How can rentiers be euthanised without massacring the middle class?

Today, 500 million people live under the regime of negative rates. Is it the beginning of a new era where it will be commonplace for the yield on sovereign debts to be negative? In other words, where governments from the right, left and centre will finance their public debt at negative rates, and investors will be reduced to paying States when asked for their savings? How did we end up here? The answer is simple. Since 2010, the meagre economic growth taking place in developed countries – mainly in the European Union – has only monetary policy to thank (i.e. central banks) because the budgetary and fiscal policy of States has been wisely exploited to break any virtuous dynamic. This hellish mixture of overly-relaxed monetary policy and stringent budgetary policy is fulfilling Keynes’s famous prophecy which spoke of euthanising the rentiers. Except that – if euthanasia there will be – this does not come with the socialisation of investment which should be its counterpart, and which it has been calling out for.

This euthanasia of the rentiers, moreover, is taking a turn that it couldn’t before have suspected because the Keynesian tale evokes an active role by the State whereby it invests in times of crisis. It thus becomes a generous purveyor of capital for an economy tipped to be reinvigorated by an influx of liquidities, which constricts interest rates. Budgetary austerity and the rolling back of State intervention leads in reality to the euthanasia of the middle class’s rentiers, in other words of this class that should certainly not be euthanised ! Because, while it is obvious that the 1% have no problem getting by today, rentiers of the middle class are now a much larger class than they were in Keynes’s times, the mid 1930s, and make up the group of people who depend on a range of interests and the profitability of their investments and deals.

This lethal combination of negative rates counteracted by limp public investment challenges precisely their one and only objective which is to have a regular, stable income. Additionally, central banks’ policy of negative rates, which has been constrained and forced, is bringing about financial instability such that assets that were once regarded as safe are now becoming risky ! All in all, the current climate of headwinds is not creating enough winners to allow the economy to run on its own two feet, so that intervention from central banks as well as from the State would no longer be necessary.

The death of the rentiers was only meant to be the collateral damage of an economy which has reached full employment. Instead of this, we are now seeing the damning sight of rentiers gradually being euthanised while, on their side, paid workers are suffering the progressive decline of their purchasing power and chronically high unemployment.