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Interest rates are the cost of money. The more money you print, the less scarce it is, the lower the cost to borrow it. This is why at the extreme end of money

by anewaccount2021 6y ago

Interest rates are the cost of money. The more money you print, the less scarce it is, the lower the cost to borrow it. This is why at the extreme end of money printing, you end up with negative rates. This article keeps getting submitted as if it signifies some success...

morpheos137 6y ago
This is true simplistically. But there are more things going on than just "money printing." There is also the problem of maturing capital/technological development, i.e. there may be also be fewer good projects for money to chase (less returns) over time. At the same time as money has become less valuable, so has human labour. So real wages stagnate while prices do not increase commensurately due to increasing productivity. So you end up with a system where asset prices disproportionately appreciate overtime and inequality grows between those who hold assets and those who produce them. In the terminal stage of "monetization" of a technological capitalist economy fewer and fewer do productive work, those that do are more and more poorly compensated (relative to the asset holders) for their work. Excess labor and financialized economy to that transfers wealth upward is a receipt for disaster, at some point. Now what if we do UBI? Won't help. UBI will cause inflation because more disposable income would still be chasing the same amount of production output relatively speaking. The only way to solve the problem in the long run is to contract the labour supply until there is more scarcity or to find another way to apportion the fruits of production than just wages which have become devalued by free money and excess labor. For instance, an in-kind UBI may work. You get vouchers for certain basic wants and needs. Housing is a naturally depreciating asset under steady population. It is only a function of cheap money that it has become an appreciating asset. People should be able to receive housing for free, i.e. expand access and availability of public housing. Private housing should not be banned but if there was enough low cost housing on the market then this would deflate the non-productive asset appreciation bubble that is "real estate." When naturally depreciating assets appreciate over time you know your financial economy is untethered from the real one. Likewise with another non-productive sector of the economy. Appreciating stock prices do not actually produce anything. They merely move relative purchasing power from one group of people, those who don't own stocks, to another. Public trading of shares dilutes the fiduciary responsibility of share holders. Rather than investing for long term returns investments are increasingly made on the greater fool theory or the assets appreciate forever theory. Instead stock prices should be firmly moored to the real expected product of the underlying company. Having more closely held companies would accomplish this. I know a lot of this stuff may seem dumb or "socialistic" but ask yourself what happens in the future as asset prices continue to appreciate without bound (due to free money) while labor prices remain stagnant due to technology decreasing the value of a unit of labor? More and more people are going to be getting smaller pieces of the pie. Maturing technology should enable us to provide basic human needs, like housing and health care and food easier for the majority of people, not harder as time goes on. Instead what seems to be happening it is harder to meet these needs for many because of the unmoderated purchasing power transfer from workers to asset holders who also rent seek in "loose" money policies to lubricate the process. The combination of cheap money and cheap labor is unsustainable in the long run without increasing social unrest.

morpheos137 6y ago

This is true simplistically. But there are more things going on than just "money printing." There is also the problem of maturing capital/technological development, i.e. there may be also be fewer good projects for money to chase (less returns) over time. At the same time as money has become less valuable, so has human labour. So real wages stagnate while prices do not increase commensurately due to increasing productivity. So you end up with a system where asset prices disproportionately appreciate overtime and inequality grows between those who hold assets and those who produce them. In the terminal stage of "monetization" of a technological capitalist economy fewer and fewer do productive work, those that do are more and more poorly compensated (relative to the asset holders) for their work. Excess labor and financialized economy to that transfers wealth upward is a receipt for disaster, at some point. Now what if we do UBI? Won't help. UBI will cause inflation because more disposable income would still be chasing the same amount of production output relatively speaking. The only way to solve the problem in the long run is to contract the labour supply until there is more scarcity or to find another way to apportion the fruits of production than just wages which have become devalued by free money and excess labor. For instance, an in-kind UBI may work. You get vouchers for certain basic wants and needs. Housing is a naturally depreciating asset under steady population. It is only a function of cheap money that it has become an appreciating asset. People should be able to receive housing for free, i.e. expand access and availability of public housing. Private housing should not be banned but if there was enough low cost housing on the market then this would deflate the non-productive asset appreciation bubble that is "real estate." When naturally depreciating assets appreciate over time you know your financial economy is untethered from the real one. Likewise with another non-productive sector of the economy. Appreciating stock prices do not actually produce anything. They merely move relative purchasing power from one group of people, those who don't own stocks, to another. Public trading of shares dilutes the fiduciary responsibility of share holders. Rather than investing for long term returns investments are increasingly made on the greater fool theory or the assets appreciate forever theory. Instead stock prices should be firmly moored to the real expected product of the underlying company. Having more closely held companies would accomplish this. I know a lot of this stuff may seem dumb or "socialistic" but ask yourself what happens in the future as asset prices continue to appreciate without bound (due to free money) while labor prices remain stagnant due to technology decreasing the value of a unit of labor? More and more people are going to be getting smaller pieces of the pie. Maturing technology should enable us to provide basic human needs, like housing and health care and food easier for the majority of people, not harder as time goes on. Instead what seems to be happening it is harder to meet these needs for many because of the unmoderated purchasing power transfer from workers to asset holders who also rent seek in "loose" money policies to lubricate the process. The combination of cheap money and cheap labor is unsustainable in the long run without increasing social unrest.