
Central banks are still testing the limits to how low interest rates can go - e15ctr0n
http://www.economist.com/news/finance-and-economics/21679231-central-banks-are-still-testing-limits-how-low-interest-rates-can-go-bankers
======
vegabook
This policy is infuriating because we all know that the people who need access
to credit cannot get it at anything like policy rates. They're credit-quality
constrained and so borrow at 15% (if they're lucky) on their credit card, or
at 30% per month if they're less fortunate.

The only people and entities able to borrow at zero (soon negative) rates are
those who have absolutely no need for the money, thereby concentrating wealth
further into the hands of the haves as they go on their asset buying sprees
(and who wouldn't if, for you, money was free).

The only way to get money to people who really need it is fiscal transfers,
either directly, or through jobs programmes. This single-lever monetary policy
game is up. It's not working, it's creating massive distortions that we'll pay
exponentially for in the future, and it's endangering the fabric of our
societies. That central banks are pushing ahead even further with these ideas
is one of the great robberies of our time.

~~~
conistonwater
You are ignoring the positive effect of this policy on unemployment and debt
overhang. See, for example, [http://www.brookings.edu/blogs/ben-
bernanke/posts/2015/06/01...](http://www.brookings.edu/blogs/ben-
bernanke/posts/2015/06/01-monetary-policy-and-inequality).

~~~
vegabook
"Helicopter Ben". I rest my case.

You see, the main issue is not so much about sprinkling money around. It's
that you're unfairly discriminating against the vast majority of medium/poor-
credit people, while giving free money to equally poor-credit banks, who, as
we all know, would be bust long ago because the liability side of their
balance sheets are much bigger than assets, were it not for the prop-up of
free money and wholesale transfer of bad assets to the public, at par prices
instead of the steep discounts that should be warranted.

We're free-funding a zombie banking system in the hope that by inflating
assets we'll bail them out "on the sly", meantime, all that money is being
siphoned off by the wealthy into getting wealthier.

The working and middle classes are paying more than their fair share of the
crisis, while capital (banks) has not been haircut for its bad decisions. Free
markets are based on the principle that mistakes are punished, good decisions
rewarded. We're instead short-circuiting the punishment warranted by poor
capital allocation decisions pre-crisis.

It's squarely a political problem, a problem of huge discrimination in favour
of the incumbent wealthy at the expense of everyone else.

~~~
HiLo
Somebody's nickname ≠ accurate description of their policy prescriptions.

All you've really done is recite the right-wing description of what you
believe has happened to "the economy."

You haven't addressed what the better alternative was. If you are going to
say, "let the economy collapse" let me ask you if you think economic collapse
is really such a surefire prescription (in a nuclear age on top of that). If
you think "stronger firms" emerge from collapsed societies, I guess maybe, but
I'd really like you to provide some examples.

Also, before going further, you haven't really identified any of the
mechanisms through which things are being "siphoned." The wealthy people are
actually the ones trying to get the banks to raise rates again, they want
their interest income back, so if it's being siphoned off to them, it's not
what their advocating for.

The whole problem with your thesis is that it rests on assumptions that some
things are implicitly bad and morally wrong, as if reality is so black and
white.

~~~
TheOtherHobbes
I'd certainly consider a central bank that deliberately pumps and dumps the
economy around it to be morally wrong. Do you think Greenspan - that Randian
acolyte - had no idea what he was doing after 2000? If so, why was he in
charge of the Fed?

The better alternative is democratic oversight of the entire financial
"industry", an international clamp down on corporate and personal tax
avoidance, checks and balances to minimise the manic depressive boom and bust
cycle, an aggressive program of financial _and social_ support for small-scale
entrepreneurs with a proven record of originality, creativity, and
inventiveness.

It would also be nice if Wall St could be retooled to provide finance to
businesses with long term prospects, instead of being the crack casino it is
now.

~~~
HiLo
>I'd certainly consider a central bank that deliberately pumps and dumps the
economy around it to be morally wrong.

OK, so it sounds like this isn't really a debate anymore. This has the same
coordination problem that the climate scientists "making it up" would have. If
you understand how the system works, there already are checks and balances on
that.

We have democratic oversight of the financial industry, as it is regulated in
the way an elected government has chosen to regulate it. You're throwing out a
lot of buzzwords but nothing that actually points to a solution.

For example, "an international clampdown on corporate tax avoidance." Well,
that's fine, but you seem to be suggesting implicitly that there is a very
clear moral case that corporations should always pay domestic taxes on income
earned abroad... which most countries actually don't do. So that's why some
companies invert. But is there anything morally wrong about this? I don't
actually know and you probably don't either.

Also, you seem to be suggesting that stable, long-term businesses are capital
constrained, which just makes it incredibly clear to me you don't actually
look at data and see what those companies are doing from a capital allocation
perspective. Those are the types of businesses that literally have too much
cash to know what to do with, other than, you know, shore up their balance
sheets after this really bad balance sheet recession we just had.

~~~
TheOtherHobbes
There are regular criminal prosecutions of banks in the UK.

Regular. Criminal. Prosecutions.

The idea that there's effective regulation is bizarre. In reality the
regulation consists of banks doing a lot of dodgy shit, and mostly not getting
caught.

How long did it take regulators to realise that Madoff was running a Ponzi
scheme?

I don't think stable, long-term businesses are capital constrained - I think
democratically elected governments are.

And that's a _serious_ problem for anyone claiming that that fact is
compatible with effective regulatory oversight.

------
HiLo
So before too much talk about the normal blockchain hype starts going, I think
this is something that would actually be a phenomenal disruptive change:

[https://bitcoinmagazine.com/articles/fedcoin-
rising-14243124...](https://bitcoinmagazine.com/articles/fedcoin-
rising-1424312468)

Allowing the central banks to not be constrained by the ZLB would allow
significantly better economic recoveries and would allow the economy to grow
despite our poor (or total lack of) fiscal spending.

------
futuravenir
We really ought to end the centralization of banking and begin more
transparent operations through a global blockchain. On par with that, we need
to print our own debt-free money and move beyond the stranglehold of this
centralized wealth conspiracy.

I can't speak for the US, but Canada has the opportunity to do it and the Bank
of Canada is being to taken to court over exactly this.
[https://medium.com/toronto-life/usury-in-
canada-287001af6abe](https://medium.com/toronto-life/usury-in-
canada-287001af6abe)

~~~
HiLo
Can you explain why?

~~~
futuravenir
If there is more debt than credit in the world, that means that we are either
a) borrowing more to pay back our debts or b) pushing others out of business
to take their funds so that we may pay back our own debts. This creates a dog-
eat-dog mentality. This is only one way of recognizing value. It is not the
only way of recognizing value. Once you acknowledge that, you can think
outside of the box of how we can generate a system that reflects values in
line with our humanity instead of one that forces us to compete.

At the core of it, we follow the money system as it is because we choose to.
We can choose to follow another type of money system...It just takes effort
and imagination. [http://www.theonion.com/article/us-economy-grinds-to-halt-
as...](http://www.theonion.com/article/us-economy-grinds-to-halt-as-nation-
realizes-money-2912)

