There's a couple of other words that describe what I'm talking about - neoliberalism, lassez-faire capitalism, and in a more general sense, the Chicago school of economics - but I chose market fundamentalism because it seemed to best describe precisely what I'm talking about. I mean the belief that the market is capable of self-regulation and that governmental intervention will cause damage to the economy.

I'm asking this because there's still a lot about economics that I don't know about and so I was hoping someone with a background in the subject who would be able to better answer the question. But I realize it's probably also a political question. I wonder if it's more of an issue of our politicians pressing these views than economists and academics.

Personally, with my life's experience, it seems almost obviously wrong. I've lived through several market downturns and even a crash, and looking through history it seems like every market crash can be attributed to the market failing to correct itself.

Everywhere I turn everything is more expensive.

I'm spending less and less every month on non-necessities, buying more basic foods, never eating out, spending less on entertainment, etc but everything else just keeps going up and up.

Electricity just went up 12%, my gas bill is up 20%, rent has gone up 10% year after year, water is somehow 30% more expensive than it used to be, my groceries are more expensive than ever even though I'm buying in bulk and not buying anything fancy, I've stopped eating luxuries I used to enjoy like steak and fancy cheese because they've just gotten outrageous.

I have a good job that pays decently but my raises have been less than 3% a year and I feel like I'm getting squeezed out of everything I once had. There's no light at the end of the tunnel is there?

I've started to notice this narrative in my news feeds. The argument is high wage growth is contributing to stubborn inflation. So cooling wage growth is seen as positive. It'll help central banks pause the hike cycle sooner.

My knee jerk reaction is if wage growth is contributing to inflation it's minuscule; just enough to print the headline. I can't help but feel this narrative is a way to distract from the earlier price gouging narrative and to help employers scapegoat out of raises.

But I'll admit, I haven't looked into this topic deeply. So I'm happy to be schooled.

inspired by a law my local county council has been debating (local news article, press release from January from the sponsoring councilmember, and actual text of the proposed law)

from the press release:

During and even before the COVID-19 pandemic, many businesses in the Seattle area and beyond began shifting to cashless operation, leaving people who rely on cash with fewer options to purchase goods and services. Research, however, shows that cashless businesses most impact communities of color, seniors, people with disabilities, undocumented residents, refugee and immigrant and communities and low-income communities.

...

At least 2.1% of Washington residents are unbanked, meaning they don’t have bank accounts, credit cards or other typical financial services, according to the 2021 FDIC Household Survey. Five-year estimates put that number even higher – at 3.1%. More than 17% of residents are underbanked, meaning they might have a bank account but often rely on alternative financial services, such as money orders, check-cashing services and payday loans.

...

The legislation would require businesses in unincorporated King County to accept cash for most retail transactions, and to not charge higher prices than for another form of payment. It would allow for retailers to only accept up to $250 in cash payment for single transactions larger than that amount. It would allow for civil actions to be brought by someone whose cash payment was refused.

what do you think about requiring this?

(especially interested in responses from around the world and not just the US, since I think cash vs. card reliance varies considerably by country)

Rate hikes. "COVID mortgages" up for renewal at much higher rates.

Wondering how badly the current rate environment is affecting people IRL. How much of this do you think (or know) is actual bad news vs. just media doom and gloom?

Putting aside specific criticisms of the GOP as it exists today, what do you think of using the debt ceiling as a tool to reel in spending and put the US on a sustainable path with its national debt? People make it out to seem backwards and manipulative, but this whole situation seems like we're driving a hundred miles an hour toward a cliff and the person saying we should slam the breaks is getting flack because it'll damage the car.

I was reading this text from the Washington Post (sorry for the maybe paywall):

https://www.washingtonpost.com/opinions/2022/10/06/xi-jinping-crackdown-china-economy-change/

The opinion asserts that in response to liberalization of Chinese life, driven by capitalistic economic growth, is the reason that Xi Pinjing "cracked down in every sphere imaginable — attacking the private sector, humiliating billionaires, reviving Communist ideology, purging the party of corrupt officials and ramping up nationalism (mostly anti-Western) in both word and deed."

My conspiratorial brain latched on to the humiliating billionaires line, and started thinking about a between the lines message along the lines that billionaires are good and should not be humiliated, a subtle warning-response to the progressive grumblings here in the U.S. that a failure to support capitalism will result in totalitarianism.

Then I started thinking about the questions, are billionaires good for society? I had always held the position that a billionaire is a market failure (in my econ 101 understanding of the term), much like pollution. It is improper hoarding and unfair leveraging of capital into disproportionate and un-earned degree of pesonal privilege.

It is certainly a by-product of euro-american capitalism, whereby the desires and welfare of the many are trodden on by those with the ability to fight and to shape the regulatory machine meant to protect the interests of the common-wealth.

I see a few possibilities. One, is that my understanding of economics is wrong, and producing as many billionaires as possible is the ultimate goal of capitalism and in fact good for everyone, even in theory.

Two, it is indeed as I suspect, a market failure. And the failure here is one of degree, it is not, in fact problematic to have some individuals with significantly greater wealth among us, and is, in fact, beneficial overall, but to have some with so much more than the rest of us (wealth inequaility) is a result of getting in the way of a clean functioning marketplace.

Three, economic theory is working as described, and economic theory/activity is an insufficient foundation for the maintenance and success of a whole society, and we need to find a way to constrain it to its own sphere, so that it provides us with what we need to be healthy and happy, but no more.

I turn to the bright minds of tildes: am I looking at this right?

When I last wrote about money, some people liked it but u/MimicSquad had issues with my simplified explanation. After thinking about it, I'm going to try again. I don't want to make my "casino world" analogy too complicated, but I will make some changes so that we can talk about payments. (Caveat: I'm not a financial expert, but this is how I think it works.)

So let's say there is a town with two casinos. In the Yellow Casino, gamblers use yellow plastic chips, and in the Purple Casino, they use purple plastic chips. Otherwise, they are much alike. Each casino has a teller window where gamblers exchange the national currency (which we might call green money) for its own chips.

So there are three currencies (yellow, purple, and green) and two exchanges (the teller windows). The casinos want their chips to be worth the same amount as green money, so their teller windows always trade them at par. (This makes yellow and purple chips worth the same amount too, even though nobody trades them directly yet.)

Suppose that a gambler who has yellow chips walks into the Purple Casino. "You can't use those chips here," they say, "but for your convenience, we will trade you a purple chip for each of your yellow chips." Which they do. Then they send an employee to the Yellow Casino and trade the yellow chips for green money.

This is a basic payment system. It's implemented as two trades, one visible and one hidden. The Purple Casino's teller visibly trades yellow chips for purple, and behind the scenes there is a settlement process, implemented using a trusted employee who carries chips and money to do another trade. The gambler doesn't need to know about trades between casinos, but they're essential for providing this service.

Notice that, although the gambler carried yellow chips from Yellow Casino to Purple Casino, the second trade (a withdrawal) causes the Yellow Casino to have less money. The money followed the chips and the chips came back home.

It doesn't need to happen quite that way, though. If Yellow and Purple agree, the Yellow casino could trade anything that's worth the same amount in return for getting its chips back. So, more abstractly, some financial asset must follow the chips from Yellow to Purple.

Furthermore, if the casinos trust each other, they can delay settling up. Perhaps at the end of the day, the Purple Casino will have some yellow chips and the Yellow Casino has some purple chips, so they can exchange yellow for purple and they can use green money (or any financial asset) to make up the difference.

Why settle at all? Partly because of risk. The casinos don't want to trust each other too much. If the Yellow Casino gets into financial trouble, the Purple Casino doesn't want to end up holding worthless yellow chips instead of the green money that they have more confidence in. (Also, they probably find green money more useful than yellow chips.)

These casinos are are my thinly-disguised model for banks. To make things a bit less abstract, I'll talk about the US. There around 4,000 banks (and 5,000 credit unions) in the US. Each bank has its own computers that implement money as bank deposits. They have payment systems that tie them all together and hundreds of thousands of ATM's that trade electronic currency for cash.

We could think of US banks as having 4,000 different currencies that all trade at par. While we normally think of the US dollar as a single currency, it could also be thought of as a federated system of many currencies, all tied together with payment systems that do lots of trades. (Nothing really changes; this is just a different way of thinking about it.) There are some currencies with special status, like paper money and coins and federal reserve accounts, but these are in addition to all the others. (You could even think of each kind of coin as its own currency, and making change as a form of currency trade.)

There is a historical basis in early US history for treating each bank as having its own currency. US banks back then issued their own paper money, and although they tried to make them trade at par, these banks sometimes failed and were sometimes frauds, and their paper money often traded at much less than par. These days banks are much better regulated and we normally don't have to worry about such things, but much as a multicellular organism has cell walls as a sort of remnant of earlier times when cells were more independent, the boundaries between banks still matter, despite all the regulated mechanisms that make their currencies practically the same to us.

Since each bank manages its own computer systems, there is a sense in which electronic money never actually moves outside its own bank. ​When we "move money" electronically, it's done by trading, and there has to be a payment system to bridge the gap. The timing of the trades varies, depending on the details of the settlement process.

What about creating money? In casino world, the Yellow Casino makes yellow chips and the Purple Casino makes purple chips, but they can only make their own chips. Similar, a bank could make money in its own computer system, but they are limited in what they can do in anyone else's computers. They influence other bank's computers via trades.

If a bad bank created a lot of their own money and then spent it (perhaps disguised as making a loan), they would still be on the hook during the settlement process, which essentially requires them to take their money back in return for a financial asset worth the same amount that wasn't created by them, such as money in their central bank account. Payments can be very complicated and there is often short-term debt involved in the settlement process, but ultimately a legitimate bank needs to honor its debts.

It's similar to how anyone with a checkbook could write bad checks, but this will catch up with you during settlement. The physical ability to write large numbers on checks isn't a superpower that lets you buy anything. What a criminal could do with it is somewhat limited and short-term.

Every bank has accounts with the central bank and one thing they are used for is implementing settlement. Having "reserves" with the central bank, even there isn't a legally required balance, is something every other bank needs to handle some kinds of payments. Just as you need money in your bank account to write a check and have it not bounce, banks need a high enough balance with the central bank to handle the payments their customers make. (Though I don't know the details of what sort of overdraft protections there are.)

The only bank that can buy anything it likes without consequences to itself is the central bank, which doesn't participate in settlement like everyone else. The central bank's power to create its own money might look superficially similar to other banks, but it's special because payment is complete after the first trade; there is no further settlement after receiving central bank money. (Though a bank could trade reserves for cash if it needs it for its ATM's.)

The end, for now. Sometimes I've been writing in a definitive way here, but keep in mind that I'm still not a financial expert and I welcome corrections from people who know better.

This question has been going through my head for quite some time. UBI has been talked about quite a bit now, and usually the question is if it should be introduced and if yes, how much should everyone get?

But how would you stop UBI from inflating the economy? If everyone suddenly gets 1000€/month purely because they exist, how do you stop rent from suddenly going up 1000€/month? How do you stop it from going up gradually?