[Fredkin]

I found the article very unsettling and seems to be advocating bigger government, financial repression, and authoritarian control of what people spend their money on:

"This [CBDCs] could enable central banks to encourage or discourage certain spending in more targeted ways, for example by restricting what can be spent by people in certain areas or income brackets."

There's also an argument that higher rates are better for the environment. They are a headwind to rampant consumption. They decrease investment in areas that might not generate a return, focusing resources on existing viable businesses instead of new unproven businesses that are likely to fail (wasted energy).

The forest example is very reductive and completely ignores other costs and factors: the expected price of timber and machinery in the future, and the inflation rate in general, the cost of re-planting the forest, wages, the convexity risk of the bonds (if rates appear to be accelerating higher, your bonds will drop in value), the confidence in the government, ... and so on. It also doesn't consider that higher rates curb construction loans, and thus decrease excessive demand for timber, which results in a pile up of timber inventories initially. Businesses then react by doing less logging in future.

Zero rates (or more accurately artificially low rates) encourage gambling and waste. If I can get a cheap loan, I can go buy loads of machinery and land and start logging, whereas I wouldn't have bothered if the financing wasn't available. Financial repression in China for instance allows for the cheap financing that builds enormous ghost cities. All that sand-dredging they do emits huge amounts of CO2.

[neilwilson]

The natural rate of interest at base is zero because money is costless to produce.

Rates above zero at base are artificial. They should be determined in the market for money via competition - not by wonks in ivory towers

This idea that rich people need to be given free money from government has no justification. There isn’t a fixed amount of money. Nobody is fighting for it.

You can only get a cheap loan if you have collateral for it. Therefore you are doing nothing more than spending your existing assets via a liquidity loan. That’s how an economy rapidly develops and why ours are better off than those where interest and lending is frowned upon

[Fredkin]

In the context of your comment, where should the base money come from?

If money is immediately costless to produce for the entity producing it, there is still a cost and it's born by everyone else. It must be accompanied by an increase in desired goods and services to retain value. If the entity that creates the money uses it to create more value than the inflation it causes then this is a good outcome. Otherwise if the money is created to pay for unproductive behaviour like funding big wasteful armies or propping up asset bubbles, then money will ultimately become worthless and society loses, especially if the originator(s) of new money or derived credit get bailed-out, socializing the losses.

Giving money/credit creation some friction should help prevent asset bubbles: Feedback loops that get going when new money bids up collateral, which is borrowed against to create loans to bid up collateral further etc. But there are many ways to do this, and I agree that subsidizing rich people with a 'risk-free' rate of return on government bonds is not very fair or effective.