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By holding interest rates so low, the Fed has created a double-bind: despite the systemic risks (which are very high) people who have investable cash have two o

By holding interest rates so low, the Fed has created a double-bind: despite the systemic risks (which are very high) people who have investable cash have two options: the stock market or paying down debt. The stock market is being "invested" in not because it is a good investment at this point (it isn't) but because there is no where else to go. If interest rates ever revert to anything normal, it will get crushed. In the meantime this means that large, multinational companies are flush and are able to destroy smaller, more local competition. This trend is aided by the lockdowns, as well as the fact that large companies have access to the extremely low interest rates, but smaller players do not. You will continue to pay usurious rates on credit cards and most small business loans, while Global Corp. can issue corporate debt as very low rates. Paying down debt is the opposite of what the Fed wants: in our system debt is the true money supply, so when debt is extinguished the money supply contracts. You can see this clearly in 2008: https://fred.stlouisfed.org/series/TCMDO https://fred.stlouisfed.org/series/TCMDO Steve Keen outlines our best hope, a modern debt jubilee, here: http://www.profstevekeen.com/modern-debt-jubilee/ http://www.profstevekeen.com/modern-debt-jubilee/

akeck 6y ago
It seems like some of the COVID relief in the US provided a view into the "Modern Debt Jubilee". Apparently, many people used the infusion of cash to pay down short term debt.
kpmcc 6y ago
This is one of the only times I’ve seen someone mention a debt jubilee and lay out the case seriously. Happy to see it!
treis 6y ago
>Steve Keen outlines our best hope, a modern debt jubilee, here: >http://www.profstevekeen.com/modern-debt-jubilee/ http://www.profstevekeen.com/modern-debt-jubilee/ This doesn't really make sense. If you force me to pay down debt and I want cash then I'm just going to take out more debt. Low interest rates or high debt aren't really the fundamental problem. The problem is a concentration of cash/wealth. Adam Neumann is a billionaire because he convinced some morons in Japan to give his company 10s of billions of Saudi money. But an average Joe would be laughed out of a bank if they asked for 10s of thousands to start a business. If we are worried about a deflationary spiral the solution is simple. Give everyone money.
- recursivedoubts 6y ago
  > If we are worried about a deflationary spiral the solution is simple. Give everyone money. Yeah, you might want to spend a bit more time thinking and reading about it. Keen has been ignored and mocked by the economics establishment, but he's the only guy I know who takes debt seriously and has developed computer models for dealing with the natural instability of exponential growth in it (Krugman famously has said "we owe it to ourselves"). You need to bring the total debt load down, to bring the absolute payment load down to a sustainable level and handle the exponent in debt growth. Giving everyone money without forcing them to pay down debt doesn't accomplish that, it's a linear response to an exponential problem. There's a reason debt jubilees were built into most pre-modern societies.
  - treis 6y ago
    > bring the total debt load down You saw the part where I said people would just take out new debt, right? You can't force people to lower their debt load unless you also prevent them from taking out more debt.
    - recursivedoubts 6y ago
      I would again suggest reading and thinking about Keens much more extensive treatment of the topic. We aren't going to make much progress here.
whoknos99 6y ago
Numerate people understand debt is driven by ideology. Enough people need to be enabled with skin in the game to jettison social narratives that elites must rule. Debt is a fascistic social object intended to enable grift of the aristocracy. It could be described in plainer math terms. But cortexes have had “facts” like “because a person has a lot of money they’re extra important” coded into them such that that’s all our limbic system can trigger as a response. A lot of smart people hold conflicting belief there are no gods and their own personal skills make them invaluable. France can’t even sort out who “holds” all of its national debt. Why would the next generation or two not just argue to change the nature of this rather than feel beholden to all the people debating this today who will be long dead by then? Nation states have hit “reset” on debt in the past. “People today” need to climb out their own arse and realize it’s not the first and last day of human existence. Consider the real messes, environment and human tragedies, your culture is perpetuating. Not the illusory idea that economists are more useful than real doers to a community. A lot of professional experts are just grifters extracting capital like you. Cognitive science is showing muscle memory and hands on doing is more important than intellect and wealth when it comes to solving problems. “Educated” administrators who peddle context as king test lower on reading comprehension and have trouble thinking outside the box. It’s not “government” that’s bad. That’s a logical straw man. Government is humans. It’s enabling human biology to exist in the state of feeling invulnerable. It leads to entitlement and fascistic defense of unrealistic idea any one or handful of people are that important. They don’t have an information advantage. They have a social narrative advantage we’re trained from childhood to abide no different than children being taught to abide god. Elites falling will mean end times! It’s just people saying things, doing things. Which people doesn’t matter. History clearly shows there will always be someone on every side of wavey debate. Using ones wealth to boost their side of the debate is authoritarian and anti-free market. America is an oligarchy. Just like all of its “enemies”.

akeck 6y ago

It seems like some of the COVID relief in the US provided a view into the "Modern Debt Jubilee". Apparently, many people used the infusion of cash to pay down short term debt.

kpmcc 6y ago

This is one of the only times I’ve seen someone mention a debt jubilee and lay out the case seriously. Happy to see it!

treis 6y ago

>Steve Keen outlines our best hope, a modern debt jubilee, here: >http://www.profstevekeen.com/modern-debt-jubilee/ http://www.profstevekeen.com/modern-debt-jubilee/ This doesn't really make sense. If you force me to pay down debt and I want cash then I'm just going to take out more debt. Low interest rates or high debt aren't really the fundamental problem. The problem is a concentration of cash/wealth. Adam Neumann is a billionaire because he convinced some morons in Japan to give his company 10s of billions of Saudi money. But an average Joe would be laughed out of a bank if they asked for 10s of thousands to start a business. If we are worried about a deflationary spiral the solution is simple. Give everyone money.

recursivedoubts 6y ago
> If we are worried about a deflationary spiral the solution is simple. Give everyone money. Yeah, you might want to spend a bit more time thinking and reading about it. Keen has been ignored and mocked by the economics establishment, but he's the only guy I know who takes debt seriously and has developed computer models for dealing with the natural instability of exponential growth in it (Krugman famously has said "we owe it to ourselves"). You need to bring the total debt load down, to bring the absolute payment load down to a sustainable level and handle the exponent in debt growth. Giving everyone money without forcing them to pay down debt doesn't accomplish that, it's a linear response to an exponential problem. There's a reason debt jubilees were built into most pre-modern societies.
- treis 6y ago
  > bring the total debt load down You saw the part where I said people would just take out new debt, right? You can't force people to lower their debt load unless you also prevent them from taking out more debt.
  - recursivedoubts 6y ago
    I would again suggest reading and thinking about Keens much more extensive treatment of the topic. We aren't going to make much progress here.

whoknos99 6y ago

Numerate people understand debt is driven by ideology. Enough people need to be enabled with skin in the game to jettison social narratives that elites must rule. Debt is a fascistic social object intended to enable grift of the aristocracy. It could be described in plainer math terms. But cortexes have had “facts” like “because a person has a lot of money they’re extra important” coded into them such that that’s all our limbic system can trigger as a response. A lot of smart people hold conflicting belief there are no gods and their own personal skills make them invaluable. France can’t even sort out who “holds” all of its national debt. Why would the next generation or two not just argue to change the nature of this rather than feel beholden to all the people debating this today who will be long dead by then? Nation states have hit “reset” on debt in the past. “People today” need to climb out their own arse and realize it’s not the first and last day of human existence. Consider the real messes, environment and human tragedies, your culture is perpetuating. Not the illusory idea that economists are more useful than real doers to a community. A lot of professional experts are just grifters extracting capital like you. Cognitive science is showing muscle memory and hands on doing is more important than intellect and wealth when it comes to solving problems. “Educated” administrators who peddle context as king test lower on reading comprehension and have trouble thinking outside the box. It’s not “government” that’s bad. That’s a logical straw man. Government is humans. It’s enabling human biology to exist in the state of feeling invulnerable. It leads to entitlement and fascistic defense of unrealistic idea any one or handful of people are that important. They don’t have an information advantage. They have a social narrative advantage we’re trained from childhood to abide no different than children being taught to abide god. Elites falling will mean end times! It’s just people saying things, doing things. Which people doesn’t matter. History clearly shows there will always be someone on every side of wavey debate. Using ones wealth to boost their side of the debate is authoritarian and anti-free market. America is an oligarchy. Just like all of its “enemies”.