Should-Read: Duncan Weldon: Negative Yields, the Euthanasia of the Rentier, and Political Economy

Should-Read: I wrestle with this political economy puzzle unsuccessfully myself. I am equally flummoxed:

Duncan Weldon: Negative Yields, the Euthanasia of the Rentier, and Political Economy: “I understand the mechanics of engine that took us here but not what the driver was thinking…

…Since approximately mid 2010 (I’d date it to the Toronto G-20) an incomplete economic recovery in the developed economies has been increasingly reliant on monetary policy to accelerate it with fiscal policy acting as brake… especially in the Europe and to a lesser extent in the US…. Years of tight fiscal policy and monetary loosening have taken us to where we are…. I am really struggling with is the political economy that drove it….

The death of the rentier was supposed to be a side effect of an economy operating at full employment. Instead, across much of Europe the rentier is being gradually euthanised whilst workers continue to suffer from weak real income growth and high unemployment….

A bund or gilt today is a very different proposition from what it was a decade ago… the income is non-existent and there is an increasing risk of a (large) capital loss. In effect, the monetary policy aim of pushing people into riskier assets has made “safe” assets more dangerous. And this is why I don’t understand the political economy that has brought us tight fiscal and easy money–it simply isn’t creating enough winners to be sustainable….

Of course the voting public don’t seem particularly keen on deficits…. It may be that… this is the best argument for helicopter money. If fiscal policy makers won’t do what is required, then perhaps monetary policymakers can…