Bond Econ Bro

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The Parasitism

This is a comment on Brian Romanchuk’s blogging on FED and Treasury bond policy. I see it as all gigantic parasitic financial sector activity, it should be eliminated entirely. With one caveat.

When central banks offer a risk free rate, I see it as nothing but, “basic income but only for people who already have money, in proportion to how much they already have.” (wbmosler).

Here Romanchuk is discussing the “term premium” … Using Fed Projections To Infer The Term Premium?

It is all financial bro bs to me. Why give rich folks incentive to hold cash? They can only spend it on what is for sale, and the way to avoid overheating the economy is not to offer the rich a bonus, but to restrict what is for sale. Regulations are needed to limit our energy through-put, and no amount of “free market” laissez faire will achieve this. Markets have failed, and will continue to fail, to price-in far future ecological crises. Offering them interest to hold their cash is no solution at all to nominal or real inflation, it makes things worse, since it cheapens the currency.

Is it Parasitic?

Governments issuing fiat currency giving interest income to the rich is not so much parasitism as simple greedflation. Basic Income. But only for the rich. Almost as if these people are our superiors and need to be rewarded for thinking so!

Oh yeah, that’s right… they were the virtuous “savers”. (Don’t make me laugh.)

Who is truly virtuous and helping drive the real economy? It’s the spenders.

You could thus use the language of leeches, rather than parasites. But I’d just ditch the biology metaphors and say they’re greedy, and people running governments are too dumb to stop feeding the greed at the source.

Caveat

A Warren Mosler (and Randy Wray) often argue, it would likely be pretty
disruptive to stop issuing short term Tsy bonds. The idea then would be for Central Banks to continue issuing 3-month Treasury Bills, in order to stabilize the overnight cash rate.

But this is in inside banking account operation, it should not be Tsy issue for private investors. With this proviso, issuing 3-month bills avoids disruption to the existing banking system, with minimal legislation jinking, and yet avoids the financial sector parasitism.

((Also, I’m more in Bill Mitchell’s MMM/MMT camp on this one, let’s just fix banking properly and stop issuing all bonds entirely, if for no other reason than to make the point MMT/MMM is correct.))

(((MMM = “Modern-money-mechanics”, the framework formerly known as MMT.;-) ))