I was pleased to belatedly run across Reihan Salam’s discussion of my proposal to provide key public goods with a minimum of tax distortion by expanding the non-profit sector rather than expanding government. In Reihan’s article, "Miles Kimball’s Quixotic but Interesting Tax Proposal," Reihan says it might not curtail growth in government spending, but then continued:
What Kimball’s proposal does do, however, is address the normative demands made by egalitarians for higher taxes on the affluent (the notion of paying your fair share) while not directly addressing this structural dynamic. This is arguably a feature of Kimball’s proposal and not a bug, as it undermines the most potent case for higher taxes (the rich should bear more of the burden of making the investments we need to help vulnerable people flourish) without effectively rewarding public sector inefficiency.
Unfortunately, as Kimball would surely acknowledge, this proposal is wildly unrealistic, in no small part because it would drive a shift in resources from the public sector to civil society organizations that will embrace a wide variety of business models, not all of which will be incumbent-friendly. And over time, one assumes that incumbents will work to stymie empowering innovations in this space that prove threatening. That doesn’t change the fact that Kimball’s proposal is extremely interesting.
The Book of Uncommon Prayer is a collection of prayers for non-supernaturalists. I plan to keep this updated, and to add a section of shorter mantras.
"The Litany Against Fear" was written by Frank Herbert, the rest by me. The title of each prayer below also serves as a link to the original post that has commentary on each prayer.
In this moment, as in all the moments I have, may the image of the God or Gods Who May Be burn brightly in my heart.
Let faith give me a felt assurance that what must be done to bring the Day of Awakening and the Day of Fulfilment closer can be done in a spirit of joy and contentment.
Let the gathering powers of heaven be at my left hand and my right. Let there be many heroes and saints to blaze the trail in front of me. Let the younger generations who will follow discern the truth and wield it to strengthen good and weaken evil. Let the grandeur of the Universe above inspire noble thoughts that lead to noble plans and noble deeds. Let the Earth beneath be a remembrance of the wisdom of our ancestors and of others who have died before us. And may the light within be an ocean of conscious and unconscious being to sustain me and those who are with me through all the trials we must go through.
In this moment, I am. And I am grateful that I am. May others be, now and for all time.
May I be strong and steadfast,
calm and collected,
as I set out to serve
the God or Gods who may be.
May this gathering uplift our hearts, enlighten our minds, and inspire our endeavors to bring us closer to, and glorify, the God or Gods Who May Be.
And may we understand more fully the mystery of the humanity we all share, and act as one family to bring this Earth nearer to Heaven. Amen.
May the works that we do, sustained by this food, bring us closer to, and glorify, the God or Gods Who May Be.
And we remember Jesus Christ, symbol of all that is good in humankind, and thereby clue to the God or Gods Who May Be. Amen.
I must not fear.
Fear is the mind-killer.
Fear is the little-death that brings total obliteration.
I will face my fear.
I will permit it to pass over me and through me.
And when it has gone past I will turn the inner eye to see its path.
Where the fear has gone there will be nothing.
Only I will remain.
This is a link to Rana Foroohar’s piece about Anat Admati in Time.
Anat is one of my heroes for her dogged advocacy in favor of the high equity requirements that will give us a stable financial system.
As you can see from the link above, for most people, it might not be that big a deal if paper currency were demoted, as I advocate in my column “How Subordinating Paper Money to Electronic Money Can End Recessions and End Inflation.” For those who actually use paper currency a lot, the system I advocate would help them financially because it would lead to lower inflation, and therefore a lower implicit tax on paper currency. And of course, other than those who use it for illegal purposes, those who use paper currency for a large share of their transactions are more likely to be borrowers than lenders, so they would benefit in the short run from the low interest rates possible when the safest interest rates are negative. And in the long run, they would benefit along with everyone else from a more stable economy.
Question: I can’t resolve a question I have about breaking the ZLB with electronic money, and it’s driving me nuts.
I re-read a couple of your posts that mention a kind of ‘first-mover’ advantage in breaking the zero lower bound: not only does a first-mover get the usual stimulus from lowering the interest rate, but the fact that it is the only country in the world that can offer such a low interest rate is likely to boost demand further.
I’m struggling with the effect on the supply of loanable funds within the first-moving country. Essentially, as the central bank lowers the interest rate, and economy-wide interest rates fall, won’t some investors begin to look abroad for better risk-reward alternatives? I know that it’s not costless or riskless to transfer to a different currency, but it seems that the central bank’s effectiveness in unilaterally changing interest rates would be hampered by the existence of outside options: either some interest rates will remain high or some agents will begin to ‘cash out,’ if you’ll pardon the pun, and move their money abroad.
I hope it’s clear what I’m trying to ask. Would you help me figure out what I’m missing?
Answer: Great question. I am using logic from Mankiw’s textbook treatment of international finance, which I lay out in my post "International Finance: A Primer."
Basically, when people start investing abroad because rates of return are higher abroad, that is a capital outflow, and that is why exports go up. Capital outflows put domestic currency in the hands of those abroad. They don’t really want it, so exchange rates adjust until that currency (whether physical or virtual) makes its way back to its home country to buy exports. “Moving money abroad” is a stimulus to exports, because goods follow money.
The only way an outside option would cause trouble is if firms starting setting prices and wages in a foreign currency. It is crucial that sticky prices and/or wages (or at least most of them) be set in terms of the electronic dollar (or whatever the domestic electronic currency unit is called).
In my electronic money seminar, I make the point that, when they occur, negative interest rates on paper currency are not meant to disadvantage paper currency. What those negative interest rates on paper currency do is make it so there is nowhere to hide from the negative interest rates except by spending the money. You can send your own funds abroad, but then the person who took your dollars in exchange for their own currency now can’t hide from the negative interest rates except by spending the dollars. In that situation, by sending dollars abroad, you haven’t eliminated the hot potato of dollars earning a negative interest rate from the world, you have only made it someone else’s problem. The only escape from those negative interest rates is to spend the money, so someone—you or someone further down the chain—will be driven to spend it.
Follow-up Question: Ok. In other words, this kind of behavior (bailing on the domestic currency) will just lead the exchange rate to adjust until some form of interest rate parity is achieved again. Is that the right?
Answer: No. There might continue to be an interest rate difference. But the international flow of funds to the higher interest rate stimulates exports through its effect on the exchange rate.
Here is the key passage, but the whole thing is eminently worth reading:
What actually happened in the 80s, however, was that central banks — most famously the Fed, but also the Thatcherite Bank of England and others — drastically tightened monetary policy to bring inflation down. And inflation did indeed come down — eventually. But along the way there were deep recessions and soaring unemployment, which went on much longer than you could justify with any plausible story about the monetary shock being unanticipated.
This was very much a vindication of more or less Keynesian views about the economy, and the 80s were in fact marked by the New Keynesian comeback.