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> In a cashless world, there would be no lower bound on interest rates. A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to c

• ineptech 5y ago
  I think your vitriol is misplaced; the whole point of a negative interest rate is to stimulate the economy, i.e. increase the value of your investments, which presumably would be good for someone who has built financial security. Suppose for example that a -4% rate spurs a 1% economic boost - that would only be bad for you if you keep more than 20% of your wealth sitting around in your checking account. I'm not saying it would work, as in successfully grow the economy, necessarily. Not my area, and it'd depend on the country and the recession and so forth. Just saying, the "central bank fucks" who toyed with this idea were trying to make people money, not take it away.
  • zaptheimpaler 5y ago
    Valuations of everything are so high they make little sense. In this situation, yes holding cash is bad, but it doesn't exactly feel safe holding superinflated assets. What will happen when interest rates rise? How long are we going to keep inflating stocks and houses 2x in a year? My overall problem is that it makes the entire process of preserving money a time consuming and scary game of predicting what the central bank will do and hoarding assets. We are forced to play that pointless game, when really that is what a simple bank savings account should do. Preserving (not growing) money shouldn't be so complicated.
    • ineptech 5y ago
      > How long are we going to keep inflating stocks and houses 2x in a year? Totally agree, there are things about modern fiscal policy that seem scary and weird! But that is pretty much unrelated to... > We are forced to play that pointless game, when really that is what a simple bank savings account should do. I don't think is true. Granted, savings accounts used to have higher returns, but inflation was higher then. It has never been possible to preserve money (i.e. beat inflation) with no risk, nor to grow money without more risk; it's just that the specific investments look different nowadays. Anyway, to put it bluntly, the goal of central bank planners is not to preserve your savings, it's to grow the economy. And what happens if mid-to-upper people get spooked by a recession, and move assets in to cash? That's deflationary, which prolongs the recession! So if low interest rates make you think, "Gah, I'd like to pile up cash in a savings account, but these bankers are forcing me to go invest it", well, guilty as charged, yes that's exactly what they're trying to do. But I don't think it follows that they're mean jerks, or that they're doing their jobs wrong.
      • zaptheimpaler 5y ago
        Yes one of the central banks mandates is maximum employment. But I don't believe people prefer sitting around not working to good jobs. The problem is the majority of jobs pay bad wages, provide little meaning and no agency. Central banks want to bully people into working anyways, but some of us have had enough of that bullshit. If they want more employment then employers should provide jobs worth doing rather than forcing it on people via inflation. Besides the fact that we've had 100 years of incredible technological progress and increasing productivity but somehow that doesn't translate to fewer jobs or lower working hours or better safety nets or anything? You say the banks want us to invest our money, but buying a house or stock just to store wealth is not an investment in any meaningful sense. Yet, people do that because they have no alternative to store wealth and no clarity on when the banks will decide to double the amount of money overnight. So at best they have implemented a policy without considering the most basic second order effects. True investment is making something better, faster, cheaper, new etc. and their tactic of just making saving more and more difficult and making people's lives more precarious is not going to achieve that. That would take education, messaging, community, and perhaps weaning off a growth addicted policy/society.
• imtringued 5y ago
  Actually, this is a failure of private bank issuance of money. If you don't let the government issue money you get shrinking interest and when interest hits 0% the economy has to end as people hoard money and eventually return it to where it came from, namely the private banks. The reason issuing money via gold backing was a mistake is also the reason why issuing money exclusively via debt was a mistake. We can't generate enough debt so that the money supply keeps up to what the economy wants. When you have negative interest rates, the government can issue money via a pseudo public method that doesn't depend on endless growth. The benefit is that if governments issue too much money inflation will catch up and so will interest rates, which then stops issuance of money exactly when there is too much money in the economy. In other words, your money becomes "complete". It can recover from every recession/depression and moderate every inflation boom back to sustainable levels. Central bank managed fiat has an extremely good track record against inflation, it just needs the same power against deflation. Just look at Turkey, Erdogan took control over the central bank and things went to shit. Democratic control isn't what you want here.