Naturally Gifted
They say that ugly people often develop a better sense of humor. I don't know if this is true, but the idea is compelling. If you lack other talents, humor may be a way for you to compensate, whereas someone with looks might not be as motivated.
Well, we live in the age of monetarism, and an age of technology. We are certainly the envy of civilizations past. We have massive 18 wheel trucks that can carry tons and tons of cargo across a continent in a day or two. We have massive shipping barges, that carry our cars and our smartphones between continents. We order items over the internet and they are produced and shipped on demand.
If there were any civilization that could cut a few corners in terms of good public policy or resource management, and simply gloss over it with more trucks, more cargo ships and shipping containers, then it is ours. Middle class people in developed countries live lifestyles better than the king's of ages past, with climate control, automobiles, science based healthcare, and entertainment on demand.
If we can do all that, how important is it that we get "money" right, and what is the worst that can happen if we get it wrong?
MMT was right about endogenous money, but are they right about interest rates?
MMTers were early advocates for endogenous bank driven money. "Early", in this case is a matter of decades really, the basic ideas of endogenous money were developed before MMT started, and took a decade or two after MMT started to start to be widely accepted.
The origin story of money affects everything else we do financially. Imagine if you had a pile of cash, but someone told you it would be bad luck to spend it. You might starve while that cash sat there, if you were superstitious enough to believe it. When it comes to the larger macro economy, cash is not how we collectively buy things, nor does it determine how much is available to buy. That is a matter of real resources: property, capital, and ecosystems. But is MMT right about interest rates and inflation?
You Can Pay Workers, or You Can Pay Capital Owners
The MMT argument, is that the interest rate debate, comes down to a simple matter of incentives. If you pay interest on money, through money markets, as well as the national debt, then you are giving people more money in proportion to the money they already have.
When You Backstop Capital, You Distort Prices
The role of central banks is two-fold, full employment and price stability. This is typically viewed as first preventing massive financial collapse which can lead to unemployment and recessions, and secondly fighting of inflation. These are viewed on a scale, where one is in opposition to the other. If unemployment is too low, inflation is likely to rise.
While this may be true of our current financial structure, there is no reason to believe it always need be true. The job guarantee offers an alternative, where instead of unemployment, the labor market is backstopped, so that minimum wage jobs are universally available. There may be concerns that a job guarantee could distort labor markets, and this is an absolutely valid concern. If the job guarantee wage is too high, it will be harder for private industry to acquire labor: agriculture, service industries, and certain kinds of manufacturing. Anything that is labor intensive, can be very sensitive to wage prices.
If the job guarantee wage is too high, prices of these labor intensive goods and services may rise.
But backstopping financial markets, can have similar, if not more egregious effects. It is easy to backstop the labor market at the minimum wage. But when you backstop financial markets, assets like corporate shares, mortgage securities, you can cause those underlying prices to rise in the long term.
Many of these markets have prices that generally go up, and occasionally experience massive drops, corrections, or bubbles. If you eliminate the downside of these massive corrections, then you prop up prices.
While higher asset prices are good for the asset owners, they are generally a cost for everyone else: real estate, housing, and corporate equity. If you protect these markets from the downside, they will rise much more quickly. This adds costs to everyone except the asset owners, and specifically means the asset owners enjoy passive income. While passive income is a great deal for
Interest is the Ultimate Form of Passive Income
Interest is not earned from work, it is earned from
What interest on money allows you to do financially, is to move wealth from more volatile assets like shares and fixed assets, into money, and still earn a return. Except, in the aggregate, "money" is not moved from one asset to another, the assets themselves all exist and trade at relative prices.
How Targeted Raises Can Reduce Inflation
There are many critical industries and trades, construction, logistics, and some manufacturing, which tend to pay less than professional office jobs, like accounting, IT, business management, etc. Young people looking to start careers, as well as others, must decide which fields to go into.
While an advertising consultant may be able to generate more profit for a particular firm or company, a truck driver is very likely to have a bigger impact on inflation, as they can actually deliver supply, instead of merely capturing demand.
Raising wages in blue collar jobs, trades, and the logistics industry, is likely to help reduce inflation, as it makes careers in these industries more attractive, it better supports workers, and it gives people options for a mid-career transition.
By reallocating the labor force to where they can make an impact, targeted raises can solve many issues. But even better is to not neglect this workforce in the first place. Companies like to trim down workers when things are running smoothly to pocket more profits, but this may be more than offset by the additional costs of adding workers when things are in a bind. Supply chains can be made too thin, so that they are precarious.
While an event like covid is out of the range of normalcy, it is still important.
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