Cash to the poor: Giving money directly works surprisingly well

With this system, people are going to be watching things a bit closer. They are personally vested in this whole process.

You have a logical point but I think everyone understood what I was saying just fine - so your point does not apply to the reality and context of the situation. Some might say you are "trolling" myself, I think that you are just very anal.

>...is fundamentally flawed. The theoretical efficiency of competitive markets is intimately tied to the assumption that both the benefits and costs are known to and born by the participants in the decision making processes, aligning rational self-interest with efficient decision making. In the charities competing for money from givers to provide services to those in need, the features which make markets theoretically efficient do not apply.

Your argument may again carry weight by logical reasoning, but that is your fallacy. The competition would be maintained by the citizens emotional and humane (these are not logical things) drive to see the money coming out of their pocket actually directly and effectively help someone in a meaningful and lasting manner. That is what the competition is all about.

>That's because bad news is good for selling media (the perception that the world is a dangerous place and you need to keep consuming the media source from which you got that impression to know where the next imminent danger is very useful to holding an audience, independently of any connection it has to real circumstances), not because lives aren't turned around by welfare and other social services.

You missed my point. I was merely stating this example because the majority of people never see any tax dollars taken from their paycheck helping a fellow citizen. They never see any emotional or inspiring linked good come of it. The majority see what is in their local community and what is on the news. They have no natural connection to the needy. This is a very bad thing IMO.

I also encourage you to personally meed and observe those being served by WSS, see the ineffectiveness and vicious cycle these people are trapped in.

Willful giving. You cannot force charity, people will resent it as they will resent anything else you force them to do. As others have suggested, it will become nothing more an exercise in tax dodging in the best case scenario.

>I may very well be wrong here, but I don't think someone with your opinion has ever given directly to a needy person...

Also, don't be a passive aggressive asshole.

1. It is not clear how sensitive to interest rates business are anyway. If you have an X increase of savings, which reduces business revenue by X but also decreases the interest rate by Y, which of those effects is stronger? It seems to depend a lot on circumstances.

2. To a first approximation, there is no incentive for banks to decrease their interest rates in the first place, because they won't have extra money in the vault!

This may seem counter-intuitive, but it follows from how the banking system works: If you transfer money to bank A and leave it there, the bank is initially going to have more money in its account at the central bank (aka "reserves" aka high-powered money). This earns zero or negligible interest, and so the bank does have an incentive to get rid of it.

However, when you did your transfer, that central bank money (aka "reserves") arriving at bank A did not come out of nowhere. It came from the bank you made the transfer from, say bank B. B now likely has a short-fall of reserves (because while bank B has "lost" X amount of reserves, and the sum of customer accounts has been reduced by X, its reserve requirements have only decreased by rX, where r is the reserve ratio).

So, bank B will be happy to borrow (X - rX) reserves back from bank A, probably at current market rates, while bank A must hold on to the remaining rX due to its own increased reserve requirements. Everything is back in balance without any change of interest rates.

Things are slightly different if you put your money into a different type of account or bank bond in such a way that the sum of all reserve requirements in the banking system decreases. In that case, banks have surplus reserve requirements and will therefore bid down interest rates in the interbank market.

Under normal circumstances, the central bank - which has a fixed interest rate target - will step up and sell assets in exchange for reserves so that the surplus reserves disappear. Hence, banks still do not have any incentive to reduce the interest rate that they offer to the public!

This really only changes when the central bank decides to change its interest rate target.

What about interest rates offered to customers? It seems that those really tend to be calculated as cost-plus based on the central bank's rate target (with some long-term expectation thrown in). Plus, they probably move with some delay because that market isn't so fast. Since the target rate has been at zero for a very long time now, savings behavior really shouldn't make a difference.

Mostly though, I think it's the first point that matters: Business decisions aren't that interest rate-sensitive in the first place, at least compared to other considerations.