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Comment by neilwilson | Hacker News Reader

Given that putting interest rates up is an artificial intervention into the market for money, what if your worldview is based around allowing financial institutions to extract rent by taxing people for setting up home?

Why is setting the price of money artificially - which gives free government money to financial institutions - better than the alternative: setting the base price of labour by guaranteeing people a job?

It would be better if we stopped talking about the false dichotomy of fiscal and monetary policy and started talking about stabilisation policy instead.

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For what it's worth, I don't fundamentally disagree with the MMT viewpoint that you're coming from. But it's not so clear cut.

> gives free government money to financial institutions

By this, the parent means that nonzero interest rates on government debt represents "free money" that the government pays voluntarily even though it doesn't have to.

I'm not so sure. First of all, most of the institutions getting these payments hardly seem happy to be getting them, and would much rather see interest rates drop.

Secondly, the money does not come free to the recipients. It comes with a very high opportunity cost. That's exactly the point, because it's an attempt to encourage people to save money when they'd rather spend it because inflation is high.

A job guarantee sounds nice, and I do think we should be encouraging full employment without worrying about wage growth. But with a jobs guarantee, who decides what the job is in service of? The point of not having a command economy is that price signals should influence such decisions.

"That's exactly the point, because it's an attempt to encourage people to save money when they'd rather spend it because inflation is high."

Except that can't happen can it.

If Loans create deposits, then to get more savings, you need more loans. You can't have one without the other.

What they are trying to do its get people to pay off loans. How many people do you know who pay off loans in the middle of an inflation?

No, because bank reserves can go up. And by increasing its interest rates, the Fed reserve is encouraging banks to put more money in reserve accounts.

Bank reserves cannot go up in aggregate unless government spends more than it taxes and doesn't issue bonds to drain those reserves.

Bank reserves are on the asset side of the bank's balance sheet. Deposits are on the liability side.

Paying off loans is equivalent to saving! As long as you aren't taking on new debt to pay off the old one.

> How many people do you know who pay off loans in the middle of an inflation?

If interest rates are low, nobody. If they are high, lots. Go look at r/personalfinancecanada and there's been a huge shift from "taking out a line of credit at 2% when inflation is 6% is practically free money!" to "which should I repay first, my mortgage, my credit card, or my HELOC?"

"If they are high, lots."

And what do the aggregate numbers say, rather than the anecdotes from rich people?

If you can't afford the heating then you don't pay down loans. You take out new ones.

> And what do the aggregate numbers say, rather than the anecdotes from rich people?

You don't need me to do your research for you, but the data agrees with the theory. Canadians are paying down their at a record pace. Household debt payments rose to $57.4 billion in Q3, its highest ever.

https://www.theglobeandmail.com/business/economy/article-can...

On the flipside, household debt exploded after rates dropped to zero. I think that's very uncontroversial. So either you believe the conventional wisdom that low rates increase indebtedness and high rates decrease it, or... or you'd have to take one of these positions:

- every interest rate somehow stimulates borrowing

- there's one or more "goldilocks" interest rate that causes people to pay down debts but every other rate causes people to borrow.

"But with a jobs guarantee, who decides what the job is in service of? "

Doesn't matter (ultimately it is a political choice). The point of the job is to use up hours so you can't use them yourself. It forces the spending of time - which is the actual underlying exchange amount.

If you give up your time for others, then others will give up their time for you.

The purpose of jobs isn't to kill time, but to produce things like food, shoes, and soap. It's important that it accomplishes that.

The purpose of jobs is to use up time. A job is a contract for employment - selling hours.

If I have to use up my time to get the things I need to live, then I'm going to want to see you doing the same.

At root we exchange time with each other. And that time has to be for the service of others.

Service to others is the rent we pay for our room here on earth.

It's a little more than just producing consumption goods - which hopefully can be mostly done by machinery.

If somebody is giving up their time and they are being directed to do something pointless, who are you going to be annoyed with: the person doing the work, or the person directing the work?

I don't know how to cordially express how much I disagree with this.

The time that a job consumes is a bug, not a feature. The reason a farmer hires a carpenter is to get the barn built, not to feel better about the hours the farmer spent growing the crops that the carpenter eats. If the carpenter could snap their fingers and get the barn built instantaneously, rather than over the course of a few days, they would, and the farmer would still give them food to pay for it.

From my parents' experience guaranteeing people a job will only result in people idling at job site because there is no work to do instead of people idling at home or possibly studying for a job they want to do.

Giving artificial jobs don't differ much from giving people artificially valued money.

Look around when you're outside and take notice of all the maintenance not being performed. Speak with people who have a job and see how many of them would describe their workplace as chronically understaffed. We're a long way away from "people idling at a job site". And even if we weren't, there's a cost to idle tasks that sit around waiting for someone to be available to do them.

That said, only a small percentage of workers are happy to be pointless. Punishing everyone over the few hypothetical lazy does more harm than good.

1000 people buzzing to build up a startup that has negative unit econimonics and will never be possible is no different than doing nothing at work.

That being said, you’re right that we are seeing a lot of genuine demand for important work not being filled.

To me, this seems like mid-allocation of labor and it’s one of the effects of a low interest environment.

>> 1000 people buzzing to build up a startup that has negative unit econimonics and will never be possible is no different than doing nothing at work.

One could make the case that is actually worse than doing nothing, as it can be seen as a net negative.

*mis-allocation

I think the maintenance is not being performed because nobody wants to spend all the time and sweat to fix a bridge and getting rewarded by "Thank you and Goodbye! Oh by the way we couldn't get your budget approved but thank you, again, you helped us out with that thorn in our butt... about your payment.. better luck next time! KTHXBYE!".

Except there is plenty of work to do in public infrastructure, if the government is willing to spend money on getting it done: roads and bridges crumbling, water treatment systems in dire need of maintenance and repair, power grids fluctuating and unable to handle peak loads. And lots of second order work: administration of, and job training for, these infrastructure projects comes to mind.

It's harder for a few at the top to monopolize all the jobs than all the money.

First time I came to the US over 25 years ago, one thing I noticed that was really different from western Europe was the amount of artificial jobs: grocery store bag filler, elevator boy, parking place guard, etc. I hadn’t seen these in Europe for years, cause nobody needs them. Having first visited Eastern Europe during communism, the resemblance in this aspect surprised me.

“Grocery _story_ bag filler”. Love the typo in the context of the post about artificial jobs.

Seriously though: other factors may create these needs: wage costs, security needs, cultural expectations.

You have not seen them in part because of labour costs. Their existence seems to correlate with that.

"Giving artificial jobs don't differ much from giving people artificially valued money."

There's a big difference. It uses up the hours so they can't self consume them. And they are forced to turn up on time, and stay the day - or they don't get paid.

Which goes back to the root of our exchange system. We don't really exchange money, that's just a token - we exchange the output of our time, which is finite, and therefore valuable.

A job is a way of giving up your hours for the benefit of others.

An artificial job does not produce value from which others would benefit.

A real job that produces value would not need to have been artificially created!

A contract of employment is a contract for time. Giving up the hours is all that is required.

It's the job of capitalists to extract value from that time. If they do they get paid. If they don't they go bust.

The number of 'artificial jobs' is entirely in the gift of capitalists. If they don't like them, all they have to do to make them go away is hire the people's time and use it better.

If they can't do that in aggregate, then they lose out until they do. That's how the stabilisation works.

A contract of employment is also usually tied to some vague job description the employer is expecting from the employee.

It's your job to take the most value out of your time, either selling it to someone else (getting employed) or helping a grandma across the street.

Hiring a bag stuffer is less of an artificial position than hiring eleventh construction worker on a project for four.

Artificial job - A job that doesn't produce value for the employer

It's not your job to get the most value out of your time. It is the person who is hiring you's job to get the most value out of your time. That's where the surplus that pays them comes from.

Otherwise you are in business and the surplus should accrue to you, not your employer.

The employer has to extract value otherwise they have no right to that value.

How does that work on an island away from civilization? I still need to get the most value out of my time so I don't starve to death.

I'd rather say that keeping interest rates down required a continuous artificial intervention into the market for money - the current rate rise seems quite fully driven by reasonable market pressure, not by some artificial intervention.

If the central bank doesn't set a rate, then the interbank rate will drift to zero - because money is near costless to produce and no chance of non-payment because there is only one central bank in a currency and central bank money can't go anywhere else.

That doesn't stop the rate for lending to businesses being higher than that because there is a risk of non-payment there. There is more than one commercial bank.

Every form of money has its 'own' rate. There is no One Interest Rate to Rule Them All - contrary to neoliberal myth.

Wait, that's not how central bank lending works - you seem to equate "not setting a rate" with "setting a rate to 0" and offering limitless lending to commercial banks at that rate - which is a very high level of intervention IMHO; I'd rather equate "not setting a rate" by the central bank reducing its participation in the interbank lending and stopping this injection of 0-rate money, in which case the interbank lending rate will become dominated by the actual market competition, because commercial banks can't arbitrarily produce money.

That's exactly how central bank lending works. You have a fallacy of composition.

In reality the central bank doesn't lend to banks. The banks lend to each other and they do arbitrarily 'create money' to do so.

The commercial banks have accounts with each other. That's what interbank lending is, and what they clear to at the end of the day.

In Bank A it is DR Bank B, CR Customer 2 Deposit. In Bank B it is DR Customer 1 Loan, CR Bank A. They can't clear interbank payments unless that happens.[1]

The Bank of England has a full document on it [0]

[0]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[1]: https://new-wayland.com/blog/why-banks-pay-interest-on-depos...

> In reality the central bank doesn't lend to banks.

Central banks absolutely do lend to banks through discount window lending and other means.

> The commercial banks have accounts with each other. That's what interbank lending is, and what they clear to at the end of the day.

> In Bank A it is DR Bank B, CR Customer 2 Deposit. In Bank B it is DR Customer 1 Loan, CR Bank A. They can't clear interbank payments unless that happens.[1]

There is not a one true way to do interbank lending, since it depends on regulation and the underlying market infrastructure used - therefore it is not a fact that banks arbitrarily 'create money' to do so.

Banks can lend to each other using central counterparty clearing houses (CCP) as intermediates, in that case, Bank A and Bank B will have accounts with the CCP, who will do all the clearing & settlement.

All interest rates set by central banks are an intervention into the economy. A central bank has the purpose of intervention.

>setting the base price of labour by guaranteeing people a job?

Minium wages are setting a floor to the cost of labour. "Guaranteeing jobs" is totally meaningless inside a somewhat capitalist system. People work if and only if there is an employer paying them a wage the person deems adequate for the job. If a person wants a compensation nobody is willing to offer they won't get a job. The only thing the government can do is either create fake jobs for the person to do give them welfare, which are the same thingv but the later is far simpler and cheaper.

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