A mundane idea that has recently occurred to me-are public attitudes toward the value/importance of money changing? I don’t really have a question, I do hope to generate a few replies from people who understand the financial system better than I.
Currently we have the very curious situation where there is a huge amount of money in circulation, to the point that interest rates have fallen close to zero and in some cases actually negative (for instance world-wide 17 trillion of bonds are denominated with negative interest rates). Classically this means a) an increase in inflation, then loss of faith in the money. To date, neither has happened. And I don’t see either being predicted for the near to medium future.
Is this due to unexplained factors? That is the message I have been getting reading news articles-no one knows what is going on.
Or is it an adjustment in public attitudes about what money is? Do people simply don’t care about the “value” of money any more? I know I don’t. Money is no longer even bills or deposits. It is simply an ever-changing set of bits in many different computers around the country (world). No one has as much as they want, the majority of people, at least in “advanced” societies have enough to make it through the week/month/year. That is what money is today-the ability to use this constantly flowing stream of digital “value” (perhaps M5? M4+credit lines, I don’t know what it is called) to get what you need and then some.
Basically, people have accepted that “money” isn’t backed by anything and no longer care. Which, for economies as large as many in this world is a good thing. The unexpected (to me) result is that inflation and interest rates have become unmoored from the money supply.
Of course there are still exceptions. Currently Venezuela and Argentina are examples. Zimbabwe is a recent one. But those are small economies with poor governments. I imagine that several European countries would be in the same boat except that they wisely created the Euro which is too big to fail (so far). Now the US is testing the limits of what people care about with trillion dollar deficits.