Comment by atweiden | Hacker News Reader

Comment by atweiden | Hacker News Reader

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Another option is to pump the brakes.

> “As the lockdown to stop the spread of coronavirus in India continues, pollution levels across much of the country have dropped sharply. Now some residents in northern India say they can see the snow-capped Himalayas 200 kilometres away for the first time in 30 years.” [1]

If we had a global deflationary economic system, the incentive to invest in capital and engage in consumerism would dissipate. People would work less, because there would be less reason to work. Without work, people would have less reason to travel. Pollution would drop accordingly.

Under a deflationary economic system, a touch over $480,000 in savings would yield an effective “UBI” of $1000/mo [2].

Once adopted by the entire world, a global currency of fixed supply controlled by computer algorithms could achieve this. Humans would voluntarily work less and pollute less.

[1] https://www.sbs.com.au/language/english/audio/himalayas-visi...

[2] https://news.ycombinator.com/item?id=31759685

This works really well if you have $480,000 in savings, but it doesn't really work if you have 0 savings, or debt.

Deflation, with its disincentives to investment or economic growth, would reduce employment and real wages. Most Americans would lose their jobs or see their wages cut as the economy ground to a halt. Anyone with debt would likely be trapped working for the rest of their life at subsistence wages, never making enough to pay their debts off.

At that point, you'd need an entire overhaul of the economy, not just an algorithmic monetary system

So? What about the cliff? Isn't that more important than getting people out of debt? It's this kind of thing that makes reasonable people who do want to avert climate disaster wonder whether the cliff analogy isn't just a rallying cry to push an agenda of nationalization and redistribution of private property. In other words, just because we do swerve doesn't mean the socioeconomic upheaval is likely to work out in favor of people who want to eat the rich, or anything resembling justice either. More likely what will happen is everyone will get poorer in a somewhat linear fashion, meaning the rich will still be rich and the poor will be below water.

If the only way to cure the climate crisis is to prevent people from flying having tchotchkes, how naive is Corey to think that the rich will somehow stop those things before the middle class and poor do?

But it's dangerous and flawed to mix climate targets with social justice targets for this very reason. Hinging the swerve on a social/economic revolution means it will never happen.

Hyperinflation of the old currency would erase all debt denominated in it as we shift to a global deflationary economic system.

Once in the deflationary environment, the cost of borrowing would be higher, and there would be less reason to work, consume and invest. Hence, there would be less incentive to take on debt.

Many things are preferable to having 0 savings and a planet on fire.

Come on. At least read Keynes just for the sake of steelmanning. Once the marginal productivity of physical capital is below the real interest rate people will abandon production even if there is a shortage of products and people are starving on the street. They will do this until the marginal productivity of the capital is high enough i.e. the shortage is strong enough to raise prices to keep up with the high real interest rate. Hence deflation will eventually result in inflation and then the process reversed because they invested too much and you get deflation in an endless cycle.

If you have a properly tuned money system you would expect it to stabilize at some level. Cycles should be the exception and full employment the rule as says law implies. If you want to discourage consumption you should introduce consumption taxes for natural resources, co2 and other forms of pollution.

Really, the answer is so obvious. You need to let the interest rate on cash be negative like -4% and then give the central bank the task to do price level targeting. The problem with deflation is that the optimal real interest rate is 0% but if the nominal interest rate is at 0% then the real interest becomes positive. A positive interest on money effectively acts as a competitor for labor. Anything that uses labor must earn at least this interest rate hence the economy must grow. If the economy stands still there isn't enough money to service existing debt. You will get an inevitable currency collapse because you didn't consider for the case where the economy stops growing even for just a few years.

If that doesn't convince you let me tell you that a negative interest rate makes deflation palatable to the public by maintaining full employment. High interest debt is prone to default which results in an increased risk of losing your investment which lowers the effective yield of the debt. A borrower that can only pay back $10000 will only pay back that amount regardless of the interest rate, so increasing the interest rate increases the risk of default without increasing the overall return on investment. If the interest rate is cut low enough that it asks for only $10000 then you will get the same $10000 back with almost no risk, but from the perspective of the borrower his life wasn't negatively disrupted by the process of defaulting. Hence once you adjust for risk, high interest and low interest debt can have the same yield. However, in the high interest case, the borrower may be fooled into believing that he can pay his debt back, so he is strongly encouraged to work more and convince others to consume more, in short he will advocate for higher economic growth.

Won't lowering interest rates lead to stimulating the economy and more debt? Actually, no. If you have negative interest rates you can abandon QE and raise the reserve ratio, in fact, you can do price level targeting (no inflation/deflation) to control the money supply according to monetarist theories which assume a constant velocity of money. Saved money is dead money, hence the need to force ever greater quantities of money into the economy to keep it alive, if you control the velocity directly, you don't need to keep adding new money. The miracle of Wörgl currency circulated 200 times faster than the national Austrian currency and therefore didn't need any deficit spending whatsoever, the money supply was somewhere around 10 per person, the local government ran all social spending programmes against unemployment on a balanced budget which is absurd considering that it was a poor indebted classic deficit spending town with 30% unemployment before Unterguggenberger became mayor.

To avoid ecological disaster, we need to slam on the brakes, not merely pump them.

> Once the marginal productivity of physical capital is below the real interest rate people will abandon production even if there is a shortage of products and people are starving on the street.

Given the profit margin on farming is something like 10%, and assuming the average annual purchasing power appreciation of our hypothetical global currency of fixed supply equals the Fed’s inflation target of 2% plus 0.25% GDP growth, how do we arrive at people “starving on the street”?

> If you want to discourage consumption you should introduce consumption taxes for natural resources, co2 and other forms of pollution

Surely the level of taxation necessary to curb industrial and retail usage of fossil fuels to the same extent of global deflationary economics would make the taxation measures politically infeasible. The tax policy would need to result in unthinkably high prices to create the drastic changes necessary. Deflation OTOH would lead to a decline in capital investment, employment, and spending without requiring any level of forcible compulsion.

A global currency of fixed supply would realistically deliver a sufficiently powerful financial incentive to galvanize widespread, voluntary adoption of ecologically sustainable consumer behaviour and business practices.

> by maintaining full employment

Particularly with the rise of automation and AI, is maintaining full employment really an achievable goal? We desperately need a way for the majority of humans to subsist without working bullshit jobs [1].

> hence the need to force ever greater quantities of money into the economy to keep it alive

We’re facing ecological collapse precisely because humanity has chased infinite growth.

[1]: https://www.strike.coop/bullshit-jobs/

>People would work less, because there would be less reason to work.

You mean most of the work will be piled up on a handful of full time employees which leaves a huge percentage of the population unemployed and destitue and ready to rebel against the system.

https://m.youtube.com/watch?v=EKd6WURBqOY

>Under a deflationary economic system, a touch over $480,000 in savings would yield an effective “UBI” of $1000/mo [2].

What if people decide to have less children to protect them from the rent seeking conducted by the rich families that inherited wealth over centuries? What if the above unemployed people die from starvation and are no longer there to guarantee the value of your money?

>Once adopted by the entire world, a global currency of fixed supply controlled by computer algorithms could achieve this. Humans would voluntarily work less and pollute less.

Voluntarily? Are you sure about that? Aren't you just trying to make some transactions illegal by forcing a less effective medium of exchange? Also we already tried this and it failed not only with the gold standard but also with Bitcoin.

If it were that simple the Roman empire wouldn't have collapsed. No currency in history would have collapsed.

You are also discounting the fact that deflation encourages corruption as gaining money through war, crime, trafficking, environmental destruction, political bribes becomes highly profitable as once you are locked in and got a lucrative 10 million dollars you will earn more from those savings than you can earn from being an upstanding politician. Hence there is an intensive pressure to destroy physical and social capital for a share of the fixed supply currency.

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