One of my recent obsessions is monetary policy, prompted by the onset of the Great Recession (which threatens to destroy all our careers) and then the reading of Goodchild’s Theology of Money. My central question is precisely why all money must be created as debt rather than spent into circulation — why does the U.S. government, for instance, “borrow” something that the state itself has willed into existence (fiat currency)? (The best reason I can come up with is that interest rates, etc., give you access to market signals to tell you when monetary policy is becoming inflationary or deflationary, but that can’t be right given that the Federal Reserve is always actively manipulating rates.) Jared Woodard sends me an Interfluidity post suggesting that the most viable way forward for monetary policy after the failure of the Fordist and Great Moderation regimes is “helicopter money”:
Here’s my proposal. We should try to arrange things so that the marginal unit of CPI is purchased with “helicopter drop” money. That is, rather than trying to fine-tune wages, asset prices, or credit, central banks should be in the business of fine tuning a rate of transfers from the bank to the public. During depressions and disinflations, the Fed should be depositing funds directly in bank accounts at a fast clip. During booms, the rate of transfers should slow to a trickle. We could reach the “zero bound”, but a different zero bound than today’s zero interest rate bugaboo. At the point at which the Fed is making no transfers yet inflation still threatens, the central bank would have to coordinate with Congress to do “fiscal policy” in the form of negative transfers, a.k.a. taxes. However, this zero bound would be reached quite rarely if we allow transfers to displace credit expansion as the driver of money growth in the economy. In other words, at the same time as we expand the use of “helicopter money” in monetary policy, we should regulate and simplify banks, impose steep capital requirements, and relish complaints that this will “reduce credit availability”. The idea is to replace the macroeconomic role of bank credit with freshly issued cash.
On a lighter note, K-Punk perfectly captures my experience of the internet:
I know that I would be more productive (and less twitchily dissatisfied) if I could partially withdraw from cyberspace , where much of my activitity – or rather interpassivity – involves opening up multiple windows and pathetically cycling through twitter and email for updates, like a lab rat waiting for another hit. (The rat analogy is not idle: there’s an argument that rats become more quickly addicted when they are given stimuli randomly; email is similarly random, sometimes providing massive satisfaction, often thin pickings.)
This phenomenon is much bigger than our own personal productivity — it’s a huge pedagogical problem for those who have to educate the younger generation, and also, as K-Punk suggests, a political problem.
If you have interesting links to share, please do so in comments.