This would create a predictable amount of created money every year.
It might be an effective “tax” compared to taxing work or profit, since those taxes disincentivize work/investments.
Since the amount is fixed, the risk of constant decrease of interest rate to temporarily boost the economy, disappears.
To my understanding, it should decrease the amount of bad investments, since today’s interest rates, are well below inflation, so investing in something with little/no growth can be profitable, assuming it has low risk.
Arguments against
The central banks can’t steer the economy, for example by lowering interest rates during recession (this might be a good thing, since they extremely unlikely can do better predictions than the free market anyways)
Risk of deflation, especially if growth surpasses 4% per year. One big problem with deflation, is that it’s very tricky to lower salaries of employees (usually employees expect an increase of salary every year).
Unsure if for or against
Today’s central banks reallocate money from high cash people and businesses (since value of cash decreases), to people and businesses with high loans.
Generally poor people have more of their money in cash, and wealthier have more loans on their investment (ex mortages) and are therefore net negative on cash. Arguably, this redistribution can increase growth, since high leverage businesses and people getting loans for houses, invests their money.
Arguments for:
This would create a predictable amount of created money every year.
It might be an effective “tax” compared to taxing work or profit, since those taxes disincentivize work/investments.
Since the amount is fixed, the risk of constant decrease of interest rate to temporarily boost the economy, disappears.
To my understanding, it should decrease the amount of bad investments, since today’s interest rates, are well below inflation, so investing in something with little/no growth can be profitable, assuming it has low risk.
Arguments against
The central banks can’t steer the economy, for example by lowering interest rates during recession (this might be a good thing, since they extremely unlikely can do better predictions than the free market anyways)
Risk of deflation, especially if growth surpasses 4% per year. One big problem with deflation, is that it’s very tricky to lower salaries of employees (usually employees expect an increase of salary every year).
Unsure if for or against
Today’s central banks reallocate money from high cash people and businesses (since value of cash decreases), to people and businesses with high loans.
Generally poor people have more of their money in cash, and wealthier have more loans on their investment (ex mortages) and are therefore net negative on cash. Arguably, this redistribution can increase growth, since high leverage businesses and people getting loans for houses, invests their money.
This is a complicated topic. https://www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/0671675567 provides a good overview of the origins and purpose of the Federal Reserve system.