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Venice’s failed war against Constantinople led to the first bond market

172 points · 59 comments · RickJWagner

  1. mono442 · · focus · HN ↗
    Technically bond markets with fiat currencies are unnecessary but for some reason they still exist.
    1. smallmancontrov · · focus · HN ↗
      "Some reason" is Separation of Power applied to money printing. The Federal Reserve is an independent body guarding the money printer from the politicians.

      Congress (and, increasingly, the executive) can't simply choose to print and spend. They can choose to spend in excess of revenue, but to do this they must sell treasuries, they must borrow and spend, but the bond market is allowed to say "no." We are seeing this in real time as interest rates rise. In contrast, if the politicians want to print and spend they have to beg/pressure/persuade the Federal Reserve to run the money printer and buy the treasuries.

      Whether this is good or bad depends on your politics. I like separation of powers. I'm not keen on the idea of handing congress/executive the power of the printer, people in the US are very sanguine about how that can go. I'm also not keen on destroying the money printer, because the events of 100 years ago showed us what deflationary shocks look like (even worse than the inflationary shocks) and unlike my goldbug relatives and crypto-pilled friends I payed attention. The mechanism of having an independent body that guards the printer is the best compromise I have heard, so personally I'm glad it's the one we have.

      Challenge: propose something better.

      1. goalieca · · focus · HN ↗
        Inflation is an invisible tax. Nothing is free.
        1. smallmancontrov · · focus · HN ↗
          Yes, and deflation is a visible timebomb. Everyone loses their job and starts drawing their savings to 0. People approaching 0 who don't want to starve join up with the first populist to promise salvation. If you're lucky, they choose FDR. If you're unlucky, they choose Hitler. Tell me, are you feeling lucky?

          Obviously, there are rocks on both sides of these rapids. Hiring a group of experts to read the room and do their best to navigate the middle is still the least bad proposal I have heard.

          1. goalieca · · focus · HN ↗
            The best option is to not spend like maniacs so you need to fire the money printer.
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