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Geoman

This is a pretty interesting analyses. There does seem to be something distinctly different occurring economically right now - certainly the stimulus/response of the normal economy seems off somehow. This is as good an explanation as any for what is happening. However...

1) Unlike inflation, deflation is mathematically limited. You can't deflate the prices of things below $0 for goods and services. the store won't pay me to take their groceries. In fact there will be some residual cost for everything, don't you think? Which means endlessly inflating the money supply to compensate for the deflationary pressures of the ATOM won't work indefinitely.

2) I have long thought of a slightly different approach to accomplishing the same thing. Endowed government. Here is how it would work.

Start with something easy, like higher education. If a college had a large enough endowment, properly invested, it could pull 5% of that endowment each year to run the university. Harvard does that now. In fact, if the endowment were large enough, the students wouldn't have to pay anything - they would get a free college education. The U.S. Federal government spends around $50 billion per year on supporting higher education, on a pay go basis. What if that money went instead to beefing up endowments, in exchange for the universities agreeing to lower or eliminate all costs for students? Start with universities that already have large endowments, and make them large enough to be self supporting indefinitely. Now tax each student getting a "free" education $3,000 a year - and use that money for more endowments.

As such a system progresses, more and more collages would be essentially free, and more money would be available to endow even more colleges. In 20-30 years every college in America would be free. free forever. This would have an enormous stimulatory effect on our economy.

But why stop there? Move on to high schools. Grade schools. Trade schools. each year, more and more of our education system would become financially self sustaining. As the economy grows, so would the invested endowments.

But why stop even there? the same thing could be done to the medical system by endowing hospitals. Retirement programs. Welfare. Road building and maintenance. Again as each segment of our government becomes fully funded by endowments, even more money is available to endow the next piece of government, and the next.

Eventually, most of what the government does is fully funded in perpetuity. taxes could then fall steadily, and there would be little danger of budget overruns.

This is a round about way to accomplish the same thing you are saying - more and more "stimulus" is being added to the economy - costs to consumers are being reduced, budgets being balanced. All the endowments would be invested in something - meaning there would be large amounts of money available for investment in economic expansion. So booming economy.

because the endowments are ever growing, they are not dependent on deflation due to the ATOM continuing forever. In fact this program would have an accelerating effect on the ATOM - more and more capital would be seeking investments, with less and less costs to individuals.

Kartik Gada

Geoman,

There you are! I have been waiting for your comments. To your points :

1) Yes, deflation is limited, but the *room* it creates rises exponentially, so an ever-rising amount of monetary creation can continue. This enables new business models to emerge, taking advantage of the now 'free' commodity. There is always some residual cost to anything, but it vanishes into insignificance in many cases.

2) The endowment model has many favorable traits, but :

a) it only benefits those who are suited for higher education in the first place, which, as we have seen, is only 15-20% of the US population. You mention trade schools, but that only comes much later in the chain..
b) A lot of bureaucrats and other corrupt individuals draw salaries from the education industry, and these parasites will continue to thrive under the endowment model. The same is true for healthcare. The graftseekers are not cut off in this system.
c) The elderly are only addressed long after the endowment model has spread past education. In the ATOM DUES, Social Security is the first thing assimilated..

The benefit of the QE-derived stipend is that it is evenly distributed and replaces a lot of make-work graft jobs, so the most deprived areas (inner cities and depressed rural towns) get the most immediate jolt, with a rapid circulation of spending.

But yes, the general idea is for taxes to be zero, all government spending be funded by the permanent, ever-rising QE that has to be done anyway, and a major simplification of bureaucracies, flow of funds, etc (which currently has a huge hidden cost at all levels of the economy).

Geoman

You know I haven't read all sections here (there is a lot to digest), but there is an interesting economic model out there to look at.

The state of Alaska has a permanent fund - they took a percentage of the oil money and invested it. Each year a portion of that investment is distributed to everyone in the state equally. It has a pretty statutory effect, especially the poor rural areas. It is a bit like both ideas: An endowment generating a small pseudo universal minimum income.

One other thing occurred to me, and that is the alternative to such a plan - immensely wealthy individuals controlling all the means of production, with a poor welfare based jobless underclass. Change is coming, like it or not.

Maybe I'll try to post something in each section - this is a bit too big to piecemeal.

Kartik Gada

Yes, Geoman, I would like you to comment on as many chapters as possible, both for your content as well as for the purpose of getting some commenter activity going..

Occam's Stubble

I share Geoman's concern about limited deflation with unlimited inflation.

I understand the need for continual inflation to keep people and businesses from losing their shirts on their capital investments. I just wonder if there would be a better way say, for example, the federal government auctions off the 1/3 of the US land it currently owns and offers the proceeds as a one-time payment to those with capital investments to pay down the balance on those loans.

Also, one other need you say there is for the stipend is all the people technology will put out of work. I think that one of the things free market capitalism does best is to exploit resources, human or otherwise. The thing I like about this plan is that it seems to push government regulation and cronyism out of the way in favor of a free market in order to ensure continued upward prosperity.

Anyway, I wish you good luck. I'm going to pass this around to some of my friends for their opinion.

Kartik Gada

Occam's Stubble,

Thanks. I hope you read the whole thing, and feel free to comment on other chapters as well.

Note that under the DUES program, the monthly adjustment is... monthly. Most times it will be an increase, but if a brief period of staying flat or even (in theory) slightly decreasing is needed, that can be accommodated. This is granular enough to take into account the ebbs and flows of technological waves.

The thing is, a land sale is one-time. We have to create an ongoing climate of higher NGDP within the context of technological deflation, so as to create a greater underpinning of tech startup valuation and exists, etc. as well as ensure that working class people have enough money with which to buy/upgrade their technology.

Ultimately, one has to have faith in the existing body of evidence of technological deflation, and how that can indeed be a funnel of new monetization that increases prosperity.

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