Wednesday, August 7, 2019

Too Much Money

Right now German bonds are paying less than the inflation rate no matter how long the term; the government could make money by borrowing.

The reason for this is that rich people and investment funds have more money than they can think of good ways to invest. Alex Tabarrok:
The global savings glut which drives asset prices higher and makes them more volatile is very much still with us. Around the world there is now over 15 trillion in negative interest debt.
Think about that: $15 trillion for which nobody can think of a good use, just parked in accounts where it shrinks by the day.

I cannot think of any solution other than to run up the taxes on the rich and spend the money on things we need. Otherwise it will just keep sloshing around the world, distorting the economy and creating crises.


David said...

If people are lending to the government at negative interest, that does effectively constitute a form of tax, and the government then has the money to spend, with much less controversy and resistance than a tax would arouse. Funding government by selling bonds as a means of avoiding controversy and resistance is one of the great contributions of the Middle Ages to statecraft. Of course, you then have to pay it (or some of it) back, or suffer the consequences of not paying. It would be interesting to know what the German government is doing with that money--perhaps they're using it to pay off old debt. It would likewise be interesting to know where all that negative-interest money has been invested. Is it all in government bonds?

G. Verloren said...


...well, the trouble with thinking of it as a tax is that 1) bond purchases are entirely voluntary; 2) they ordinarily cost the government money over time, which is the opposite of a tax; and 3) the negative interest issue is likely only temporary, and people can just keep sitting on the bonds until the situation changes and then they're profiting again.

What John seems to be getting at, though, is that the bond situation demonstrates how little the wealthy care about what their excess money is doing.

If these bonds are losing value compared to inflation, you would imagine that people would be collecting upon them immediately to minimize further losses / preserve extant profits, and be refraining from purchasing new bonds. And yet that's not happening.

There's $15 trillion of debt whose owners could collect upon it at any moment and invest it elsewhere for better returns (costing governments a massive chunk of change in the process as a sort of "anti-tax" that will almost certainly cancel out any "tax" gained from their initial bond sale profits). And yet that doesn't happen.

Why is that? John seems to be suggesting that it's evidence that the rich simply have more money than they know what to do with and can't be bothered to care about, and my inclination is to agree. Half the wealth and resources of the planet are controled by 1% of the population, and a staggering portion of that sits around doing nothing of value, or even creating negative value, all while millions struggle to keep roofs over their heads, and get enough food and medicine to survive.

We live in a world ruled over by dragons, who luxuriate atop mountains of gold, never putting it to any purpose other than their own self obsessed vanity, and the acquisition of ever greater hoards of treasure. And they will placidly sit and let it all rot beneath their bloated corpses while the "lesser beings" of the world toil and suffer and starve and die from simple want.

Our society is built upon the absurd notion that the decision of how to divide our limited resources should belong almost utterly to individuals who have never in their lives known hunger, hardship, or want. It is they who steer the ship of state; they who decide the fates of untold millions whom they revile as their inferiors; they who ensure that for every coin that slips from their talons, massive and relentless systems have been put in place to ensure they eventually get two back.

Plutocracy is tyranny. It's just that simple.