Hacker News Reader

Comment by jeffparsons | Hacker News Reader

Gosh, that's bleak.

I've recently been thinking a lot about policy changes that might help with housing affordability, and the same thing keeps happening: every time I think I've come up with something clever, I eventually realize that I've just accidentally made things even better for people that started off with a lot of capital.

It feels like aside from explicit redistribution of wealth (raise minimum wage, tax high income earners more, raise high-end property taxes), you can't change _anything_ without making the rich richer and the poor poorer.

View on HN

My preferred policy would be to have central banks adjust rates to maintain inflation at 2% average, and more gradually have governments adjust UBI to maintain a central bank interest rate average at 5%.

(You can certainly have the input to one feedback loop be the output of another).

Then structural deflationary forces would manifest as UBI increases instead of interest rate decreases.

I think the positive real interest rates would ensure the UBI isn't all captured by rent increases, although it's hard to be certain unless it's tested.

The 2% figure is arbitrary though. The correct thing to do is just stop printing money entirely. The idea of a 'deflationary spiral' is one of the many not very well founded bits of economics that's really more like psychology, but inflation is always and everywhere a redistribution of wealth away from savers and people at the bottom, towards those who print money at the top. There's a deep lack of justice in that.

It's arbitrary but I got those numbers from economist John Taylor, who knows more than I do. Maybe zero inflation would be better.

The "savers" don't stop saving just because the money supply stays the same. They will actually save more until there is mass unemployment and they are structurally unable to save because of the aforementioned unemployment.

We got at least two world wars out of "deflationary spirals" and every single gold standard that was attempted failed during deflation.

Also, liquidity preference is a systemic redistribution from the bottom 90% to the top 10%.

The people that benefit from inflation are the savers and bankers in the top 10% because they can live off the interest or capital yields which must be higher than interest.

Bankers and savers benefit because governments, people and companies pay debts first before they pay anyone else. If the cantillon effect exists it exists in the boring form of those who own the most get paid the most. The proximity argument is nonsense because there are banks in every city. You can "print" money yourself by getting a mortgage to buy a house and many people do.

"They will actually save more until there is mass unemployment"

This is pop psychology and there is ample counter-evidence for it.

World War 2 was not caused by monetary policy! A hypothesised, partial cause that Hitler certainly exploited was crippling debts. But that wasn't solvable by economists. Do you think the allied powers that defeated Germany in WW1 would have sat back and tolerated Germany inflating away its war debts?

Yes you can, and it is pretty easy. Build.

Every single, new building puts downward pressure on the average price. The moment supply outstrips demand, prices goes down, housing market stops being reasonable asset, money outflows causing further collapse of the market and houses are dirt cheap.

I think that evidence from China's real estate bubble suggests that no matter how much of a supply excess you build, it might not bring down prices as long as the macro environment favours real estate as an investment, because demand for perceived-as-safe and fast-appreciating investments is nearly infinite. (The excess supply can probably make the eventual bubble pop more dramatic, though, but it seems like it won't be triggered simply by a supply excess).

At the very least, a supply-solution proponent would need to explain how China's property supply glut didn't bring prices down until the government cracked down on credit.

You can introduce negative interest rates to pay off debt and reduce the money supply. Do the same to land via a land value tax.

A lot of equity derives its value from real estate so the obvious escape into stocks won't work in practice.

Negative interest rates increase the money supply though, and explode the valuations of real estate and other assets.

Land value tax

Reply on news.ycombinator.com