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by neilwilson
1040 days ago
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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 |
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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.