Thursday, October 31, 2019

Robert Hockett — The Green New Deal: How We Will Pay For It Isn't 'A Thing' - And Inflation Isn't Either


Andrew Anderson said...

Suppose, for a moment, that the Fed offered what I call interest-bearing ‘Citizen Accounts’ for all citizens, instead of just offering ‘reserve accounts’ to privileged banks as it does now. Were it to do so, we’d not only eliminate our nation’s ‘financial inclusion’ problem in one swoop, we’d also gain a most powerful money modulation tool.

During deflations like that after 2008, for example, the Fed could drop debt-free ‘helicopter money’ directly into Citizen Accounts rather than giving it to banks in the hope that they’ll lend (which they didn’t – hence the notorious ‘pushing on a string’ problem of the post-2008 period). And were inflation ever to emerge, the Fed could likewise simply raise interest rates on Citizen Accounts, thereby inducing more saving and less spending.
Robert Hockett [bold added]

Except positive interest/yields on the inherently risk-free debt of a monetary sovereign, including account balances at the Central Bank (aka "reserves" when the account holder is a depository institution), constitutes welfare proportional to account balance - a moral obscenity.

Otoh, de-privileging the banks would create a vast deflationary void as existing bank credit is repaid with vastly less new bank credit to replace it.

That vast deflationary void could then be filled with:
1) So-called "deficit spending" for the general welfare
2) an equal Citizen's Dividend.

Ralph Musgrave said...

Robert Hockett goes a bit off the rails when he said "....our economy now is operating at far below capacity even as is, before the Green New Deal adds to capacity. Labor force participation rates still languish at historic lows..."

Actually according to Fred charts on participation rates, while those rates are about 3% bleow 1990-2005 levels, they are about the same amouint (3%) ABOVE 1950-70 levels.

Peter Pan said...

Andrew Yang has a freedom dividend.