Add The Tyranny of the Myths post

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+---
+title: "The Tyranny Of The Myths"
+date: 2024-12-15T09:57:51Z
+tags: [article]
+summary: "Uncover the myths holding back our economy and explore a bold vision: jobs for all, zero interest rates, and a system designed to serve the many—not the few"
+
+---
+Economics is often described as the dismal science, but it's more apt to
+call it the mystical science. For generations, the field has been ruled by
+aphorisms that sound profound but crumble under scrutiny. These sayings,
+like "tighten your belt in tough times" or "the market knows best," are
+not neutral observations. They are myths crafted to justify particular
+views of how society should be run—views that often prioritise the
+interests of the few over the many.
+
+Take monetarists, for example, with their obsession with controlling
+inflation through tight monetary policies. Their aphorisms reinforce the
+"sound money" myth, which ultimately serves financiers by ensuring that
+debt repayments hold more value than wages. Similarly, New Keynesians push
+the myth of the impartial, unelected central bank—a supposedly noble
+institution that must remain insulated from democratic accountability
+to protect us from our worst instincts. But making "correct decisions" for
+whom? These systems, by design, elevate the interests of those who
+already hold power and wealth.
+
+### A New Compass for a Modern Economy
+
+In contrast, a more honest approach to economics would start from the
+premise that democracy can be trusted—that the people of a nation have
+the agency to shape its future via the ballot box. This is the bedrock of
+what I see as modern economic thought, encapsulated by a simple aphorism:
+
+**It is better to give poor people a job than rich people a bung**
+
+This phrase cuts through decades of economic dogma to reveal a fundamental
+truth: prosperity grows from the ground up. By ensuring everyone who
+wants a job has one, we can stop funnelling unearned income to the
+wealthy and instead build a society where the labour market—not
+financial markets—stabilises the economy.
+
+### Three Pillars of Reform: Interest Rates, Bonds, and Bank Deposits
+
+How does this work in practice? It starts by addressing three
+entrenched pillars of the status quo: interest rates, bond markets,
+and bank deposits. These are often seen as immutable forces of nature,
+but they're merely policy choices—choices we can change.
+
+First, eliminate the Bank Rate and drop interest rates to zero permanently. This
+would end the cycle of "bungs" to the wealthy through interest payments
+on government debt. Central banks would stop tinkering with rates and
+return to their proper role, ensuring the payment system runs smoothly and
+affordably while keeping the banks on a short leash via the judicious
+raising of the Governor's eyebrow. With interest rates at zero forever, the
+cost of borrowing would fall for everyone, reducing mortgage and rent
+burdens—a tangible benefit for millions of households.
+
+Second, [dismantle the bond market][1]. Without government bonds, the
+so-called "bond vigilantes" lose their leverage. They cannot hold
+governments hostage over fiscal policy if there are no bonds to speculate
+on. Instead, savings can be safely stored as real money, backed by the
+state, without the destabilising effects of financial engineering and
+rehypothecation. Removing this layer of complexity simplifies the economy
+and shifts power away from financial elites.
+
+Third, ensure that all bank deposits are money. There should be no more
+insured limits; instead, they should have the same guarantee as a £20
+note. This would make the financial system safer and eliminate the need
+for elaborate safety nets to prop up fragile banking practices. By cutting
+out the middlemen and the money changers, we would create a system where
+savings and payments are secure, simple, and accessible to all.
+
+### Stabilising the Labour Market
+
+Together, these reforms shift economic stabilisation from the market for
+money to the market for labour. Instead of relying on unemployment to
+control inflation, we offer a straightforward, standard hours job to anyone
+who wants one—a genuine opportunity to contribute to society while
+ensuring a baseline level of income and dignity. Businesses concerned
+about this government expenditure can always hire people away—a clear
+indicator that the system is functioning as intended. For those who claim
+the standard job pays too much or is "too easy," the solution is simple:
+take the job. It's open to everyone.
+
+### The Economic and Political Payoff
+
+The economic benefits are clear. Unemployment disappears, boosting GDP and
+eliminating the social costs of joblessness. But the political benefits
+are just as significant. The standard job is the lynchpin of this
+transformation, providing the stability that allows for a zero Bank Rate
+policy. By guaranteeing a job to anyone who wants one, the government can
+confidently eliminate interest rates, directly leading to a reduction
+in mortgage and rent costs for everyone—including those earning above the
+minimum wage. Knowing that a job is always available in the local area
+provides not just a safety net but also the conditions for a fairer,
+more accessible housing market.
+
+### Anticipating the Criticisms
+
+Of course, these changes would provoke resistance. The battleground
+would inevitably shift to the currency exchange rate, as critics claim
+these policies would weaken the pound. But that's a debate for another
+day. What matters now is recognising that the myths of sound money and
+independent central banks have failed to deliver prosperity for the
+majority. It's time to chart a new course, one rooted in the simple yet
+transformative idea that national economic policy should serve the people
+of that nation, not the jet-set globe-trotting elite.
+
+{{<joindiscord>}}
+
+[1]: {{< relref "euthanise-the-bond-market" >}}