what Japan was able to manage (with a weaker currency (ie not the global reserve currency), in a weaker economy, lower incomes, with far less wealth to debase). Negative rates means you get a 'free' national high-speed rail project. You get 'free' $2 trillion in infrastructure spending. You get 'free' expansion of Medicare down the ladder and Medicaid up the ladder (likely lessens the tax hammer short-term anyway). I mention those things because the next President after Trump is guaranteed to be a Democrat and is guaranteed to pursue some variation of those general things (high-speed rail is questionable, unfortunately). We're likely to enter a window in the next decade, where the US can float a trillion dollars for 30 years at 0.5% or lower. We desperately need to violently take advantage of that small window of opportunity to build a national high-speed rail network and pull off a once-in-a-generation repair of our infrastructure. The voters will support it in that time frame.
bsanr2 7y ago
The problem is that you either incentivize higher economic volume or you get deflation. They tried printing money and giving it to the banks to loan because they're afraid to do the one rational thing there is and, in doing so, piss off the wealthy. But now that it seems that we're going to see instability and unrest no matter what, it's time to play that card, and hopefully shorten our inevitable economic Dark Age: Wealth tax.
- DuskStar 7y ago
  > Wealth tax. HAHAHAHAHA If anything, a wealth tax is what turns things from "depression" to "catastrophic failure" - capital flight would be a massive problem. And even ignoring any effects from changing incentives, why would taking from the most productive and giving to the government improve the economy?
  - toomuchtodo 7y ago
    Adam Neumann (WeWork) coaxed billions of dollars out of Softbank for nothing of value in return. I would not consider that productive. Having wealth does not immediately confirm the activity that allowed for that wealth was productive, nor that one is productive for having amassed wealth.
    - DuskStar 7y ago
      Ehhh, fleecing the Saudis is arguably productive. But yes, there are certainly wealthy people who are not more productive than an S&P 500 index fund. (this might still be more productive than the US government, of course) But how do you propose to tax them and not the Bezos' and Musks of the world?
      - toomuchtodo 7y ago
        Bezos and Musk reinvested all of their wealth into their own endeavors. Craft policy to support such efforts. You still tax productive activities, just not as much as unproductive activities (such as mega-yachts or sailing teams, which are luxury goods).
Ambele 7y ago
It typically takes a reduction in interest rates of 4% to pull the economy out of a recession. Interest rates are at 2% right now so if we enter a recession, it'll be a doozy. Europe has been testing out negative interest rates and are finding out that negative interest rates are not stimulating the economy. The fed is expected to try out quantitative easing mostly by buying various dated treasuries from the open market and a lesser amount of the toxic debt banks are holding like CDOs or mortgage backed securities just like they did in 2008/2009. This all assumes a recession will happen which is debatable. If a recession was guaranteed, the stock market, which functions as a leading indicator, would already be down and it's not -- it's relatively flat.

by npo9 7y ago

toomuchtodo 7y ago

The fundamental problem is that you can't use interest rates to set fiscal policy, only monetary policy. Central banks do what they can, but it's like chemo: low or negative interest rates create asset bubbles while attempting to start the economy back up (and if wages disconnect preventing the ability to acquire inflated assets, you aren't going to try to acquire assets; Central Banks can keep those asset values inflated artificially forever though). Who have assets? Older and wealthy people [1]. If your government won't act with policy to fix fiscal (not monetary policy), you encounter the Populism response (which should surprise no one but apparently still does [2]). The Federal Reserve chair Powell has come out and said as much ("we have exhausted our toolkit"). TLDR It's time for the government to tax and spend. [1] https://www.brookings.edu/blog/up-front/2019/06/25/six-facts-about-wealth-in-the-united-states/ https://www.brookings.edu/blog/up-front/2019/06/25/six-facts... [2] https://www.theguardian.com/business/2019/jan/30/historian-berates-billionaires-at-davos-over-tax-avoidance https://www.theguardian.com/business/2019/jan/30/historian-b...

adventured 7y ago

> The system where we reduce interest rates to spur spending to stimulate the economy (probably) don’t work when interest rates negative. Sure it will. We're just in the early stages of the government abusing the Fed & USD for spending expansion, they've yet to begin getting truly outlandish on what could be done. They'll pump up the government spending projects, directly funded (subsidized) by the Fed's policies. It will continue to work at least for a while yet. 30 more years at a minimum, based on what Japan was able to manage (with a weaker currency (ie not the global reserve currency), in a weaker economy, lower incomes, with far less wealth to debase). Negative rates means you get a 'free' national high-speed rail project. You get 'free' $2 trillion in infrastructure spending. You get 'free' expansion of Medicare down the ladder and Medicaid up the ladder (likely lessens the tax hammer short-term anyway). I mention those things because the next President after Trump is guaranteed to be a Democrat and is guaranteed to pursue some variation of those general things (high-speed rail is questionable, unfortunately). We're likely to enter a window in the next decade, where the US can float a trillion dollars for 30 years at 0.5% or lower. We desperately need to violently take advantage of that small window of opportunity to build a national high-speed rail network and pull off a once-in-a-generation repair of our infrastructure. The voters will support it in that time frame.

bsanr2 7y ago

The problem is that you either incentivize higher economic volume or you get deflation. They tried printing money and giving it to the banks to loan because they're afraid to do the one rational thing there is and, in doing so, piss off the wealthy. But now that it seems that we're going to see instability and unrest no matter what, it's time to play that card, and hopefully shorten our inevitable economic Dark Age: Wealth tax.

DuskStar 7y ago
> Wealth tax. HAHAHAHAHA If anything, a wealth tax is what turns things from "depression" to "catastrophic failure" - capital flight would be a massive problem. And even ignoring any effects from changing incentives, why would taking from the most productive and giving to the government improve the economy?
- toomuchtodo 7y ago
  Adam Neumann (WeWork) coaxed billions of dollars out of Softbank for nothing of value in return. I would not consider that productive. Having wealth does not immediately confirm the activity that allowed for that wealth was productive, nor that one is productive for having amassed wealth.
  - DuskStar 7y ago
    Ehhh, fleecing the Saudis is arguably productive. But yes, there are certainly wealthy people who are not more productive than an S&P 500 index fund. (this might still be more productive than the US government, of course) But how do you propose to tax them and not the Bezos' and Musks of the world?
    - toomuchtodo 7y ago
      Bezos and Musk reinvested all of their wealth into their own endeavors. Craft policy to support such efforts. You still tax productive activities, just not as much as unproductive activities (such as mega-yachts or sailing teams, which are luxury goods).

Ambele 7y ago

It typically takes a reduction in interest rates of 4% to pull the economy out of a recession. Interest rates are at 2% right now so if we enter a recession, it'll be a doozy. Europe has been testing out negative interest rates and are finding out that negative interest rates are not stimulating the economy. The fed is expected to try out quantitative easing mostly by buying various dated treasuries from the open market and a lesser amount of the toxic debt banks are holding like CDOs or mortgage backed securities just like they did in 2008/2009. This all assumes a recession will happen which is debatable. If a recession was guaranteed, the stock market, which functions as a leading indicator, would already be down and it's not -- it's relatively flat.