Interest rates like beer for a dime
Two big questions about the crisis are: what was the state of capitalism before coronavirus, and what’ll its future be?
I rarely hear socialists talking about interest rates, but interest rates have to be a big part of any answer to the above questions. (Remember that interest rates are the price of borrowing and lending money and are set by the Fed.)
In the last ten years, the Fed has cut interest rates a lot. One result of perpetually lowering the interest rate is what’s been called a corporate debt crisis where firms took on tons of loans and, among other things, bought their own stock.
Jim Grant, an interesting character, has a website called the Interest Rate Observer. His podcast is pretty funny (in a dandy kinda way) and interesting.
In the most recent episode, he likens the Fed’s “activist monetary policy” of continually lowering interest rates to a stunt that the Cleveland Indians baseball team used in the 1974.
Apparently, to get people buying tickets, the Indians management starting charging 10 cents a beer at the stadium. That was super cheap, so people came in droves and got wasted. But by the second half of the game people were so drunk they were going bonkers (see the picture above for one example).
He likens recent interest rate policy to the Indians’ 10 cent beer policy, where capitalists are the fans getting drunk for nothing and then going bonkers. Then the coronavirus happened. The future of capitalism rests, to some degree, on what happens when you layer a production crisis over a capitalist mode of production where the capitalists are bonkers from ten years of low interest rates.
I guess if we keep Grant’s analogy, we can imagine a stadium full of capitalists drunk as hell. Then they get an announcement over the loudspeaker that there’s an infectious disease spreading. What happens then? And how do change your beer pricing policy moving forward?
The socialist response to this would be to change who makes these decisions, and who benefits from those decisions. Socialists would reconfigure ownership and management of the stadium so the workers were in charge and benefitted the most from policies.
Rather than the management who lowered beer prices, or the customers who just kept drinking, we would want the people selling the beer, making the beer, cleaning up before, during, and after the game to be in charge moving forward.