I’m not an economist, but isn’t it unambiguously better to send everyone small and adjustable amounts of money than buying a bunch of bonds or other financial assets? My reasoning is as follows:
Inequality is increasing, which increases violence and destabilizes the social order. It might even have other negative effects, such as hampering economic growth. The current method of QE exacerbates inequality, as it mostly helps people who already own assets. A direct payment to everyone would instead reduce inequality. FYI, I don’t think equality is a universal virtue or anything, but why increase inequality unnecessarily since it seems to make societal outcomes worse?
I suspect you could accomplish more inflation per unit of money created by directly sending it to people to be spent. In the current method there is hardly any velocity, and the created units mostly just sit around pooling up in the financial sector. Again, nothing universally preferable to me about getting that inflation with fewer rather than more dollars, but I guess it might save a bit of...something, not sure, I’m just giving layperson babble right now. What’s astonishing is how little inflation has happened after the astonomical amounts of dollars added to the “circulation”; why not give it to people who are likely to actually do stuff with it, instead of having it mostly just sit in investment portfolios?
The whole “jobs” and work ethic thing has been historically very important for the functioning of society, and you would just starve if you didn’t work dawn to dusk in 1850. But who thinks 40 hours a week is even still a preferable use of the people’s time? Flipping burgers or writing TPS reports 40 hours a week is pretty frigging restrictive in what you can invent or create, and it gets less necessary every decade from here out. I keep hearing the claim that we can’t afford a basic income, and here we are funding various questionable programs and wars, giving questionable subsidies to various firms, and printing colossal amounts of money. We watch it pool up without causing much inflation, and wonder whatever could be done to stimulate. I don’t see the dilemma. Give it to people.
1. The Fed needs to be able to buy back the entire base money supply always, always, always. If it cannot, i.e. the Fed is insolvent, instant hyperinflation is almost certainly the result. (Theoretically, the value of money could float in midair. Practically, lots of arbitrageurs will be betting on hyperinflation—and in principle the Fed could buy back money as long as it could, and maybe the speculators would run out of dollars before the Fed ran out of assets—but don’t count on either assumption holding up.) As a result, it can only expand the money supply by market-rate purchases of securities (of stable value). Mailing checks to people would be a gift out of share capital. (This is the difference between banks and counterfeiters: the former treat money issued as a liability on their balance sheets, and are willing to buy it back at any time in any quantity.)
2. Cut the interest on excess reserves (IOER). Though keeping the Fed’s balance sheet smaller doesn’t really save on anything important; financial institutions trading T-bills for reserves is not something that can realistically be depleted.
3. Most of that is fiscal policy (government stuff) rather than monetary policy (central bank stuff).
The US govt could raise taxes (or loans) and give the money to the Fed and then it wouldn’t be insolvent any more and the people betting on hyperinflation would lose.
I’m not an economist, but isn’t it unambiguously better to send everyone small and adjustable amounts of money than buying a bunch of bonds or other financial assets? My reasoning is as follows:
Inequality is increasing, which increases violence and destabilizes the social order. It might even have other negative effects, such as hampering economic growth. The current method of QE exacerbates inequality, as it mostly helps people who already own assets. A direct payment to everyone would instead reduce inequality. FYI, I don’t think equality is a universal virtue or anything, but why increase inequality unnecessarily since it seems to make societal outcomes worse?
I suspect you could accomplish more inflation per unit of money created by directly sending it to people to be spent. In the current method there is hardly any velocity, and the created units mostly just sit around pooling up in the financial sector. Again, nothing universally preferable to me about getting that inflation with fewer rather than more dollars, but I guess it might save a bit of...something, not sure, I’m just giving layperson babble right now. What’s astonishing is how little inflation has happened after the astonomical amounts of dollars added to the “circulation”; why not give it to people who are likely to actually do stuff with it, instead of having it mostly just sit in investment portfolios?
The whole “jobs” and work ethic thing has been historically very important for the functioning of society, and you would just starve if you didn’t work dawn to dusk in 1850. But who thinks 40 hours a week is even still a preferable use of the people’s time? Flipping burgers or writing TPS reports 40 hours a week is pretty frigging restrictive in what you can invent or create, and it gets less necessary every decade from here out. I keep hearing the claim that we can’t afford a basic income, and here we are funding various questionable programs and wars, giving questionable subsidies to various firms, and printing colossal amounts of money. We watch it pool up without causing much inflation, and wonder whatever could be done to stimulate. I don’t see the dilemma. Give it to people.
1. The Fed needs to be able to buy back the entire base money supply always, always, always. If it cannot, i.e. the Fed is insolvent, instant hyperinflation is almost certainly the result. (Theoretically, the value of money could float in midair. Practically, lots of arbitrageurs will be betting on hyperinflation—and in principle the Fed could buy back money as long as it could, and maybe the speculators would run out of dollars before the Fed ran out of assets—but don’t count on either assumption holding up.) As a result, it can only expand the money supply by market-rate purchases of securities (of stable value). Mailing checks to people would be a gift out of share capital. (This is the difference between banks and counterfeiters: the former treat money issued as a liability on their balance sheets, and are willing to buy it back at any time in any quantity.)
2. Cut the interest on excess reserves (IOER). Though keeping the Fed’s balance sheet smaller doesn’t really save on anything important; financial institutions trading T-bills for reserves is not something that can realistically be depleted.
3. Most of that is fiscal policy (government stuff) rather than monetary policy (central bank stuff).
The US govt could raise taxes (or loans) and give the money to the Fed and then it wouldn’t be insolvent any more and the people betting on hyperinflation would lose.