[R]outinizing transfers from the central bank to citizens might reshape society. "Free money" would certainly carry consequences, both good and bad, foreseeable and unforeseeable. My suggestion would be that the central banks should make equal transfers to all adult citizens irrespective of income, job, or tax status. That would be simple to understand and administer, and it is "fair" ... flat transfers are guaranteed to put money in the hands of cash-constrained people who will spend it. Flat transfers are much more effective...BONUS
The most obvious hazards of monetary policy transfers have to do with dependency and incentives to work. If people grow accustomed to getting sizable checks from the central bank, that would change behavior. But not all changes are bad... Employers would undoubtedly have to pay people who work unpleasant jobs more than they currently do. But that's just another way of saying that workers would have greater bargaining power in negotiating employment, as their next best alternative would not be destitution.
...it is possible that too many people would choose to "live off the dole", or that people would come to depend upon income from the central bank, limiting the bank's flexibility to reduce transfers when economic conditions called for that. So here's a variation. Rather than distributing cash directly, the central bank could make transfers by giving out free lottery tickets. The winnings from these lottery tickets would constitute transfers from the central bank to the public. But the odds that any individual would win in a given month could be made small, in order to prevent people from growing dependent on a regular paycheck from government. Plus, it would be easier for the central bank to reduce the "jackpot" offered in its free lottery than to scale back payments that people have come to expect...
I know this all sounds a bit crazy, a new normal under which central banks would print money to fund lottery payouts and then fake an asset on their balance sheets to offset the spending. But these are perfectly serious proposals.
What, then, is the future of the American Dream? Michael Spence, a Nobel Prize-winning economist, whom the World Bank commissioned to lead a four-year study into the future of global growth, admits to a sense of foreboding. Like a growing number of economists, Spence says he sees the Great Stagnation as a profound crisis of identity for America.Reseeding the Economy - "let's discuss the third bullet point in what you might call an agenda for 21st century capitalism: recapitalizing the economy. (The first being having an economic purpose and the second creating higher quality demand*) ... The real problem's deeper than fixing a handful of today's broken industries. It's in the institutional structure of the economy ... Yes, we've got to recapitalize the economy. But not with low-potential capital, like cash and machines. With higher order (more productive, more enduring, and more fundamental) kinds of capital." cf. Why Economic Recovery Hinges on Values
For years, the problem was cushioned and partially hidden by the availability of cheap debt. Middle-class Americans were actively encouraged to withdraw equity from their homes, or leach from their retirement funds, in the confidence that ¬property prices and stock markets would permanently defy gravity (a view, among others, promoted by half the world’s Nobel economics prize winners, Spence not included). That cushion is now gone. Easy money has turned into heavy debt. Baby boomers have postponed retirements. College graduates are moving back in with their parents.
The barometer is economic. But the anger is human and increasingly political. "I have this gnawing feeling about the future of America," says Spence. "When people lose the sense of optimism, things tend to get more volatile. The future I most fear for America is Latin American: a grossly unequal society that is prone to wild swings from populism to orthodoxy, which makes sensible government increasingly hard to imagine. Look at the Tea Party. People think it came from nowhere. While I don’t agree with their remedies, most Tea Party members are middle-class Americans who have been suffering silently for years."
Spence admits he is thinking aloud and going "way beyond the data". And he concedes that America probably still retains its most vibrant strength in its still world-beating capacity for technological innovation. Most economists are not as bleak as Spence. But it is in the neighbourhoods among ordinary Americans that his pessimism gets its loudest echo. "To be pessimistic about the future is so new for Americans and so strikingly un-American," says Spence. "But most people grasp their own situations way better than any economist."
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