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How can the central bank _not_ interfere?

For a central bank there's no such thing as no policy. Even inaction is a policy.

(Of course, there are systems that work without a central bank. And can work very well in fact. But that's not what the Dutch as part of the Euro zone have.)

I don't know, I'm just an idiot on the internet, but it seems like a better solution to monetary stimulus would have been fiscal stimulus. The government could have passed an infrastructure bill 18 months ago and the fed could have backed off.

I'll admit I'm pretty furious at the fed right now though. As someone with a lot of assets in cash who was hoping to buy a house last year, I have been double penetrated by inflation and spiraling home prices. The housing market accelerated just out of my reach before I could make a move and my cash pile is on fire. I'd have moved back into the stock market to protect it, but it seemed risky given historical valuations and such. Now I'm poorer and I can't help but think Powell effectively just stole from me and I've been punished for being defensive and not participating in the fueling of an asset bubble.

dec0dedab0de 1758 days ago

I've been punished for being defensive and not participating in the fueling of an asset bubble.

Yes, that is exactly it. The economy falls apart if everyone saves too much. Money is an imaginary number designed to facilitate separation of labor, if too many people save and retire early then there won't be enough people working.

FWIW I am the same way, and used to be angry about it, but I have accepted it for what it is. I bought my house 15 years ago at the height of the last housing bubble. I was under water for a while, but I didn't qualify for any of the assistance because I bought a house I could afford. If I had bought a more expensive house, or if I made slightly less money I would have been able to get some money from the government. It was all based on the ratio of income to mortgage payment, which is still kind of annoying.

Only way I could cut my losses in my mind was to pay off the house as quickly as possible, to save money on interest. So now it's paid off, and for the first time since a year after I moved in Zillow has it at a higher price than I paid for it, though just barely.

But back to the point, don't keep your assets in cash, or any one thing for that matter. Index funds, mutual funds, commodities, collectables, anything that is easy to sell and will generally go up in price with inflation. These policies are meant to encourage people with cash to do things with that cash, instead of hoarding it.

hirvi74 1758 days ago

> The economy falls apart if everyone saves too much.

I have no problem with policies meant to encourage people to do things with their cash, but only if proper social measures are taken to provide safety and well-being for those people if and when unfortunate events strike e.g. encouraging people to not save their money is a little bit more palatable in a country where socialized health care, public transportation, free public education, etc..

In other words, perhaps people wouldn't need to save so much money if more of their basic needs were covered. In my country (USA), not having savings is like playing a game of Russian roulette with one's financial well-being, assuming one is fortunate enough to have enough income to even have savings.

> These policies are meant to encourage people with cash to do things with that cash, instead of hoarding it.

Which cause the rich to get richer, and the poor get poorer.

betterunix2 1758 days ago

"assuming one is fortunate enough to have enough income to even have savings"

This cannot be overstated enough. In the USA a myth has developed about "personal responsibility" in which people have a choice, they can save for retirement or they can spend their money on other things; we tend to forget that for roughly half the country there is no such choice because just paying for basic living expenses (food, shelter, clothing, and transportation to a job) will leave nothing to save. People bought the myth and allowed defined-benefit pension plans to be replaced by IRAs and 401k plans.

"Which cause the rich to get richer, and the poor get poorer."

The rich should get richer if they are compounding their investment returns over time. The problem is that for more than 40 years America has been in the grip of politicians who have attacked government programs of all kinds, insisting that we cannot afford to pay for anything that benefits the poor while also insisting that we have to cut taxes on the rich (naturally, the tax cuts also benefit those very politicians). The fact that the poor cannot invest (for lack of capital) is not the reason they are getting poorer; they are getting poorer because for decades we have reduced the scale and scope of government programs that benefit the poor (or that benefit everyone equally).

[1] https://www.investopedia.com/terms/p/paradox-of-thrift.asp

> Yes, that is exactly it. The economy falls apart if everyone saves too much. Money is an imaginary number designed to facilitate separation of labor, if too many people save and retire early then there won't be enough people working.

Yes, this I recently learned is called the paradox of thrift. [1]

https://en.wikipedia.org/wiki/Paradox_of_competition

It's not just the paradox of thrift. The general concept is the paradox of competition. There are macroeconomic statements that always apply but as individuals optimize their local statements they actually end up "deoptimizing" the global statement. Basically a race to the bottom or a continuous form of the prisoners dilemma. In other words, the idea that local decision making will always reach a global optimum, the very foundation of free market economics, isn't even true in theory given our current money system.

See this in the case of Greece vs Germany. Germany is trying to boost exports by cutting back on imports. If Greece would retaliate by following the exact strategy there would be less trade between them overall. Meanwhile if both countries tried to boost imports, then both of them would be better off.

How exactly does Germany do it? The government is simply enacting policies to destroy the bargaining power of labor. Yes, Germany is trying to compete with Greece based on labor costs. It's trying to pass off a questionable economic policy that destabilizes the eurozone as strength because of moral attachments to export industries and saving money while blaming the other side for importing its products and borrowing to pay for them. This is why the eurozone is a failure and every country should have its own currency.

Yeah, it's not actually real.

The central bank can always just keep printing enough money to keep nominal GDP stable, if they want. No matter how much people want to save.

They can’t actually, GDP is a function of supply and velocity. If you increase supply and it’s saved, velocity drops commensurately. This yields no change in nominal GDP.

> I'll admit I'm pretty furious at the fed right now though.

I suspect you would have been a lot more furious at the Fed in the event they had sat back during COVID and presided over a deflationary spiral triggered by the lockdowns. Can't get a mortgage if you're out of work, ya know?

> As someone with a lot of assets in cash who was hoping to buy a house last year...

Let me stop you right there. Generally speaking, you shouldn't hold cash. Nobody should hold cash. Nobody should have ever held cash because even at the baseline expectation 2% inflation that's still a loss.

> I have been double penetrated by inflation...

Inflation is somewhere between 2 and 5%. That's not what I would call "penetration." Mild discomfort maybe.

> ...and spiraling home prices.

Housing affordability hasn't really changed on a monthly basis, because on a 30-year fixed rate mortgage the drop in interest rates from 4.xx% to 2.xx% means that a monthly payment two years ago on a $1M property is the same as it would be today on a $1.2M property. That's napkin math, I believe the spread is even larger IRL.

In fact, if you can lock in a 2.xx% mortgage in a 2-5% inflationary environment then it is in real dollar terms a zero-interest loan. Before factoring in tax deductions.

What's become more painful is making the down-payment.

> Now I'm poorer and I can't help but think Powell effectively just stole from me and I've been punished for being defensive and not participating in the fueling of an asset bubble.

You're not poorer, you're not as rich as you thought you'd be.

landemva 1758 days ago

OP said he or she is upset with price inflation and now has a pile of cash losing purchasing power.

arcticbull said '... you would have been a lot more furious at the Fed in the event they had sat back during COVID and presided over a deflationary spiral ...'

Deflation makes cash have more purchasing power, so arcticbull your speculation is wrong. Completely backwards.

I'm aware, however a mortgage also requires a job to obtain, which was what I was pointing to in the statement. Unless we saw truly spectacular deflation, I'm talking 500% year over year, it wouldn't have mattered. I suspect OP would have lost their job well before their admittedly less than 20% down-payment amount deflated enough to buy a house outright.

I suspect anything in between would have led to a huge spike in interest rates making borrowing yet less affordable no?

> Deflation makes cash have more purchasing power, so arcticbull your speculation is wrong. Completely backwards.

>> Can't get a mortgage if you're out of work, ya know?

So no, not really... unless you stopped reading before you got to that sentence ;)

why do you assume a deflation will cause job loss, in particular for the poster? Maybe they have a deflation-proof job (most jobs that aren't a result of malivestment). Deflation is not a magic wand where "boom, it happens, and people lose their job". Just as, much as the central bank might wish it to be, inflation is not a magic wand where "boom it happens, and jobs are created" (hence the word "stagflation").

landemva 1758 days ago

'spectacular deflation, I'm talking 500% year over year ...'

If currency loses 100% of value, it will be worth zero. A complete, 100%, total loss.

A 500% loss would be spectacular! And not possible using commonly accepted laws of the universe such as math.

betterunix2 1758 days ago

The economic consequences of deflation are very destruction. Cash may become more valuable, but a prolonged economic contract will leave you with less to buy with that cash.

> I suspect you would have been a lot more furious at the Fed in the event they had sat back during COVID and presided over a deflationary spiral triggered by the lockdowns.

No, what I'm saying is the government failed to act sufficiently and forced the fed to act when they shouldn't have(or at least to the level they have).

> Generally speaking, you shouldn't hold cash.

Now come on that's not really true in the short term. Generally speaking, you shouldn't put your money in the market if you need it in the next 5 years. Sure I could have bought CDs but have you looked at rates lately? That wouldn't have helped. My only option would have been to pile into an asset, and by the time I needed to park my money assets had already appreciated above historical norms. I'd be gambling against a reversion to the mean.

> Housing affordability hasn't really changed on a monthly basis

The market I am familiar with and was planning on going back into is up about 35% from late 2019. You're also then gambling that these historically high valuations will hold going forward. Homebuyer sentiment has plummeted because folks like me no longer think paying these high prices(https://fred.stlouisfed.org/series/CSUSHPINSA) makes sense.

godot 1758 days ago

> Generally speaking, you shouldn't put your money in the market if you need it in the next 5 years.

Did you really mean 5 years, or 5 months, or something else? I'm not sure if I can take this statement seriously, or if it's meant to be a joke. 5 years is a long time.

niij 1758 days ago

Asset prices don't always go up. The downturns have lasted much longer than 5 years. So if you want relative certainty you'll have $X at a certain date then you need to be in cash years beforehand. Otherwise you're gambling or have a backup source of cash.

Yes, 5 years. http://nerdwallet.com/article/investing/where-to-put-short-t...

If you're young and you've only seen the market go up you need to familiarize yourself with normal volatility patterns. The market can easily take a dump at any time and fail to provide a positive return for years.

icedchai 1757 days ago

Do you remember the lost decade? 2000-2009-ish... the markets went no where for almost 10 years.

> No, what I'm saying is the government failed to act sufficiently and forced the fed to act when they shouldn't have(or at least to the level they have).

What should the government have done?

01100011 1757 days ago

Fiscal stimulus. More jobs programs. More infrastructure. Put people in affected industries to work doing something productive.

quickthrowman 1758 days ago

> Generally speaking, you shouldn't put your money in the market if you need it in the next 5 years.

According to whom? Right now, nothing pays out any yield, it’s stocks or lose to inflation.

BDCs are paying ~10%. It’s not without risk, of course, they saw large drawdowns in 2020 but have recovered alongside the rest of the economy. I personally generate income borrowing on margin to purchase the Goldman Sachs BDC (GSBD) and using a risk reversal (selling a call, using the premium to buy a put) to hedge against a large draw down. NFA.

I’ve followed ARCC, MAIN and GSBD for years, and there’s the more diversified Van Eck Vectors BDC ETF (BIZD), with an 8.5% yield. But I digress.

You can try real estate as well. Or junk bonds.

> Let me stop you right there. Generally speaking, you shouldn't hold cash. Nobody should hold cash. Nobody should have ever held cash because even at the baseline expectation 2% inflation that's still a loss.

Nah, holding cash is fine under some circumstances.

Yes, the 2% inflation that the Fed chose to aim for makes holding cash costly.

But everybody holds cash. It's just that higher inflation expectations makes people hold less cash in real terms.

But then, you can be angry at the Fed for choosing that particular inflation target. The Fed could just as well go for 0% inflation. Or even go for a stable nominal GDP 65,000 USD per year per capita in perpetuity. (The latter would basically automatically ensure its dual mandate. Though most of the proponents of nominal GDP level targeting suggest to target a slight increase over time.)

In such a stable nominal-GDP system, holding cash would be rational in many more circumstances than today, because in general cash would slowly increase in real value as productivity and thus real GDP improved.

aksss 1758 days ago

> you shouldn’t hold cash

I don’t think they intended to be holding cash, they were setting up for a large purchase and the timing was bad. But yeah, arguably when there’s no immediate prospect of the opportunity resurfacing, probably reinvesting that paper would be more congruent with the system we have before us.

divbzero 1758 days ago

> In fact, if you can lock in a 2.xx% mortgage in a 2-5% inflationary environment then it is in real dollar terms a zero-interest loan. Before factoring in tax deductions.

This is a factor worth considering for anyone who is currently looking to buy a home. As long as you can afford the downpayment, you could lock in a fixed-rate mortgage while your earnings or other savings could grow at a higher rate. This is analogous to what some companies have done in recent years, loading up on low interest debt.

frockington1 1758 days ago

I did this a month ago. 2.3% interest on a second home, refinanced the other for close to that. Assuming (big assumption) this transitory inflation doesn't go away it's stupid not to load up on debt.

If the Fed and the government are going to reward those who leverage up on risk, might as well. As '08 shows you'll even be rewarded when the crash happens

hirvi74 1758 days ago

When interest rates on mortgages are lower, doesn't the prices of homes increase to compensate (like what's happening right now)?

If interest rates decrease and home prices increase vs. interest rates increase but home prices decrease, then there is a point where the two will intersect, and there are many points around the intersection where the difference between the two is fairly insignificant.

How does the common expression go -- "The house always wins?"

dpweb 1757 days ago

A $2000 mortgage payment at 4% interest is not equivalent to a $2000 payment at 2%.

That money that would have gone towards your equity, is being spent in interest. This is why people making 60k/yr. buy $65,000 trucks. Interest rates drop and they only look at the monthly payment amount.

You don’t always get the full tax deduction on a first home either. In high tax states the 10k deduction limit kicks in when your paying high state taxes + mortgage interest.

SilasX 1758 days ago

People absolutely should be holding cash if, as in the parent’s case, they’re looking for a home to buy :-p

Also, “don’t worry, just look at the monthly payment” is something that should only ever be said by a car salesman.

On a 30 year fixed mortgage what else matters? That’s your monthly payment. Taxes I guess?

Depends how long you’re planning to save. You can hold treasuries or risk parity adjusted pairings. Or CDs ladders. Lots of stuff!

SilasX 1758 days ago

As above, the same reasons why it’s bad to think of a car purchase purely in terms of the monthly payment.

> Depends how long you’re planning to save. You can hold treasuries or risk parity adjusted pairings. Or CDs ladders. Lots of stuff!

You don’t know how long the search for a home will take. That’s the point.

wahern 1758 days ago

>> Also, “don’t worry, just look at the monthly payment” is something that should only ever be said by a car salesman.

> On a 30 year fixed mortgage what else matters?

I think the general criticism regarding monthly payments is more targeted at products like interest-only mortgages, which were hot in the early oughts. Those aren't as common these days. Maybe some people have 10/1 ARMs and similar in mind, but that's a stretch. (Anyhow, today the spreads between ARMs and 30-year are ridiculously small.)

majormajor 1758 days ago

The people who outbid you for those houses could have outbid you without any monetary stimulus too, yes?

nostrademons 1758 days ago

Not if he has a large pile of cash, which the OP said it did.

Say that he's got $500K in cash but can put only $3.8K/month toward the mortgage, while the average person around him has $250K but can put $5K/month toward a mortgage. Average housing prices are $1.25M, so at 4.5% interest rates he's competitive. He puts down $500K and borrows $750K @ $3.8K/month for a $1.25M house, while the average borrower puts down 20% ($250K) and borrows $1M @ $5K/month.

If interest rates go down to 2.5% like they did now, the average borrower can now borrow $1.25M, so home prices go up to $1.5M. His cash stash still would require a $1M loan, which would cost around $4K/month, so he has been priced out.

If interest rates go up to 20% like in 1980, then the average borrower can only borrow $300K to maintain $5K/month, so home prices drop to around $550K and he can purchase with cash, or a tiny mortgage. All of the homes between $550K-730K (previously, roughly $1.25M-$1.7M) are now unaffordable to the average mortgage buyer, but are well within OP's range.

Inflation acts as a tax on savers and a subsidy for debtors.

hirvi74 1758 days ago

> Inflation acts as a tax on savers and a subsidy for debtors.

Slightly tangental, but you piqued my interest. If it's clear the Fed can print more money, which causes inflation, which is a tax on savers. Then why do savers or anyone need to pay taxes? Could the Fed just not use inflation as a form of taxes in general? Instead of taking x% of people's income, the dollar could just print the money they need, and inflate the dollar's value to recoup their costs.

I'm not saying this is a good idea or anything. I am not knowledgable enough in economics to argue for/against this. It's just a food for thought kind of thing.

> Could the Fed just not use inflation as a form of taxes in general?

In some sense, they already do that.

But it's more complicated than it first appears.

First, most of the money the Fed+government makes from issuing money comes from seigniorage, not from inflation.

Simplified a bit, seigniorage just means that the cash people hold in their wallets (and bank accounts) took the government pennies to print, but the people offered real goods and services in exchange to acquire it.

Second, higher inflation makes people hold less cash in real terms. A simple illustration: when Germany had hyperinflation in the early 1920s, some people might have carried cash by the wheelbarrow, but even a whole wheelbarrow would only be worth eg a few apples and potatoes.

In contemporary Germany with a stable currency, it's not too unusual to carry enough cash in a slim wallet to be able to afford wheelbarrows full of apples and potatoes.

So if the government+central bank want to maximize how much real benefit they get from printing money, they can't just crank up inflation. In fact, lower inflation is probably better, if you want to maximize this.

mosburger 1758 days ago

I'm not even close to an expert on economics, either... but I think what you're describing sounds similar to what's called "Modern Monetary Theory" or MMT.

If I understand the very basic gist of MMT correctly, it's basically that the government "invents" currency simply by spending. If the government wants to finance, e.g., an enormous infrastructure project, all it has to do is will it into existence and the money will get printed - mostly because the full faith in credit of the United States Treasury will make sure the right people are paid.

If this is true, what then is the point of taxes? Taxes are a buffer to "sop up" excess cash in the economy to keep inflation under control.

Another central tenet of MMT is that the end goal of tuning these knobs should be 0% unemployment, because that's when your economy is producing maximally.

I'm sure I got a lot of that wrong, because (like I said) I'm not an expert, but what you described reminded me of the MMT Wikipedia rabbithole I ended up in a few years back.

[1] https://mattstoller.substack.com/p/the-cantillon-effect-why-...

nostrademons 1758 days ago

Heh, you've asked an eternal question which I asked in my intro macroeconomics class, and which I suspect is being asked at the Presidential/Prime Minister and Central Bank levels in many developed countries now. I'll give you both the macroeconomic answer and the historical answer.

The macroeconomic answer is yes, assuming that you can control inflation and spend your money in a wise disciplined manner, you can do this. An inflation rate of 10% is basically a wealth tax on currency-denominated assets of 1/1.1 ~= 9%, collected implicitly. And it has many benefits. Administration cost is near-zero, the government just needs to print money and let price levels do the rest. As a wealth tax, it's progressive. It encourages consumer spending, and encourages people to hold productive assets rather than currency-denominated financial instruments. Aside from land & externality taxes, it's one of the best types of tax.

The historical reality is much nuanced, and negative. In reality, you never get uniform inflation across all prices; instead you get something called Cantillon Effects [1], where money pools at the places it's injected within the economy and at monopolies, and never makes it to ordinary consumers. This ruins a lot of the progressiveness of inflation: Google and Facebook shareholders will enjoy higher ad prices (which is happening now), but the ordinary service worker on the street still lacks the bargaining power to get a raise. And it's also easier to dodge than governments believe: instead of holding wealth in cash, wealthy individuals will simply hold stocks, cryptocurrency, art, NFTs, and other "floating" assets whose value rises along inflation (this is also happening now). Inflation also acts on a tax on the economic efficiency of businesses and consumers - instead of the government collecting the tax, businesses simply have to re-price all of their items, and consumers may need to find alternate sources if relative prices change.

The worst case, though, is that it's unclear whether it's possible to maintain steady, government-controlled inflation at appropriate tax levels (which would have to be about 50% to maintain government spending levels of about 35% of the economy). Looking at incidents of high & hyperinflation [2], it's very difficult to find time periods where inflation exceeded 20% but then did not go on to exceed hundreds of percent. Businessmen seem to have a binary approach to inflation - either they can think of a world of stable prices (where maybe they give 2-3% CoL increases each year), or they must grab all the money they can right now because all their costs are going up too and if they don't they'll go out of business. There are many historical examples where governments thought "Okay, we can tolerate just a few percent higher inflation to fund this one war, and the spoils will pay it back later" and instead they found themselves tipped into hyperinflation and unable to rein the economy back in.

[2] https://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hig...

foepys 1758 days ago

Not necessarily. If the monetary stimulus was like $10,000 per person, it would be totally different than lowering interest rates that mainly benefit the rich that can get even more cheap money now to buy properties off the market.

Sure, some of them. But others (institutional investors) are basically able to make outrageous bids due to access to easy money.

raducu 1758 days ago

A lot of those people bid because interest rates are so low or even negative

majormajor 1758 days ago

So?

If they could afford an X/month mortgage, so bidded a higher total cash price because X/month suddenly was a higher total purchase price due to lower interest rates, and the original poster could only afford a X-$300/month mortage, the original poster isn't beating them anyway.

There has been an extreme shortage of supply due to some combination of people not wanting to move due to Covid because of exposure to lots of people being required, people valuing homes with more space over apartments more than they did in the past, and people not wanting to try to "trade up" because the houses they'd upgrade to were also being hit by the price increase. That shortage is what fucked the original poster here, not stimulus checks.

fileeditview 1758 days ago

I think one important point is that said people need to invest into properties instead of say government bonds because interest rates are so low or even negative.

_dain_ 1758 days ago

But this article is clearly about the Netherlands, not the USA ...

MomoXenosaga 1758 days ago

Indeed the Dutch economy is fine. Everyone expected COVID to be some kind of economic disaster but despite heroic efforts by the finance minister to spend money like water the Netherlands still only has a 70% GDP debt ratio and unemployment is at 4%.

There's a lot wrong with the Netherlands and Dutch people but economically everything is still chugging along nicely. Our sole saving grace.

divbzero 1758 days ago

Not only has the Fed’s endless easing been unfair to many, I fear what will happen next. We will suffer when the bubble pops or inflation worsens or both.

We'll see about that. I was predicting deflation months ago. Now that the government is cutting back on stimulus the labor market will have to support itself.

Do you want to bet on the 'bubble popping' or 'inflation worsening'?

Financial markets don't seem to expect either. Inflation expectations (via TIPS spreads) are where the Fed wants them.

eru 1757 days ago

Why? Fiscal stimulus is very expensive. Monetary stimulus is basically free.

01100011 1757 days ago

But it's not free. Idiots like me are paying for it.

exporectomy 1758 days ago

I can understand your frustration, but you seem to have contradictory feelings. You didn't want to fuel an asset bubble and are unhappy that you didn't?

01100011 1757 days ago

Are you fueling an asset bubble every time you make a purchase?

systemvoltage 1758 days ago

Don't forget, our salaries are largely unchanged although the market is finding it out the hard way (employee shortage).

So honest hardworking people got triple-fucked.

I can't imagine how well UBI would ever go. This should be the nail in the coffin for UBI for me, I will never vote for it.

dec0dedab0de 1758 days ago

That's not fair to UBI.

Not everyone got it, so it wasn't universal.

They shut down most small businesses, so the benefits of the extra income were consolidated in a few major companies.

The housing market went up because people who were previously happy to live in an expensive small apartment in a busy city were suddenly forced to stay inside most of the time, and realized they would rather have a bigger place.

systemvoltage 1758 days ago

Not convinced. Inflation would skyrocket, asset-holders will get richer and inequality would get worse if it already isn't. The fella working at McDonalds would get shortchanged for not playing the asset-bubble stock-bubble game as he/she is serving $20 burgers to customers.

dec0dedab0de 1758 days ago

That may be true, but my point was that this is not a good example of UBI. This is a global pandemic, and a bunch of actions around it.

Though since we're talking about it, I think UBI might work if we also outlawed fractional reserve banking.

Currently, new money is created when banks lend out more than they have, I think they like to call it "leverage." This creates a type of inflation, but the only ones benefiting are the banks and the people/businesses they choose to loan money to.

Instead of allowing leveraged bank loans, we could create the same inflation by blatantly printing new money every year and distributing it equally. This would give the benefits of inflation to everyone. If you wanted to start a business, instead of getting a cheap loan you would have to crowd fund it, because all the money(power) that was in the hands of banks is now everywhere. If we needed to control inflation, we could have taxes and remove the money collected from the pool instead of using it.

It would be a bit of a balancing act to make sure enough people keep working, and that prices don't get too high, but I think it's doable.

bee_rider 1758 days ago

Was this actually the last nail in the coffin for you? Or had the coffin already been buried?

> Inflation would skyrocket, asset-holders will get richer and inequality would get worse if it already isn't.

1) I don't think UBI would be that much money per person. The UBI proposals are alternatives to food stamps, not jobs.

2) The people with money to burn and buy assets and $20 burgers would lost more than their UBI due to taxes.

Aside, in expensive west coast cities we already have $20 burgers

I think you're getting downvoted for your UBI comment.

> So honest hardworking people got triple-fucked.

You're absolutely right. Real wages are actually down. If I wasn't a relatively rich SW guy and was a laborer I might be out in the streets lighting shit on fire right about now. I feel frustrated because I might not be able to buy a home again for a year or two, but there are people who are seeing their dreams disappear forever in front of their eyes. Imagine being a low-skilled person who was aiming to buy a house in a lower-tier market until outside speculators and investors move in, searching for anywhere they can park their leveraged cash piles before inflation sets them aflame. I can only hope that these piles of capital go up in smoke as the malinvestments driven by fanatical fed policy prove unwise.

lifty 1758 days ago

You wouldn't vote for the party that promised to implement it you mean. I would love it if more democracies would enable citizens to vote on important issues like this, similarly to what Switzerland does.

This sounds noble in theory, but in practice people make awful choices.

systemvoltage 1758 days ago

I've always been a Democrat but lately, I am reconsidering my position. I am not a single issue voter but UBI might be the reason to not support the Democratic party for me (if it ever gets on the ballot). Thankfully, most Democrats I know oppose UBI. The reason I am reconsidering is to do with how the entire west-coast is run - living in Seattle, Bay Area, LA and Portland feels like a third world nation. I'll probably continue to vote for Democrats in the presidential election, but local and county elections it will be the Republicans or Libertarians.

bananabreakfast 1758 days ago

You've very clearly never been to an actual third world country.

Having homeless people and a high crime rate does not == 3rd world. In fact, it only means many, many people want to live there due to the overwhelming economic prosperity that is clearly not equitably split.

Also fun fact: the three "third world" states you mention have a combined GDP higher than EVERY OTHER COUNTRY IN THE WORLD after the US, China and Japan.

> living in Seattle, Bay Area, LA and Portland feels like a third world nation

UBI would help a lot with homelessness and blight. Also seattle is not nearly as bad as the rest of those places in 90+% of the area.

Inflation is a tax on cash. It's how the government can spend money without increasing explicit taxes. I don't hold any cash because of this.

However, asset inflation is not quite the solution it seems, as the government taxes the illusory capital "gains" due to inflation. I suspect the stock market surge over the last year is mostly fake inflation gains.

[1] https://fred.stlouisfed.org/series/PSAVERT

> I suspect the stock market surge over the last year is mostly fake inflation gains.

It's not really possible to make 100% gains out of 5% inflation. Not every price increase is inflation!

The increase in the price of stocks isn't really inflation (except with respect to CPI) because 1 share of AAPL buys you far more CPI goods than 1 share of AAPL bought you 2 years ago. For it to be "inflation" and "entirely illusory" 1 AAPL share, while priced at $150 would have to only buy you as much a 1 AAPL share 2 years ago at $50.

That makes the increase in asset prices "ROI" not inflation.

What you're seeing is a massive increase in personal savings among Americans, recently at near all-time highs. [1] Combined with FINRA margin debt at near all-time highs due to the low-cost and broader availability of loans. [2] That's my theory anyways.

[2] https://www.advisorperspectives.com/dshort/updates/2021/08/1...

Do you really believe that inflation is only 5%? I don't. I see big price increases across the board.

BTW, what the shares of one company does means nothing in this discussion. What the S&P 500 does means something.

(1) well I don’t know what to tell you haha, inflation calculations are public. You can’t just say without citation that ehhh I feel like it’s not though shrug - this is actually something you can calculate! Please, do it, or cite some sources - ideally credible ones! You can’t just make giant claims like that without evidence. Of course certain contributors will be higher than the average weighting - like housing - but that’s how averages work.

(2) ok the same exact thing applies to SPY shares and doubly so when you include dividends. I mean AAPL is 7% of the S&P500 and 12% of the NASDAQ and so is fairly representative but your point is well taken.

Inflation is a tax on money earned in the past. Money earned in 2011 isn't as good 2021. You can't sit on it. If you actually spend it within a year the impact is barely noticeable.

There are two reasons why stock prices go up. Inflation raises revenue expectations. Lower interest rates raise the value of future cash flows. This is especially bad with land because it can absorb any additional money you get from lower interest rates. Low interest rates make your car cheap but not your house... It's a big problem.

intothev01d 1758 days ago

Yes, they ultimately act at some point and not at others, and that is their policy or stance (action or inaction). The problem is the actions they've been taking that are leading to the results I'm referencing.

GDC7 1758 days ago

> Even inaction is a policy

Inaction is the only policy. All the other actions are stuff that these people do to justify their existence .

With all due respect for Jerome Powell, Bernanke etc. these people are kind of frauds.

They are the only academic which are globally known and get all the respect and bows as well as recognition.

But their craft is a pseudoscience. The Nobel committee knows this, in fact the Nobel Prize for Economics is commonly referred as such but in reality it's:

"The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel"

Worlds apart.

If they were real men they'd pick a real science and face real irrelevance like real men if they are wrong or fail to make important contributions. Only in economics people are still around after getting it wrong so many times.

It seems like the more wrong you are , the more recognition you get, as people anticipate that economists who shoot frequently will get it right more than those who shoot infrequently given the randomness of their predictions

jfengel 1758 days ago

There's no Nobel at all in mathematics. Does that make it pseudoscientific?

yjftsjthsd-h 1758 days ago

I don't think mathematics is a science at all, nor has it been claimed to be one?

mpalczewski 1758 days ago

Math isn't a science at all, nor does it pretend to be.

GDC7 1758 days ago

Math is the foundation of sciences which gets the real Nobel, it would be redundant to have it in there.

Blikkentrekker 1758 days ago

I don't know about other countries, but this country is absolutely full of such loopholes and my parent is a master at exploiting them.

My entire family s moving assets around in creative ways as to save money. In anticipation of my the death of my grandparent, he is now loaning money to his children in the legal sense to avoid inheritance tax so that when he dies they don't have to pay it. — All of this is legal, and it is silly.

My father always said that taxes are a problem of the rich. Middle class and below rarely complain about them. If your family is moving around money like that to avoid taxes, then you are a lucky and/or wealthy person!

Silly? Yes, I agree. I favour about 50% inheritance tax with almost zero minimum. Inheritance is fuel for the fire of income inequality. Families create dynasties by avoiding inheritance tax. Most highly industrialised, wealthy countries would have much less income inequality with vastly higher inheritance taxes.

Blikkentrekker 1758 days ago

> My father always said that taxes are a problem of the rich. Middle class and below rarely complain about them. If your family is moving around money like that to avoid taxes, then you are a lucky and/or wealthy person!

Your father is simply wrong. It can, and is done in my family to avoid losing out on university, rent, and health insurance subsidies that only apply to the poorest segment of society.

By moving our assets around, the poorest members of the family can continue to receive them all the while effectively being slightly over this treshold.

There is much to gain from creative accounting for the poor in countries that provide assistance to the poor by making one appear poorer than one is.

> Silly? Yes, I agree. I favour about 50% inheritance tax with almost zero minimum. Inheritance is fuel for the fire of income inequality. Families create dynasties by avoiding inheritance tax. Most highly industrialised, wealthy countries would have much less income inequality with vastly higher inheritance taxes.

The problem is that it is very easy to avoid it in a number of ways such as simply creating a shell company jointly with one's heirs and then donating the assets to the company; the heir then becomes the sole owner of the company after death, as if such taxes were to apply to stakes in a company, then companies would go defunct upon the deaths of some of their owners.

Tax laws in many ways rely on citizens not being clever enough to exploit the numerous loopholes, — but then again “idiot tax” is not something I'm entirely opposed to.

I think "taxes are a problem of the rich" is a thing that rich people say. I've been poor, and taxes really fucking suck when you're poor. It's even worse when you're poor and in a service industry where taxes are really stacked against you (taxes on tips). Finally, since this is, after all a thread about inflation: Bracket creep is a thing.

> Most highly industrialised, wealthy countries would have much less income inequality with vastly higher inheritance taxes.

Its trivial for someone with lots of money to find ways to avoid dying with money but still ensure the next generation has a good life. As grandparent comment suggests. I don't think any tax or any plan that is not destructively over-burdensome can avoid people ensuring their next of kin have a good life.

[1] https://en.wikipedia.org/wiki/Mittelstand

You wrote: "destructively over-burdensome"

How do you feel about my suggestion of 50% inheritance tax without loop holes and minimums? It should decrease inherited wealth by greater than a geometric rate.

If any Germans / Austrians / Taiwanese / Koreans / Japanese are reading this thread: Can you comment about how to handle inheriting a family business than is worth more than 1M EUR? (They are all famous for "Der Mittelstand"[1].) My point: When you begin to add exceptions, 1M EUR quickly becomes 10M EUR and 100M EUR! Idea: You "pay" the tax on a family business inheritance buy guaranteeing payments to national tax authority / treasury as long as the business is open. (Assume business does not go bankrupt!) You can discount the future cashflows and get a present value that appears as a debt on the company balance sheet.

> without loop holes and minimums

How does this work? There are always loopholes. I don't think it could exist, nor will exist with the incentives of politicians, frankly. It would be nice though.

> How do you feel about my suggestion of 50% inheritance tax without loop holes and minimums? It should decrease inherited wealth by greater than a geometric rate.

I have no issue, in theory with aggressive taxes. I of course don't want to lose my income if the taxes don't help society, but i have no issue with useful tax. As a not-billionaire without inter-generational wealth protect, i see inheritance taxes value. I think, realistically, that people will always prefer to protect/provide to kin, at expense of society, and we have to work around that.

Can i create a holding company, co-owned between me and next-of-kin and "invest" my money in it then let them liquidate?

Can i loan them the money? Can i gift them money? Can i store in trust? Do other nations have successful ways to do this?

> Idea: You "pay" the tax on a family business inheritance buy guaranteeing payments to national tax authority / treasury as long as the business is open.

This seems like its burdensome to the business, in a way that could be destructive to it. If you suspend payment when its not profitable, then you can act like amazon and many other corps and eternally run a deficit to avoid tax. If you don't allow that, then you're draining the cashflow of a valid business which may kill it.

Frankly, i think its backwards too. Giving cash or liquid assets to your kids? Tax the S*T out of it. Giving a successful business that employees lots of people in your local town? Don't ruin the business trying to tax an old (wo)man giving it to their kids - that's destructive. Tax the kids when they cash-out from the business (sell biz, receive income, etc). I'm not particularly biz friendly, but they have real value to people outside of the family and produce something for society.

I also don't think its unreasonable to not tax real estate transfers, especially if its a primary residence. Maybe estate that actually stays in the family multiple generations doesnt get taxed, idk. Lots of people have strong multi-generational attachment to physical places. That's what really makes this hard.

MinorTom 1757 days ago

Note: I'm not the person to vote for more taxes, and I agree with you in principle. It's just that your arguments aren't ones.

> Can i create a holding company, co-owned between me and next-of-kin and "invest" my money in it then let them liquidate?

You'll always have to transfer the stock to your next-of-kin somehow. This is where a tax would apply.

> Can i loan them the money?

Yes, but they'll need to pay it back someday. That makes the debt a taxable asset. (i.e. when you inherit you inherit the "asset" = the obligation, which is taxed with 50%)

> Can i gift them money?

In Germany the gift tax is the same as the inheritance tax.

> Can i store in trust?

Yes, and that's why I agree with you. It's just not as simple to avoid inheritance tax as you make it out to be.

sombremesa 1758 days ago

> Most highly industrialised, wealthy countries would have much less income inequality with vastly higher inheritance taxes.

It's true that extremely tax-heavy countries generally have poorer populations with a more even wealth distribution, but that's more or less the result of "nobody will get rich if you take everyone's money".

The vast majority of millionaires in the US are self made, so inheritance taxes couldn't possibly change that?

Ever wondered why government debts are a problem to begin with? Lots of people with money aren't paying taxes. There is always enough money in an economy to repay all debts, the problem is getting that money to move back to the government. If interest is positive it must loop around multiple times.

jdsully 1758 days ago

I'm surprised that forgiven debt isn't considered income. It would be in the US, but then in the US the debt would still be owned by the estate and is still collectable.

viktorcode 1758 days ago

This is being practiced successfully throughout the world since the Great Depression times. Would love to hear when do you expect this system to collapse?

https://fred.stlouisfed.org/series/WALCL

grey-area 1758 days ago

Maybe around the time all restraint has been abandoned - assets held by the Fed have expanded by 8x in the last 10 years (the story is the same for most large central banks).

We already see the impact in massive asset price inflation over the last decade, a distorted bond market, growing inequality, an inefficient stock market, and a proliferation of scams and fraud. This is not going to end well and MMT is not a panacea.

How do we now leave ZIRP and QE without crashing markets and entering another depression? They have already tried several times to exit and had to abandon it.

Why doesn't the US/EU/UK/Japan all have run away inflation?

And, what is your alternative plan to quantitative easing (QE)?

grey-area 1758 days ago

We could return to the times when governments didn’t buy their own debt using an intentionally convoluted and obscure process involving third parties in order to prop up asset values and suppress risk free yields.

See the linked graph above for evidence of just how abnormal the last decade has been.

QE is a failure on its own terms. It was to be targeted and of short duration and to promote growth and suppress inflation. None of those objectives were achieved and we’re now addicted to it in ever increasing amounts, along with zirp. What do we do when the next crisis hits if we don’t normalise rates and bond buying again? How will the bond market function when the gov owns more than half its own debt? How will stock markets function when governments step in to buy even corporate bonds indiscriminately with new money?

rurp 1758 days ago

The US does have runaway inflation of financial assets, due to the policies of the Fed. Housing and stock prices have been growing at a ridiculous rate for years. The country hasn't tripled its entire productivity in the past decade, but the stock market has been acting like it.

throwaway2037 1757 days ago

You raise an interesting point about Fed policies (QE) and housing prices. The UK/EU/Japan all use extensive QE. The wealthiest (per capita) economies of EU (France, Germany, Italy, Belgium, Netherlands, Nordics) are not experiencing huge increases in housing prices. Actually, France, Germany and Italy are not very good places to buy houses from an investment viewpoint. Except for center of most economically important cities, most housing in those countries grows at inflation or less. And Japan certainly does not have run away housing prices. Again, they increase only slightly more than inflation.

My point: I think housing prices in Australia, New Zealand, Canada, US, and UK are "out of control" because we read a lot of English-language media about the richest places in those countries where housing supply is highly constrained. As a result, it seems like housing prices are run-away. But no one is saying that about Perth, Australia, or Leeds, UK, or Minneapolis, Minnesota, US, or Ontario, Canada. Do you see my point?

Another thing to consider, most regions of France and Germany carefully plan how much housing supply is needed, then build it -- public or private. This seems to work very well to keep housing prices very stable and affordable for middle class and below.

And Japan has national and universally applied land usage and building codes. It is almost impossible to practice "NIMBY-ism" in Japan. So plenty of houses get built, even in very crowded places like Tokyo, Nagoya, and Osaka.

rurp 1757 days ago

That's an interesting perspective with some ideas I wasn't aware of. Thanks for the thoughtful response.

default on the currency and never borrow again. Start following a policy of: Pay for everything this year using last year's tax receipts.

https://en.wikipedia.org/wiki/Debt_monetization

grey-area 1757 days ago

That would neither be necessary nor particularly helpful.

I think you're really talking about a soft default here with 'default on the currency' (normally you default on debts, not currency), which is in fact the current policy of risking inflation to get rid of debts, but then you're following that up by suggesting austerity, which was also tried as a response to 2008 (the UK is a prominent example), and failed miserably as well.

There's nothing wrong with borrowing for counter-cyclical spending, or with borrowing in general IMO. There are other answers than borrowing to pay for everything or never borrowing and during a recession a little government support (monetary and fiscal stimulus) can go a long way.

What is wrong and dangerous IMO is to pretend that we don't need taxes any more and that countries can simply print their way out of any problem (as has become orthodoxy with MMT). This used to be called debt monetisation, and was frown upon as debasing the currency in this way usually eventually ends in financial crisis and/or hyperinflation. We'll see where it leads as this is the policy we've been pursuing since 2008 and supercharged in 2020 as you can see in the graph above.

dnautics 1757 days ago

> There's nothing wrong with borrowing for counter-cyclical spending, or with borrowing in general IMO

1. You're stealing from the poor (via currency devaluation) to give to the rich (via government grants, if you are struggling in the tenderloin you are not getting a SBA)

2. Contemporary ethical government is predicated on the principle that the actions of the government have the consent of the governed. Sure, you can't always have that, but you want to try not minimize not getting the consent of the governed. If government borrows money, then people who could not have voted against the borrowing of that money are enjoined to pay it back (for example, people who became of the voting age after the act of borrowing). If you go to a pay-go system, the voters have approved of the taxation and the voters have approved of the use, and the chain of consent is not broken.

"default on the currency and never borrow again"

I am struggling to believe this is a serious suggestion.

Can you please (oh please HN don't down vote me!) provide more details?

Almost all highly industrialised, wealthy nations are heavily dependent upon trade. If you default on your national debts to foreigners, they are very unlikely to want to trade with you in the (near) future. How to do you propose to overcome this issue? See Argentina!

oh there is no doubt that everyone will be pissed off at the US for defaulting on the dollar since debts are denominated in it. But honestly, TINA. Due to demographics (we had milennials) the US is one of a few robust, rich, markets where you can sell your sh*t, so people will still want to trade with americans, regardless of what the government does. Finally, the US is not as dependent on foreign trade as you think. It has the lowest GDP:trade ratio of any country in G20 (worldwide it is in the very bottom: less than cuba and more than pakistan, and only above nigeria, afghanistan, ethiopia, and sudan). The US is even a net food and energy exporter, so it could probably survive a lowered trade volume. Everyone else would "be rekt", though. It would really suck for ecuador.

> See Argentina!

Perfect example. The country defaulted and it's honestly not a terrible place to be, considering what it's been through. Not everything is an exact parallel, but compare it to Brazil, where the country inflated instead of defaulted.

The problem with austerity is that it is incompatible with everything else. You have to sacrifice something to obtain it. Either reducing global trade or increasing regulation (primarily more taxes on bad behavior) to keep companies in check.

ashtonkem 1758 days ago

Usually austerity is coupled with drastic reductions in expenditures, both for infrastructure and things like social welfare. This kind of stuff regularly drives ruling parties out of power and leads to protest and revolt.

Not a good choice if you can avoid it!

The problem with austerity is that most countries implemented it were forced into doing it and, due to the particulars of that political relationship, chosen to cut social services instead of cutting cronyism, which is also politically calculated to cause as much pain as possible for the poor and create an unpopular sentiment against austerity and coerce the entity imposing the austerity into ending it.

eloff 1758 days ago

With interest rates trending ever lower since then. The only reason to hold government debt right now is to park large amounts of cash that can't otherwise be parked. Bonds are a terrible investment now.

What happens when the only way the state can sell debt is to print the money and buy it itself? What happens in the next crises when we need to stimulate the economy and rates are still negative?

At some point you can't keep kicking the can down the road. When do we reach that point? Are we there now?

I'm not a doom and gloom kind of fellow, but this does not appear to be sustainable to me. As with climate change, destruction of ecosystems, and draining groundwater reserves, all unsustainable practices come to an end. Abruptly if not planned for. It looks like we're nearing that point with monetary policy.

davidgay 1758 days ago

>With interest rates trending ever lower since then.

Clearly not, the peak was in 1981 which is more than 50 years after the Great Depression: https://advisor.visualcapitalist.com/us-interest-rates/

>>>With interest rates trending ever lower since then.

We are at crazy lows compared to most of this time frame.

eloff 1758 days ago

That's missing the forest for the trees. No, it's not a continuous straight line down. But the trendline is, which is what I talked about.

klipt 1758 days ago

How far negative can you go before it becomes ridiculous? If your bank has -50% interest, is that not effectively the same as hyperinflation?

[1] https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-nega...

wcoenen 1758 days ago

It can continue until people start withdrawing physical cash in large amounts, which will happen when the negative rate starts outweighing the cost and risk of storing cash.

After that, further decreases of the interest rate can only work if cash withdrawals are restricted to prevent bank runs, or alternatively if the value of physical cash and digital deposits are decoupled. The IMF has posted something about the latter option[1].

If interest is -50% those bonds must truly be worthless. Seriously, if you can't find solvent borrowers at -49% something is really wrong with your economy.

Considering that central banks for highly industrialised, wealthy nations normally move in 25bp increments, moving from -50bp to -50,000bp seems... well, a lot of central bank meetings. Are you proposing run away deflation? We have never seen it since the industrial revoluation stated. If the risk is real, why aren't we seeing more academic papers about this subject?

lifty 1758 days ago

But we don't need money, the government can tell us exactly what to do and where to go work, so that way we can run the economy at 100% efficiency. /s

istingray 1758 days ago

This is the equivalent of saying: This is being practiced successfully throughout the world for the last 80 years

Does that give you confidence? 80 years doesn't seem long to me.

ashtonkem 1758 days ago

80 years is short enough that we can’t be confident that it’s some rule of human societies, but it’s also much longer than any other recorded bubble has ever lasted. At 80 years the burden of proof is beginning to shift from those who think the system will work tomorrow the same as it worked today, and onto those that are predicting doom and sudden change.

I’d also like to point out that prior to the current system, market panics occurred significantly more often than once in 80 years. So if we’re comparing the system we have today and the system that existed 80 years before it, the current system seems measurably more stable.

80 years is longer than the average life span of most highly developed economies. In short: It is a lifetime. It seems long to me.

And 80 years is roughly 50% of all years of industrialised economies that started around 1850. Recall that the world economy had zero growth per capita until the industrial revolution started around 1850.

ashtonkem 1758 days ago

80 years is longer than most constitutions. The current French Republic was created in 1958, 63 years ago. In fact 80 years covers three French constitutions. China’s constitution is from 1982, and Finland redid theirs in 2000.

Of the countries part of the UN, only 14 countries have a constitutions older than 80 years. The oldest is the US in 1788, and the youngest is Ireland in 1937.

what is your definition of "success"? Is the divergence between productivity and wage growth success? Also, over and over countries have tried to stimulate their economy with the printing press and had some rather... unsucessful experiences, with extreme examples being yugoslavia, zimbabwe, venezuela. And some more mild but still painful experiences including brazil and argentina.

Predicting timeframes is tricky. An inflationary spiral by its very nature is an exponential process, so you can seem fine for a while and then all of a sudden there's no way out except through a singular process and things are really bad.

StanislavPetrov 1758 days ago

Just because you can't be sure when a ponzi scheme will collapse doesn't mean its not a ponzi scheme.

http://rootbug.com/interstellar-oikeassa-aikaan-liittyvat-ol...

An article from 2014:

>That people’s “time preference”, impatience, cannot be negative in the long run — and hence the possibility of negative real interest rates is not needed.

How does time preference become negative? Aging populations consist of people who need to work now, because they cannot work later. Alternatively, rich people at the top consider money a measure of wealth and optimize it like a high score. Third cause. Banks have written an excessive amount of money losing bonds and the money they have issued does not actually reflect the losses in the bond market (2008). In other words, people use money to isolate themselves from losses in the real economy because it is insured by the government.

I will say this: Over the long term interest rates are not set by banks, not even the central bank. It is primarily the availability of solvent borrowers. Companies essentially offer an investment opportunity to the bank and promise a fixed rate of return. The banks purpose is to price risk, effectively it is determining whether that promise is the real deal. The fact that low interest rates have not lead to inflation simply means that there are no solvent borrowers at that level of interest.

Here is a perverse fact about deflation: Once you have deflation, money itself provides a risk free rate of return that competes with labor (the thing that backs debt based money) for capital. When there is deflation there is no market mechanism that can determine an interest rate that balances credit (savings) and debt (borrowing). According to the Friedman Rule [0] the best interest rate is 0% and it is assuming no inflation or deflation. When you have deflation interest rates must become negative.

[0] https://en.wikipedia.org/wiki/Friedman_rule

csomar 1758 days ago

> The fact that low interest rates have not lead to inflation simply means that there are no solvent borrowers at that level of interest.

That's where you lose me. Prices are going up for many things all over the world (including in the Tech world which used to be highly deflationary). Let's not forget that we are in a pandemic (loss of demand) and that oil prices are relatively low. Prices should have gone down. The only thing going down right now is the government CPI.

useful 1758 days ago

When you have deflation, capital in general, not just money, competes with labor.

Buffet became very rich because of this fact. In the current environment, revenue, profit, growth are what drives valuations. Cigarette butt value investing? Not so much.

But what if you have deflation and/or high taxes? A building, land, machinery, yourself, etc are what you should invest in because they can be used to make money. Those who get rich in these environments are the ones that are making a bet on depreciation of capital (property, goods, etc) being less because of an increase in value or their useful life in an environment that rewards those who put their money to work.

cryptica 1758 days ago

When 99% of people realise that they've essentially been scammed by the reserve banks, the backlash is going to be massive. There will be discussions about asset seizures and wealth redistribution. That's just a matter of time now. The cryptocurrency crowd knows this and wants this. They're helping to accelerate this. Guess what asset is hard to seize?

The masterplan is this: Let the banks mess things up, ruin people's trust in their governments and in capitalism, you move to a country that's unlikely to fall to communism, HODL your crypto, then wait it out then watch your crypto price moon as capitalists desperately try to flee into crypto to protect their wealth while their home countries fall to communism.

I don't understand what you are trying to say. Negative interest rates combined with low inflation are literally the holy grail of capitalism. All investments that can be done at 0% interest have been done.

Honestly, I'm tired of "boomer capitalism" i.e. capitalism that thinks exponential growth that followed a devastating war should be permanent for all eternity. Essentially demanding that we have periodic wars according to the broken window fallacy.

Where is the "maximalist" capitalism that lets humanity reach its full potential instead of insisting on profit expectations that are divorced from reality?

I don't know what you mean by protecting "their wealth" because money is a promise to work. You cannot protect such a thing by using it to purchase a commodity because there is no promise that the commodity will be worth anything. Sure, the speculation is sort of reliable but it is still speculation.

frockington1 1758 days ago

This question never goes well but I'll try it again. How would asset seizure happen? If the government says this is now mine, wouldn't most people say no? Maybe in a disarmed population this could happen but I don't think its feasible in America where citizens are heavily armed and raised in a culture that glorifies rebellion

cryptica 1758 days ago

The government could easily seize all company stocks without any force. For private property, they could make people forfeit their assets - Create a situation such that if you don't forfeit your assets to the state then you will be a social pariah and won't be allowed to participate in the economy. You won't be able to buy food even.

But the thing is that if the monetary system continues down the current path, eventually, the most ardent capitalists will grow to resent capitalism and might turn to communism. Already a lot of young people want communism even those who believe that it's not going to work out; they like the reset aspect of it.

Same reason why people turn to dictators. When the situation gets desperate enough, people will willingly accept an obviously terrible option; just to reset the board. There is a point when people just want to see heads on spikes and are willing to do it at a cost to themselves.

> There will be discussions about asset seizures and wealth redistribution.

There already is. Asset seizures and wealth redistribution are central planks for Sanders & Warren.

"[W]ealth redistribution" -- I smile when I hear this fiscal conservative talking point. I put this term in the same category as "penalising savers with low (central bank) rates". Hello Thatcherites!

Do you consider the wide and deep social safety nets of Canada, Uruguay, Ireland, France, UK, Germany, Austria, Belgium, Netherlands, Denmark/Nordics, Spain, Italy, Israel, Australia, New Zealand, Taiwan, Korea, and Japan as "wealth redistribution"?

From the perspective of an academic economist: I do.

From the perspective of an average working Joe, who is lucky to not yet fall into such safety net: I do not.

The social safety net is essential for a well-balanced, modern, highly industialised, capitalistic, wealthy country.

To be clear, when I use the term "social safety net", I mean (at least): healthcare, education, housing, unemployment, and retirement pension.

Is a wide and deep social safety net essential? All the biggest, most prosperous companies are US based.

> who is lucky

I know it's popular these days to say one's success is all luck, but we both know better :-) You've made some good choices along the way.