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It seems kind of crazy that the incredibly distorting effect of consistently low interest rates, quantitive easing and other central bank policies - mostly to t

It seems kind of crazy that the incredibly distorting effect of consistently low interest rates, quantitive easing and other central bank policies - mostly to the benefit of existing capital owners - is seen as almost a-political in the West. We argue about other things - like tax rates and social security, and meantime our central banks carry on with their mission almost unchallenged. Central banks have managed to create an aura of science over what they do. Mean while the cumulative policies of the last decade have created incredible asset price inflation, mostly to the detriment of the young. Is this healthy for society? That doesn't seem to be a question the (mostly baby boomer) people making these decisions are asking. The central banks try to paint themselves as mere lever pullers, reacting to inflation and economic growth with their interest rates. But the system is so much more complicated than that - all these other unseen effects rippling through the economy and affecting people's lives.

strikelaserclaw 5y ago
The kind of people who even know this is happening are the ones who have a vested interest to keep it there in the first place. People are selfish and greedy.
jjoonathan 5y ago
Yes, it's nuts. The moment that younger generations realize that inflation reduces debt, I predict that, ummm, the baton will be firmly gripped, yanked, and the equilibrium will shift hard in the opposite direction. Then we'll have a different set of problems.
zzzzzzzza 5y ago
the distortion is much more fundamental than interest rate policy. The real distortion is taxing income and sales and not land or other forms of monopoly rent. creating the vast majority of money through mortgages or student loans to motivate people to work hard as slaves for feudal masters. central banks have no control over that fundamental design decision, they just oil it, but if they didn't it wouldn't be any prettier of a sitution.
- wonnage 5y ago
  Government spending on social programs would be a much more straightforward way to create money, but seems politically impossible
wonnage 5y ago
Housing demand has many inputs, only one of which is low interest rates. It's not like we've exhausted the economy's capacity to build... NIMBY policies and a general demographic shift towards living in cities (which may be reversing) are also to blame. Inflation has myriad causes and money supply is the culprit only when you have too many dollars chasing an at-capacity resource.
lend000 5y ago
It isn't really apolitical. Ironically, it seems to be more supported by the left (like the people downvoting you), despite the lack of consistency with progressive economics. I suppose it enables big spending and debt, which can be progressive, while more than undoing itself with X-inflation + deadweight loss.
- jjoonathan 5y ago
  > Ironically, it seems to be more supported by the left (like the people downvoting you) Speak for yourself. > it enables big spending and debt No, low interest rates are not what enables big government debt. The government can monetize its debt -- money printer, remember? > , which can be progressive, while more than undoing itself with X-inflation + deadweight loss. Well, if the losses trickle down as effectively as the last 40 years of gains, I think the bottom 90% of the pyramid should rather welcome those losses.
  - lend000 5y ago
    The parent describes "consistently low interest rates, quantitive [sic] easing and other central bank policies," so I'm not sure why you singled out low interest rates (which are a byproduct of the Fed actions that DO enable big government debt, and which certainly make it take longer before annual interest on government debt becomes unsustainable). > I think the bottom 90% of the pyramid should rather welcome those losses. Maybe my sentence wasn't clear, but X-inflation here refers to asset/property inflation as much as consumer inflation, none of which should be welcomed by those who don't have huge amounts of net worth tied up in appreciating assets.
deleted 5y ago
[deleted]
dragonwriter 5y ago
> Central banks have managed to create an aura of science over what they do. In the case of the US Federal Reserve (different central banks may be different), the major ideological part is done by Congress in delineating the Fed's mandate. Which is why fairly radical ideological shifts in Fed leadership haven't significantly changed Fed approaches; that the Fed is minimally political in the partisan/ideological sense isn't an illusion they have created, its a reality.

strikelaserclaw 5y ago

The kind of people who even know this is happening are the ones who have a vested interest to keep it there in the first place. People are selfish and greedy.

jjoonathan 5y ago

Yes, it's nuts. The moment that younger generations realize that inflation reduces debt, I predict that, ummm, the baton will be firmly gripped, yanked, and the equilibrium will shift hard in the opposite direction. Then we'll have a different set of problems.

zzzzzzzza 5y ago

the distortion is much more fundamental than interest rate policy. The real distortion is taxing income and sales and not land or other forms of monopoly rent. creating the vast majority of money through mortgages or student loans to motivate people to work hard as slaves for feudal masters. central banks have no control over that fundamental design decision, they just oil it, but if they didn't it wouldn't be any prettier of a sitution.

wonnage 5y ago
Government spending on social programs would be a much more straightforward way to create money, but seems politically impossible

wonnage 5y ago

Housing demand has many inputs, only one of which is low interest rates. It's not like we've exhausted the economy's capacity to build... NIMBY policies and a general demographic shift towards living in cities (which may be reversing) are also to blame. Inflation has myriad causes and money supply is the culprit only when you have too many dollars chasing an at-capacity resource.

lend000 5y ago

It isn't really apolitical. Ironically, it seems to be more supported by the left (like the people downvoting you), despite the lack of consistency with progressive economics. I suppose it enables big spending and debt, which can be progressive, while more than undoing itself with X-inflation + deadweight loss.

jjoonathan 5y ago
> Ironically, it seems to be more supported by the left (like the people downvoting you) Speak for yourself. > it enables big spending and debt No, low interest rates are not what enables big government debt. The government can monetize its debt -- money printer, remember? > , which can be progressive, while more than undoing itself with X-inflation + deadweight loss. Well, if the losses trickle down as effectively as the last 40 years of gains, I think the bottom 90% of the pyramid should rather welcome those losses.
- lend000 5y ago
  The parent describes "consistently low interest rates, quantitive [sic] easing and other central bank policies," so I'm not sure why you singled out low interest rates (which are a byproduct of the Fed actions that DO enable big government debt, and which certainly make it take longer before annual interest on government debt becomes unsustainable). > I think the bottom 90% of the pyramid should rather welcome those losses. Maybe my sentence wasn't clear, but X-inflation here refers to asset/property inflation as much as consumer inflation, none of which should be welcomed by those who don't have huge amounts of net worth tied up in appreciating assets.

deleted 5y ago

[deleted]

dragonwriter 5y ago

> Central banks have managed to create an aura of science over what they do. In the case of the US Federal Reserve (different central banks may be different), the major ideological part is done by Congress in delineating the Fed's mandate. Which is why fairly radical ideological shifts in Fed leadership haven't significantly changed Fed approaches; that the Fed is minimally political in the partisan/ideological sense isn't an illusion they have created, its a reality.