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How about we just don’t empower a central planning body to make monetary decisions that devalue wages & salaries while inflating asset prices? QE & LIRP have l

by boppo1 3y ago

How about we just don’t empower a central planning body to make monetary decisions that devalue wages & salaries while inflating asset prices? QE & LIRP have literally been “rich get richer, poor get poorer: the policy”. People educated enough in finance to follow the effect tend to be in the asset-holding camp so there is less complaint. I’m not advocating high rates as good for the poor; I’m championing shaping the yield curve with a market mechanism. It might be too late for that to be anything other than disastrous though, after years of addiction to funny money.

MR4D 3y ago
> How about we just don’t empower a central planning body to make monetary decisions… For people that might argue with this statement, I’d highly suggest reading the book The Panic of 1907. And if you’re wondering I’m bringing up a book about 1907 instead of 1929, then that should lead you to go read the book.
- newzisforsukas 3y ago
  Ah yes, 1907 a time of great monetary equity
  - throwawaymaths 3y ago
    Whatever you think of 1907, the US went from a highly unequal society (an entire sector of citizens not even owning themselves) followed by being a failed state after an an insane civil war that decimated the population... To world power with a much MORE equal society, in five decades with no centralized financial institution
    - Supermancho 3y ago
      > To world power with a much MORE equal society, This statement relies heavily on how one might want to measure an equal society.
      - throwawaymaths 3y ago
        Basically the only way you can achieve the metric you desire is by ignoring slavery. Understood.
        deleted 3y ago
        [deleted]
- username332211 3y ago
  Let's see.. "In 1907 there was a financial crisis. We learned our lessons and created an institution to prevent the next crisis. So, the next time things went south in finance, in 1929 there was no crisis. There was a catastrophe instead."
  - MR4D 3y ago
    If I ever write a book, I’m going to ask you to write the intro! Love it!
  - ttfkam 3y ago
    In the wake of the 1929 crash and The Great Depression, a huge swath of regulations were put onto financial institutions so as to limit the riskiest investments with money in personal savings and checking accounts, aka Glass-Steagall. FDIC insurance was also born in this time. Prior to these changes, bank runs and financial crises occurred about every twenty to thirty years. By contrast there were none until the 1980s S&L crisis following…major deregulation of the financial sector. Many provisions of Glass-Steagall were repealed by late 1999. Less than ten years later, risky investments using consumer monies mostly in the form of real estate mortgage-backed securities imploded. Deregulation of the financial sector often brings short term windfalls with near term crises and catastrophes. When folks trot out the old "government is the problem" canard, I can't help but point out the economic arsons working on Wall Street and/or owning huge buildings in the middle of downtown financial districts. The government sometimes f's things up due to bureaucracy and ineptitude. The financial sector always f's things up because risk means nothing to them when it's someone else's money and they get their bonuses either way. One makes infuriating mistakes. The other doesn't make mistakes; only self-interested sabotage. I consider the latter a greater evil frankly.
    - roenxi 3y ago
      > Prior to these changes, bank runs and financial crises occurred about every twenty to thirty years. That isn't in itself a bad thing. There needs to be a mechanism to punish people who give their money to charlatans and to reign in malinvestment. If there aren't occasional bank runs then that suggests an excessively cautious investment environment that is destroying potential wealth. Or a lot off government bailouts to cover excessive risk. As you point out in a few lines with the "risk means nothing to them" comment, a situation has been set up where only the government cares about whether the risk profile being taken on is appropriate. Bankers don't care because it isn't their money, depositors don't care because it isn't their problem. That is a very poor outcome, everyone should care about that. People are presently empowering incompetents by flooding money into stupid ventures and they get no feedback about the damage they are doing. Mass voting once every few years combined with committees of professional bureaucrats is an ineffective way of doing risk assessment. This has to be something that people work out with their bankers on an ongoing basis. The US would look completely different and probably a lot better to live in if these incentives were corrected. It is interesting that in the crypto space a group of people have gotten so sick of this that they're going and making their own financial system (with hookers and blackjack, one suspects). It is a really interesting ongoing experiment because if the situation plays out in the obvious way, we're going to see a much healthier system in crypto. We've already seen any number of frauds cleaned out that'd probably have gotten away with it in traditional finance. And the way Tether eventually explodes will be a really interesting case study.
- scythe 3y ago
  Monetary policy could probably be implemented through some other means than real estate, which is what I interpreted the suggestion to mean. QE as it has existed was a real example of Friedman's "nothing so permanent as a temporary government program": a reaction to the housing bubble becoming a default tool of monetary policy.
dools 3y ago
The best interest rate policy is zero, which is the natural rate of interested in a floating exchange rate economy. Fiscal policy is the only tool through which equity can be managed. Monetary policy is pointless.
- JackFr 3y ago
  Zero is the natural interest rate? That’s ludicrous. A dollar today is always going to be worth more than a dollar tomorrow.
  - ebb_earl_co 3y ago
    Why is this the case about the worth of a dollar?
    - satellite2 3y ago
      Because you can invest it in the riskless asset and have a dollar and some interest tomorrow.
      - ebb_earl_co 3y ago
        Forgive my naïveté, but if it’s riskless, how are you getting interest from investing in it?
        ahepp 3y ago
        Isn’t that confusing cause and effect? You’re getting interest because they’re paying it to you. They wanted to borrow, and even if there’s no risk, you won’t lend it out for free.
        jaredhallen 3y ago
        One might argue about the relative value of interest rates vs risk, but all lending incurs risk. Maybe very little, but non-zero.
newzisforsukas 3y ago
[flagged]
- germandiago 3y ago
  Well, depends on who you ask... there are well-structured ways of thinking on intervention or non-intervention on both sides.
jan3024-2r 3y ago
[dead]
roenxi 3y ago
The most frustrating part of economic arguments, right there. There is an official policy that prices will go up exponentially, controlled by a tiny committee who implements the policy by, effectively, money printing. The official justification is a just-so story with no compelling evidence that I've ever seen. We seem to have gotten there because politicians don't like sound management any more than anyone else and just borrow and spend until the money runs out. And the outcome is asset owners get an enormous leg up over everyone else and the biggest asset owners get privileged. Given the level of this-sounds-crazy in the policy mix there should be much better justifications for all this policy than people accept. We should routinely be seeing actual studies by real economists justifying this madness. It looks like trash policy.
- tdullien 3y ago
  Which just-so story without evidence do you mean? Are you saying a liquidity trap does not exist? (https://en.m.wikipedia.org/wiki/Liquidity_trap https://en.m.wikipedia.org/wiki/Liquidity_trap)
  - roenxi 3y ago
    It probably exists. I don't see any reason that it should always be a good idea to lend money. But the link between "it is a bad idea to lend money" and "therefore we should cause prices to rise exponentially" is absurd on its face. The obvious alternative is people shouldn't lend out money until someone figures out a good use for the borrowings. I've never heard an argument that justifies a policy response. There are a couple of metrics that I'd accept as a goal for the economy. Maximising median leisure time, maximising wealth creation, maximising payoff for working hard, minimising waste. Something like that or any reasonable combination. I don't think exponentially increasing the prices of goods and services helps with any of those. As far as I can tell it just transfers wealth to asset owners. Which is nice enough if you are an asset owner but it seems arbitrary, unfair and pointless to me. I propose alternative strategies of asset owners have to rely on the value of the asset to make money, rather than waiting for handouts. I own enough assets that this policy probably benefits me. But it also appears to be causing terrible damage to the community and general faith in capitalism so I expect there will be a nasty backlash at some point that will outweigh the short term benefits. I can't buy stuff if people don't see a benefit in making it.
cosmojg 3y ago
Market monetarism with nominal GDP targeting based on a robust futures market is the way.

by boppo1 3y ago

MR4D 3y ago

> How about we just don’t empower a central planning body to make monetary decisions… For people that might argue with this statement, I’d highly suggest reading the book The Panic of 1907. And if you’re wondering I’m bringing up a book about 1907 instead of 1929, then that should lead you to go read the book.

newzisforsukas 3y ago
Ah yes, 1907 a time of great monetary equity
- throwawaymaths 3y ago
  Whatever you think of 1907, the US went from a highly unequal society (an entire sector of citizens not even owning themselves) followed by being a failed state after an an insane civil war that decimated the population... To world power with a much MORE equal society, in five decades with no centralized financial institution
  - Supermancho 3y ago
    > To world power with a much MORE equal society, This statement relies heavily on how one might want to measure an equal society.
    - throwawaymaths 3y ago
      Basically the only way you can achieve the metric you desire is by ignoring slavery. Understood.
      - deleted 3y ago
        [deleted]
username332211 3y ago
Let's see.. "In 1907 there was a financial crisis. We learned our lessons and created an institution to prevent the next crisis. So, the next time things went south in finance, in 1929 there was no crisis. There was a catastrophe instead."
- MR4D 3y ago
  If I ever write a book, I’m going to ask you to write the intro! Love it!
- ttfkam 3y ago
  In the wake of the 1929 crash and The Great Depression, a huge swath of regulations were put onto financial institutions so as to limit the riskiest investments with money in personal savings and checking accounts, aka Glass-Steagall. FDIC insurance was also born in this time. Prior to these changes, bank runs and financial crises occurred about every twenty to thirty years. By contrast there were none until the 1980s S&L crisis following…major deregulation of the financial sector. Many provisions of Glass-Steagall were repealed by late 1999. Less than ten years later, risky investments using consumer monies mostly in the form of real estate mortgage-backed securities imploded. Deregulation of the financial sector often brings short term windfalls with near term crises and catastrophes. When folks trot out the old "government is the problem" canard, I can't help but point out the economic arsons working on Wall Street and/or owning huge buildings in the middle of downtown financial districts. The government sometimes f's things up due to bureaucracy and ineptitude. The financial sector always f's things up because risk means nothing to them when it's someone else's money and they get their bonuses either way. One makes infuriating mistakes. The other doesn't make mistakes; only self-interested sabotage. I consider the latter a greater evil frankly.
  - roenxi 3y ago
    > Prior to these changes, bank runs and financial crises occurred about every twenty to thirty years. That isn't in itself a bad thing. There needs to be a mechanism to punish people who give their money to charlatans and to reign in malinvestment. If there aren't occasional bank runs then that suggests an excessively cautious investment environment that is destroying potential wealth. Or a lot off government bailouts to cover excessive risk. As you point out in a few lines with the "risk means nothing to them" comment, a situation has been set up where only the government cares about whether the risk profile being taken on is appropriate. Bankers don't care because it isn't their money, depositors don't care because it isn't their problem. That is a very poor outcome, everyone should care about that. People are presently empowering incompetents by flooding money into stupid ventures and they get no feedback about the damage they are doing. Mass voting once every few years combined with committees of professional bureaucrats is an ineffective way of doing risk assessment. This has to be something that people work out with their bankers on an ongoing basis. The US would look completely different and probably a lot better to live in if these incentives were corrected. It is interesting that in the crypto space a group of people have gotten so sick of this that they're going and making their own financial system (with hookers and blackjack, one suspects). It is a really interesting ongoing experiment because if the situation plays out in the obvious way, we're going to see a much healthier system in crypto. We've already seen any number of frauds cleaned out that'd probably have gotten away with it in traditional finance. And the way Tether eventually explodes will be a really interesting case study.
scythe 3y ago
Monetary policy could probably be implemented through some other means than real estate, which is what I interpreted the suggestion to mean. QE as it has existed was a real example of Friedman's "nothing so permanent as a temporary government program": a reaction to the housing bubble becoming a default tool of monetary policy.

dools 3y ago

The best interest rate policy is zero, which is the natural rate of interested in a floating exchange rate economy. Fiscal policy is the only tool through which equity can be managed. Monetary policy is pointless.

JackFr 3y ago
Zero is the natural interest rate? That’s ludicrous. A dollar today is always going to be worth more than a dollar tomorrow.
- ebb_earl_co 3y ago
  Why is this the case about the worth of a dollar?
  - satellite2 3y ago
    Because you can invest it in the riskless asset and have a dollar and some interest tomorrow.
    - ebb_earl_co 3y ago
      Forgive my naïveté, but if it’s riskless, how are you getting interest from investing in it?
      - ahepp 3y ago
        Isn’t that confusing cause and effect? You’re getting interest because they’re paying it to you. They wanted to borrow, and even if there’s no risk, you won’t lend it out for free.
        jaredhallen 3y ago
        One might argue about the relative value of interest rates vs risk, but all lending incurs risk. Maybe very little, but non-zero.

newzisforsukas 3y ago

[flagged]

germandiago 3y ago
Well, depends on who you ask... there are well-structured ways of thinking on intervention or non-intervention on both sides.

jan3024-2r 3y ago

[dead]

roenxi 3y ago

The most frustrating part of economic arguments, right there. There is an official policy that prices will go up exponentially, controlled by a tiny committee who implements the policy by, effectively, money printing. The official justification is a just-so story with no compelling evidence that I've ever seen. We seem to have gotten there because politicians don't like sound management any more than anyone else and just borrow and spend until the money runs out. And the outcome is asset owners get an enormous leg up over everyone else and the biggest asset owners get privileged. Given the level of this-sounds-crazy in the policy mix there should be much better justifications for all this policy than people accept. We should routinely be seeing actual studies by real economists justifying this madness. It looks like trash policy.

tdullien 3y ago
Which just-so story without evidence do you mean? Are you saying a liquidity trap does not exist? (https://en.m.wikipedia.org/wiki/Liquidity_trap https://en.m.wikipedia.org/wiki/Liquidity_trap)
- roenxi 3y ago
  It probably exists. I don't see any reason that it should always be a good idea to lend money. But the link between "it is a bad idea to lend money" and "therefore we should cause prices to rise exponentially" is absurd on its face. The obvious alternative is people shouldn't lend out money until someone figures out a good use for the borrowings. I've never heard an argument that justifies a policy response. There are a couple of metrics that I'd accept as a goal for the economy. Maximising median leisure time, maximising wealth creation, maximising payoff for working hard, minimising waste. Something like that or any reasonable combination. I don't think exponentially increasing the prices of goods and services helps with any of those. As far as I can tell it just transfers wealth to asset owners. Which is nice enough if you are an asset owner but it seems arbitrary, unfair and pointless to me. I propose alternative strategies of asset owners have to rely on the value of the asset to make money, rather than waiting for handouts. I own enough assets that this policy probably benefits me. But it also appears to be causing terrible damage to the community and general faith in capitalism so I expect there will be a nasty backlash at some point that will outweigh the short term benefits. I can't buy stuff if people don't see a benefit in making it.

cosmojg 3y ago

Market monetarism with nominal GDP targeting based on a robust futures market is the way.