[clairity]

yes, QE is inflationary, and inflation relatively benefits assets, but that’s a minor effect. the major effect is that assets are the means of production, and those are inflation protected, since prices on the outputs of production will adjust accordingly. that doesn’t happen with wages, because the wealthy will use the opportunity, whether explicitly or implicitly, to squeeze profits out of their productive assets, which almost always includes labor wages.

basically all macro changes to the economy benefit assetholders because of this mechanism (of owning productive assets), except those specifically targeted at circulating their wealth (e.g., wealth/estate taxes).

[1cvmask]

For those who are into an inflation of inflationary quotes this a true gem:

One frequently quoted passage from the work of John Maynard Keynes is that

“the best way to destroy the capitalist system [is] to debauch the currency.”

The passage, attributed to Vladimir Ilyich Lenin, appears in Keynes’ book The Economic Consequences of the Peace, which became an international bestseller when it was published in 1919.

[clairity]

i genuinely believe we should be clamping inflation to the sub-1% range (perhaps 0.1-0.3%), rather than 2-3%, so that gains would largely go to productive innovation rather than financialization. you’d still have slight pressure on capital to find productive uses, but not so much to relatively deflate labor income over a lifetime. rather than destroying capitalism, that would promote a more pure form of it (greed being redirected into the common good being a pillar of capitalism).

[imtringued]

How are you going to introduce negative interest rates?

[mywittyname]

Negative interest rates are easy for the US Treasury to institute. They can only offer t-bonds that can be redeemed for less than the bonds were purchased for.

Businesses and such will have to go along because there's nowhere to store $10-$100 billion dollars in short-term, cash-equivalents. I'm willing to be that most companies auto-renew their short-term t-bonds at market rates. Thus, if negative yield t-bonds went on offer, they'd be bought up by the tens of billions. It would be news-worthy, but companies would be unlikely to really act any different as a result.

Long term, some companies might move currency to the treasury of another country, but that introduces risks involved with exchange rates which would greatly overshadow any potential interest gains.

If you look at the €/USD over the past ten years, it's pretty clear that storing USD in Euros to earn 0.2% in interest is for fools; the lowest ratio (ever) is like 0.87 and the highest was 1.58, and these two events occurred only 8 years apart. Even the month-to-month changes are rather dramatic. American companies doing business in USD are going to continue to hold USD regardless of negative interest rates.

[clairity]

are you implying that the (imputed) risk-free rate (which ideally the inflation rate would track exactly) is naturally higher than the fed rates would imply, so then we need set fed rates negative to induce a lower than 'natural' inflation rate? or is it just ambiguity around the use of dashes, which look like minus signs?

[imtringued]

Just think about what 0% inflation means. It means your money never loses value. That's frankly impossible. It's as if you built some sort of pocket dimension that can store everything without decay.

During recessions people will try to acquire this magical storage instrument to shield themselves from losses in the real economy because a yield of 0% is greater than a company stock that is crashing. The people who end up unemployed don't store their labor in money. That labor is simply gone and so is the value of the money and that loss must be represented through a negative interest rate.

[clairity]

> "Just think about what 0% inflation means. It means your money never loses value. That's frankly impossible."

your causation is backwards. inflation is an emergent property of the economy, and can be negative or zero if it wants (e.g., japan).

> "That labor is simply gone and so is the value of the money and that loss must be represented through a negative interest rate."

this makes no sense. what interest rate must become negative when unemployment rises?