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Why not just implement a damn negative interest rate on cash and a land value tax on land? In fact, it is quite amusing to see capitalists talk about free markets when the currencies they use quite literally exist to prevent free markets from forming. A precious metal currency is a tool for maintaining power with the aristocracy. Perpetual land ownership is effectively the same. Feudalism ended by giving everyone the freedom to become a feudalist, that's capitalism. It works much better but how about we stop the concentration of power for good? When you are rich, you have the option of investing or lending. If you lend, then someone else must invest on your behalf. When you think about it, lending simply shifts all the risk of an investment onto the borrower. In an increasingly saturated economy, which the author of the original article doesn't even recognize as a thing, most investments are unable break even. The risk adjusted return of an investment is negative but you, the lender, can always pull out your money as cash to get guaranteed 0%, this threat makes banks unwilling to lower their interest rate below 0%. Banks stop lending to risky lenders. Saved money is no longer circulating in the economy. Deflation/low inflation sets in. If the government does nothing or austerity, then you get a great depression very soon. If the government does something, then it must act as the borrower of last resort, who is creating artificial demand for capital. If I had to describe QE it is actually as if the government created a state operated investment fund for government bonds that is exclusively accessible to banks. It's not really money printing. It's a weird ass way of letting banks find a solvent borrower of last resort. When you deposit money on your bank account, the bank doesn't know when you are going to spend it. A bank reserve created by QE is just as liquid as money so it does the job. You can spend your money instantly and no bank is going to care. They can just shrug off the fact that they are lending out deposits that can be spent instantly for 30 years. This is still better than doing nothing. For all we know, the money could be spent on climate change or whatever. However, it would be better to address the problem at its root and just tell the rich to get lost by no longer guaranteeing automatic capital accumulation and free capital preservation. |