Ping!
This is what’s wrong with economists today. Why is it even so important to be spending our money anyway? How does forced or compelled spending raise our standard of living? This proposal is absolute insanity.
Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.
That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10.
I am missing the logic here
The people who lend money are banks and they don't loan out green Federal Reserve Notes
They loan out money from their pool of assets which are in the form of book keeping entries on a computer. Cash money is a minor part of their assets.
A mafia loan shark would be "stimulated" to loan out more money because he does deal in cash and with this plan 10% of his cash stash would be eliminated each year
“Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.
That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10.”
“Of course, some people might decide that at those rates, they would rather spend the money — for example, by buying a new car. But because expanding aggregate demand is precisely the goal of the interest rate cut, such an incentive isn't’ a flaw — it’s a benefit.”
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An insane idea ... however, we have learned that progressive liberals love ideas like this; and do attempt to make laws of stupid ideas.
God have mercy on your people in America.
Wasn’t Mankiw one of Bush’s economic advisers?
Small freaking wonder.
I think he’s completely missing the EVEN WORSE point of Manwik’s op-ed. (Manwik does not take the proposal to demonetarize cash seriously. He mentions it as a way of illustrating the “benefits” of accelerated spending.)
What Manwik is actually proposing in his article is MUCH WORSE. (Pardon my shouting.) He is proposing that the Federal Reserve deliberately increase inflation! This would have the “desired” effect of punishing saving and rewarding consumption. (Actually, it will probably just have the effect of driving up the price of gold and other inflation hedging commodities.)
Inflation is war by debtors on creditors. LBJ waged a successful campaign, 1966-68, carried on in full by Nixon and Ford. It was left to Jiminy Carter to reap the whirlwind, which he did with characteristic ineptitude. It took Reagan to have the guts and insight to ride out the resulting recession without any hair-brained schemes, and bring inflation under control and right the economy for the next 25 years.
As bad as Bush II was, only a Democratic would view inflation as a cure for indebtedness.
Rather then put one random digit out of circulation we should announce that within thirty days the "old design" would no longer be legal tender and you should cash them in now for the "new design".
That would make the off shore counterfeiting operations obsolete overnight. It would also cause the obscenely wealthy drug lords to loose a major stash of cash. Thoughts?
Regards,
GtG