We are likely to need National Savings annuities, where an individual can build up an annual additional pension by purchasing ‘Granny Bonds’ directly. They would have limited residual capital value and no capital uplift, but they would give a secure additional income in retirement for ordinary people who decide to be thrifty and save. The precise level and nature of the instruments is open to debate....Lots of other interesting MMT-related stuff.
New Wayland
The Only Bonds We Need Are Granny Bonds
NeilW
12 comments:
They would have limited residual capital value and no capital uplift, but they would give a secure additional income in retirement for ordinary people who decide to be thrifty and save. NeilW
This is welfare proportional to account balance, not need, and so violates equal protection under the law.
MMT understands that a permanent 0% policy rate is the base case for analysis of a floating exchange rate currency, since that is the natural rate of interest in such a system. ibid
How can there be a natural interest rate of 0% in fiat when only private depository institutions may even use fiat except for mere coins and small Central Bank Notes?
It concludes that it is better to pay government money out to people as wages, than banks as interest. ibid
Disingenuous since MMT would instead require government/Central Bank to:
1) Provide unlimited, unsecured loans to private depository institutions at 0% interest. This is fiat creation for private interests - a violation of equal protection under the law.
2) Provide unlimited guarantees of private bank deposits, including privatily created bank deposits, FOR FREE (not that the cost matters since the systemic risk of a government-privileged private credit cartel is uninsurable anyway.)
Neil advocates the permanent zero interest rate idea (which I basically agree with), with “granny bonds” being an exception.
I suspect though that an ABSOLUTELY PERMANENT zero rate till the end of time would not be achievable: i.e. as Milton Friedman suggested, I think interest rate hikes would still be needed occasionally and in emergencies.
I don’t agree with taxpayer backed deposit insurance for private banks (not to mention billion dollar bail outs for private banks), which is what Neil wants. Private banks are just ONE TYPE of lender, not essentially much different to pension funds or mutual funds which lend to corporations when the buy corporate bonds. Plus MILLONS of firms lend when they supply goods on credit.
Why should banks enjoy taxpayer backed featherbedding and not the latter type of lender? There’s no good reason. If everyone is to be entitled to a method of storing a limited amount of money in a totally safe way, and I’m all for that, then that’s a job for govt / central bank. People can store central bank issued money in the form of $100 bills, so they should be allowed to store it in digital form as well, e.g. via CBDC.
Indeed, there’s a bit of a contradiction between Neil’s granny bonds and deposit insurance: the justification for granny bonds rather than state backed corporate bonds is that the latter would amount to subsidising corporate bonds. Exactly the same applies to state backing for deposits at private banks.
locking the Base Rate at 0% permanently which would keep mortgages low forever NeilW
There are ethical ways to produce low interest rates which don't include privilege and welfare for private banks. These are:
1) An equal Citizen's Dividend to replace ALL fiat creation for the banks and other private interests.
2) Negative interest ad yields on the inherently risk-free debt of the monetary sovereign, a public utility, for large (e.g. banks and rich fiat hoarders) and non-individual citizens.
Indeed, we could decide on a zero or negative interest rate policy at the RETAIL level, not just at the WHOLESALE level as MMT proposes if desired with individual citizens shielded to a reasonable extent via their accounts at the Central Bank.
Moreover, any price inflation created by ETHICAL money (fiat and private deposits) creation should not matter so much so long as it is not extreme since the Cantillon effects would be minimized.
Of course we also need land reform to deal with the problem of rentiers.
And btw, both de-privileging usurers and just land reform are BOTH Biblical imperatives so at least Jews and Christians should be behind them.
Unlimited deposit insurance for individuals (directly and on trust - to cover client accounts at solicitors, for example) would be as much as is required. NeilW
Accounts at the Central Bank are INHERENTLY risk-free and everyone should be allowed to have them with ONLY individual citizen accounts FOR FREE up to reasonable limits on account balance and transaction rate.
So you can take government guarantees of private deposits, including privately created(!) deposits, and throw them in the trash can of history labeled fascist scams that were seen through.
Let's cut to the chase, Neil:
Banks should be 100% private with 100% voluntary depositors.
Otherwise we have welfare for the banks themselves and for the more so-called "credit worthy" at the expense, one way or another, of the less so-called "credit worthy"
"There’s no good reason. If everyone is to be entitled to a method of storing a limited amount of money in a totally safe way, and I’m all for that, then that’s a job for govt / central bank."
The insured system is operationally identical to that Ralph as has been explained to you many. many times before.
It's just outsourcing of the transaction system to the banks. Just as we outsource bin collection to Serco.
There is no operational difference, and no subsidy for the fairly obvious reason that banks make no money from holding central bank assets. It's purely an intra-group accounting feature.
If you draw out the balance sheets and interlinks, and understand how banks earn their crust, you'll see how it works.
"Banks should be 100% private with 100% voluntary depositors."
They always are. There is never any need to put money in a bank. You can always sit on bank notes.
They always are. NeilW
No they are not; eg. the government insures bank deposits, including deposits banks themselves create.
There is never any need to put money in a bank. ibid
What if I wish to buy over the Internet? Or even pay my Federal taxes? Or don't wish to deal with grubby coins and paper CB Notes? Or risk carrying large amounts of cash?
You can always sit on bank notes. ibid
One can almost wish for the abolition of physical fiat if only to make it clear that the population are slaves to a government privileged usury cartel.
You're a liar, Neil. Or defending the indefensible (government privileges for banks) has driven you crazy.
It's just outsourcing of the transaction system to the banks. Just as we outsource bin collection to Serco.
There is no operational difference, and no subsidy for the fairly obvious reason that banks make no money from holding central bank assets. NeilW
Baloney since if banks were not privileged by government, they would face huge bank runs as people moved their now at-risk deposits, including newly created ones via bank "lending", into their inherently risk-free accounts at the Central Bank.
In other words, the ability of banks to create new deposits would be sharply limited since their liabilities toward the non-bank private sector would no longer be largely a sham.
“No they are not; eg. the government insures bank deposits,“
No they don’t ... first $100k... and it’s an insurance corporation FDIC that does it not the govt...
The govt guarantees funds in securities accounts at the Central bank... not bank depository accounts...
You need to study up on the Federal Reserve system and how it operates....
Meanwhile maybe you can just go back to OT basics stoning some LGBTs while you get educated...
No they don’t ... first $100k... and it’s an insurance corporation FDIC that does it not the govt... Franko
It's well known that the FDIC has the implicit backing of the FED.
Besides, the MMT School would provide UNLIMITED deposit guarantees FOR FREE.
What kind of insurance has ZERO premiums?
And the deposit limit is $250,000 per account per bank so someone could have multiple maximum insured accounts by using several banks.
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