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Jeff

Why is deflation a bad thing?

https://mises.org/library/deflation-biggest-myths

Tom Schiller

Additionally, demographic factors are moving unfavorably towards housing. The imminent retirement of baby boomers and shortage of new first-time buyers (due to a combination of youth unemployment, exploding student loan debt, and a falling marriage rate), means that sellers will outnumber buyers for the first time since data collection began in the late 1940s.

According to Bill McBride from Calculated Risk, demographics trend will be improving in the US in the next few decades. Can you comment?

http://www.calculatedriskblog.com/2015/05/demographics-are-now-improving.html

Kartik Gada

Tom Schiller,

Bill McBride says that the number of working-age people is now rising. That does not mean that they automatically translate into housing demand. Plus, as more boomers hit 65, there will be an exodus from the ranks of working-age people, even if for a year or two it seems that the working-age population is rising. Much of the rise is because the exodus did not begin before the small number of new 22 year-olds entered.

Also note that even if the number of working-age people remains decent :

a) Student loan debt will delay house-purchases by years, for millions of them.
b) The marriage rate is falling, as young people don't find marriage as compelling. This means that the *composition* of housing being demanded will be different, with more people in condos their whole lives and fewer buyers for 4-bedroom suburban homes.
c) A lot of the young people entering working age are from lower-income ethnicities. This ensures that they cannot prop up the housing market as they are not like-like replacements for aging boomers.

T.S.

Not all housing is equal.

A certain type of housing (the 4 bdrm single for example) is now persecuted by a majority of citizens that have embraced environmental totalitarianism. These forces work towards a supply restriction and thus eventual scarcity developing in those market segments.

Look at Europe for what lies ahead for the US. Few people have 4 bdrm single family houses, and that is not because they don't want them or because they voluntarily moved away from desiring them.

I was born and grew up in Europe. The housing prosperity we have here in the United States is by comparison astronomical. And it will not last since most Americans seem fatally attracted to the European societal model (the 1% growth continent in a 4% growth trendline, go figure, but that's what it is).

T.S.

I'd also like to know why should I work if helicopter money is going to rain from the sky in the future. Even more important, why should my children have any ambitions and work hard? Why not take it easy? Seems like some significant benefits will unconditionally rain from the sky, redistributed benefits from the few that can now produce a lot due to technological leverage.

And why would my country, with such a demotivated, central bank redistribution welfare pampered workforce, have enough productivity to remain in the developed world of 2080?

Kartik Gada

T.S.,

A certain type of housing (the 4 bdrm single for example) is now persecuted by a majority of citizens that have embraced environmental totalitarianism. These forces work towards a supply restriction and thus eventual scarcity developing in those market segments.

It also depresses demand. Plus, there is no restriction in places with higher birthrates (such as Texas).

I was born and grew up in Europe. The housing prosperity we have here in the United States is by comparison astronomical.

Europe's population density is much higher then the US. Key metros like NYC and SFBA are as expensive as London, but the suburbs of Tier 3 cities in the US are the cheapest housing of any first-world country.

I'd also like to know why should I work if helicopter money is going to rain from the sky in the future. Even more important, why should my children have any ambitions and work hard?

The people with that mentality are not the ones who generate the most productivity. The most productive people continue to work long after their net worth surpasses $5M, $10M, $20M, etc....

Plus, as the article states, when income taxes are zero, the incentive to work is much higher. You are taking only one side of the ledger into account. With no income tax, the incentive to work is much, much higher.

Lastly, Chapter 7 further addresses this point :

"The first is the speculation that such a stipend will merely create a leisure class out of the bottom 60-80% of the population, who spend their lives immersed in various types of home entertainment. They may do nothing else with their time and do not set good examples for their children, who then fail to grow into productive innovators that sustain the ATOM. Putting aside the fact that such a concern is mutually exclusive with worries that AI will leave millions permanently unemployed, or that healthcare costs are surpassing affordability, it is unfounded in any event. "

Plus, read Chapter 9 about talent monetization by era.

T.S.

Thank you Mr, Gada.

I may be combative, but in a Socratic way. I'm indeed honestly interested (and I'm not saying that tongue in cheek) whether you may help me see another reality and get me unstuck from what seems to be a rather deep rooted narrative. A narrative developed from comparative observation in having lived in a statist continent and a less statist one.

You are the only person I have found so far offering a different narrative worth considering, hence my keen interest.

I have a deep interest in trying to predict the future with a probability that is even remotely better than random. The stakes, both personally and nationally, are enormous indeed.

In that spirit,...

I'm not as productive as the people who earn tens of millions indeed. But I'm productive enough to be in the world's top 0.3%. I may be a tier 3 or 4 compared to the uber productive innovators. However the uber productive innovators still need me. Without me, or with a less motivated me, the über productive may lose enough competitiveness to be overtaken by marginally more productive uber complexes in distant lands -- and then the death spiral begins -- likely already has, as evidenced by our below par growth trendline.

I also think that at the micro-economic level you assume too much about some rather binary nature of productive people. Does the US have the only naturally motivated people?

More to the point, I may be productive enough to be in the world's top 0.3% (American mid upper class, the three percenters) however I've always found the hippie life of some of my immediate relatives attractive. I'm rather certain that had I not migrated to the US -- where the rich are less taxed and the less productive are less insulated from the consequences of mediocrity -- I would have settled into an easier less ambitious European life. A life of being only a quarter as productive as I am today, earning one quarter of what I earn today and being a quarter less helpful in helping realize the vision of the uber smart who indeed change the world through the leverage of technology. These less motivated people, these people living in the flatter effort-reward curves of Europe, are the T.S.'s who help the, say, French uber productive. That is why there's no French Steve Jobs, Larry Page etc.

All summed up, I still prefer what I did by immigrating to the US -- but not by a wide margin!

If you offer me the European quarter prosperity life, without any work at all, then I may just take it. If not me, many people at the margin will. Then, once a few uber innovative companies start falling to international competition, some uber productive people, at the margin, will say "heck not worth it wasting my youth over this, the reward is just not a high enough multiple to lose sleep, increase chances of pancreatic cancer etc. ". This is, after all, the predominantly failed fate of the uber productive amongst the French who tried. After a few intergenerational experiences at this failure you stop trying. Low ambition and survival in mediocrity become internalized into the dominant national culture. And, as the uber productive fall, they drag down some of us 3 percenters (3 percenters in the US = 0.3 percenters worldwide) and we then drag down the middle class, their mechanics, their gardeners, their house cleaners. Essentially, the death spiral to a one percent European trendline growth country in a world that is riding a four percent trendline and, as you brilliantly point, ever accelerating!

But perhaps most important,

Your point about the abolition of the tax disincentive more than compensating for the helicopter allowance disincentive is very well taken. However...

once I get that steady quarter income while the presumably more "genetically programmed/addicted to ambition" uber rich continue to earn tens of millions (according to your narrative they are apparently immune to international competition) why not get my pitchfork out, together with the other 99% and vote to double, then quadruple, then octuple etc. our unconditional helicopter allowance? The argument we are earning 40k, 80k, 160k, 320k while they earn 400 times that will always hold -- and as you point, will even accelerate. With such a strong majority, "of course we can, and will!" What would prevent that from happening? The fact that the ATOM may be slowed down just enough to be overtaken by the ATOM of other countries? Do you think we understand those things as voter-lemmings?

If we did understand we would not be paining for candidates that will further flatten the effort-reward curve while our country's growth is already in a structurally anemic 2% growth trendline, half the world average. We don't even understand the deterministic arithmetic of exponents of decline!

For the time being I still see your theory the same way as I see Marx's theory: Very sophisticated and conceived by a very brilliant person indeed. But one fatal flow for Mr Marx: People have little desire to work for distant unknowns, and coercing them to do so does not work -- at least not to the extent of preventing other marginally more motivated people in other countries from overtaking them. I'm, of course, not implying that this is also the flaw of your theory. I have a hunch there is some fatal flaw in your theory and I'm trying to either find it or be convinced to your line of thinking.

Now, having said that, I do believe a distortion crisis, one much bigger than the previous one, is in the cards. But I think that the distortion is the distortion of a developed world who is trying to desperately cling on to its supremacy by flattening the effort-reward curve. The slow growth and desperation of decline this causes will predictably and reflexively lead voters to get out their pitchforks and demand even further flattening of the effort-reward curves --and thus cement the stranglehold of a classic vicious cycle to decline. A vicious cycle few countries will escape, though some will emerge battered but freer to lead the next burst in a yet more inevitable successful branch of humanity. The ATOM will indeed advance and, though I agree with your prediction, I don't quite see eye to eye in some of your more pivotal explanations and remedies.

In my estimation it matters little what form this flattening of the effort-reward curves will take, it being helicopter allowance or what have you. This distortion is coming close to an uncontrollable breaking point.

The enormous leverage of technology is creating and will continue to create enormous inequalities. Those electorates that can live with that will prosper, even if unequally so. Those who find these growing disparities unbearable will find themselves all more equally poor. Better of than today but poor by the fantastic living standards of the latter half of this century.

The middle income country of the 2070s will have a much higher living standard than the US has today. But will you want to be in a middle income country in 2070? Would you be happy living in today's Angola under the consolation that the standard of living is better than 1880s London? We do judge prosperity in relative terms, after all. That is exactly why we are envious of our neighbors and the big house in the cup-de-sac in the first place.

Hence the voter-lemming's conundrum: Accept the mansion in the corner without envy, or become the more equal citizen of a middle-income country by the latter half of this century.

Kartik Gada

T.S.

Thanks,

But I'm productive enough to be in the world's top 0.3%. I may be a tier 3 or 4 compared to the uber productive innovators. However the uber productive innovators still need me.

Then you should still be very excited about the phase-out of income taxes. Your (after-tax) pay from your job is set to rise a lot, on top of the DUES. I don't think you will reach a point when you decide not to work if it involves turning down what will by then be a $300,000 job with no income tax, 10 years from now.

I also think that at the micro-economic level you assume too much about some rather binary nature of productive people. Does the US have the only naturally motivated people?

I don't see the productive Europeans retiring early either. They keep going.

That is why there's no French Steve Jobs, Larry Page etc.

There does not need to be, as the ATOM knows no international boundaries. Sergey Brin and Elon Musk were immigrants to the US, as you mentioned.

If you offer me the European quarter prosperity life, without any work at all, then I may just take it.

I don't think you would, if you were younger than, say, 70. Keeping up social status is one form of pressure. The higher pay of existing jobs is another. The chance of more careers closer to what you really want to do, is another.

If not me, many people at the margin will.

Some may, but those people were not essential to ATOM advancement to begin with.

In the 19th century, there was no end to authors writing about how once basic needs are met, people will work fewer hours. Their definition of 'basic needs' from their point of view was so low that in the US, that would take the average person just 10 hours of work per week. Yet, that did not happen. New products and services become desired. Many things that you do for fun, and would not want to give up, are things your grandparents never even considered to be available to them. Internet access, for one thing.

Even today, you can move to India and live in an Ashram where room and board are free (paid by donors). Your only job is to meditate, teach children to meditate, tend the garden, etc. No stress and no money needed. Perhaps boring, but also fulfilling.

according to your narrative they are apparently immune to international competition)

This situation is possible in all countries of ATOM density. Have you read Chapter 10?

The fact that the ATOM may be slowed down just enough to be overtaken by the ATOM of other countries?

The ATOM has no borders, only minor ebbs and flows based on the policies of one country vs. another. All major technologies immediately become available to all who can afford them, irrespective of which (stable) country they live in. When a VR Headset is released by Facebook or Samsung, is it not released in France and Germany almost on the same day?

People have little desire to work for distant unknowns, and coercing them to do so does not work

This is not coercion. This is in fact an unprecendented high level of freedom and autonomy, with a major reduction in government meddling. The ATOM dues monthly increment is calculated in a very formulaic and transparent way.

Would you be happy living in today's Angola under the consolation that the standard of living is better than 1880s London?

That comparison is useful in some areas, but not others. It is amazing to think that just 100 years ago, 1.3 million W. European soldiers killed each other in the Battle of the Somme. Today, that is the sort of thing we expect nowhere except the Congo or Middle East.
___________________________________________

Keep in mind another dimension, which is that once AI can advance without any human assistance, technologies that increase human living standards may plateau. That is some decades away, but humans are not the final stage of the procession at all.

T.S.

Well, sorry for posting comments that may be generally boring, but I'm not convinced.

I don't agree that a helicopter allowance is not coercion. When some people work for their reward (however high) and some get rewarded in addition to the market value of their production then it is at least unwilling redistribution.

Your conjecture is that the ATOM produces so much wealth that whatever amount of redistribution occurs through the helicopter allowance is relatively small, smaller than current taxes, and thus has little impact on incentives.

But, as you said, standards of living, and thus expectations, will rise to unimaginable levels, and so will our political and electoral demands out of the helicopter allowance and the ATOMs energy.

So I would probably turn down that 300k job, since it will be much easier to get together with my supermajority buddies and vote to increase our helicopter allowance to 300k. Working for Larry Page (the demands of the ATOM) is not that easy of a job, you know. So when I see the ATOM morph Larry Page into Larry Page squared, I'm going to want a bigger (much, much bigger) helicopter allowance. If I get 150k from the ATOM then perhaps I'll just retire to the lake, or just find a part time job where I produce one third of what Larry Page demands and earn 100k just to top off my helicopter allowance. I'm also confident that with a little bit of political campaigning and a solid 90% percent supermajority I can get the ATOM to shell out the full 300k. The less productive people at the firm who depend on my 300k job? Oh well, good luck to them, they'll figure it out.

Your theory seems to me more along the lines of the old hippie dream with different mechanics: "The machines will produce so much that we will no longer have to work (much). Some people will have more but a basic decent living will be available to everyone from the work of the machines (and the helicopter allowance in our case)".

Oh well, I guess the hippies grew up and now they want more. The "basic decent living" of yesteryear is no longer "decent". It's poverty! They now want a twenty first century lifestyle, of course. Just like I will want a Larry Page lifestyle and will vote to get enough helicopter allowance to approximate it.

Sure, things could become so different that things as we know them (indeed they will become different sooner than most realize) such as voting, our descent into pitchfork democracy, etc. may resemble nothing we know. Well, while I agree that an unimaginable fantastic future awaits, beyond the myopic vision of most voters (talk about the delusion of climate activists who think the world in a hundred years will be more or less like today except warmer) I think we should wait a bit until that future starts to materialize, rather than start right away with the futuristic helicopter allowance.

BTW, do you think the Swiss were wrong to recently defeat their helicopter allowance at the polls? Along the same lines, why not wait for another country to vote the helicopter allowance (Japan is almost doing it indirectly)? Then if it works we join the bandwagon when helicopter allowance 3.0 comes out.

And also BTW, I totally agree with you that most people have their heads buried in the sand minutia of everyday life rather than anticipating the very rapidly changing future, as evidenced by the total lack of writings and discussion on the true future, the unimaginable to us fantastic future that will come much sooner than most anticipate.

I'm saying that not being a young dreamer. I'm actually quite deep into middle age.

P.S. I don't earn 300k (at least not yet, not without a more mature ATOM) but I am in America's top 3%, hence about top 0.3% worldwide.

Kartik Gada

T.S.

When some people work for their reward (however high) and some get rewarded in addition to the market value of their production then it is at least unwilling redistribution.

This is better than what exists presently. Remember that 75% of all government spending in the US is a direct transfer. In Europe it is even worse.

So I would probably turn down that 300k job, since it will be much easier to get together with my supermajority buddies and vote to increase our helicopter allowance to 300k.

No. It can only rise at a certain ceiling rate. The Fed governors are not elected, otherwise QE would already be something voters could force even today.

The less productive people at the firm who depend on my 300k job? Oh well, good luck to them, they'll figure it out.

This contradicts your other claim that people will stop working if their basic necessities are met.

As per your comments it appears that you :

a) think that there is not already a massive redistribution underway
b) have not taken into account how much inefficient wastage already occurs, both in taxation and disbursement
c) have surprisingly little awareness how much incentives change when the marginal tax rate goes from 50-55% down to zero.
d) are not aware that $220B/month of QE is already being done worldwide as we speak (see Chapter 4).
e) probably have not read this entire publication.

Read the whole thing.

Too much of your comment(s) are just resistance to change, without seeing how much redistribution and wastage is already happening, and how inferior it is to the DUES program. Plus, it does not appear you have taken into account how much QE is already being done now.

Geoman

"All of this results in a situation where the ‘published’ tax rate and actual tax rate are widely divergent." Like buying a seat on an airline.

Kartik Gada

Like buying a seat on an airline.

Precisely. Although this only applies to high-income people. The higher one's income, the more methods one has to make their tax rate zero. Mitt Romney got slammed for doing something completely legal in his IRA, but people much richer than Mitt Romney (like Donald Trump, Warren Buffet, and George Soros) do even more elaborate things. It is legal, since the tax code is complex enough to provide far too many loopholes for anyone to monitor.

That is why a 'tax increase' never works, and actually solidifies the ultra-wealthy by removing their upper-middle-class competition...

This is also why high-tax states lose middle-class jobs, but continue to be the leaders in the most profitable industries. Apple, Google, and Goldman Sachs don't pay any significant tax, nor do most of their upper executives.

A 15% flat tax would collect a lot more from the wealthy than the current tax code. But 0% income tax is possible by 2025 under the ATOM-DUES plan, and should be the goal.

Geoman

I have always been an advocate of a flat tax, or better yet, a VAT system. Complicated laws have a tendency to favor those with the time and money to game the system, which is not coincidentally why large corporations favor more regulation, not less.

Kartik Gada

Geoman,

Yes. This is why I favor a plan of phasing out all income tax. 0% income tax is the fairest of all (see Chapter 10).

0% tax also means zero filing and compliance burden. The costs of this are astronomical, and no longer needed to fund a robust safety net (a substandard version of which is what most government spending goes towards anyway).

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