13. Conclusion

 

We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light.

– Plato

When a wise man points to the stars, an imbecile criticizes the finger.

– Confucius (modified)

 

This book is the culmination of years of observations in combination with some proprietary research across different fields.  The process of shaping these ideas involved deep immersion on both ends of the political spectrum, as well as in many alternative ideologies across fragmented parts of the Internet.  I have had to adopt various online personas and wade through swamps of fanatics and mentally ill people, pretending for years to have views that I actually do not hold in real life, to find the occasional genius who delivers one profound sentence after another.  Then the same had to be done in the opposing ideological camp.  The process of creating transformative new knowledge is a messy one, full of many dead ends, distractions, and dances with lunatics.  From this process, I hope this research has given rise to material that starts a trickle that grows into a stream, and later into a mighty river.

I do not claim to have all of the answers, but if some of these ideas are refined and implemented, we will make it easier for trends to return to established trajectories.  This may permit us to enter a new age of abundance and upliftment and avoid at least one massive fiscal crisis and deflationary depression.  A lot of material has been covered and it may be a challenge to retain the holistic case in the first read, but if I were to summarize the most crucial themes and ideas into a condensed list, it would be :

• The accelerating rate of technological change, while previously a topic of interest only to futurists and related technophiles, is now at a stage where insufficient awareness has tangible costs to individuals.
• Economic growth, which has always been closely pegged to technological progress, has similarly been accelerating through centuries of data, and we are now entering a steep trajectory for the trendline, indeed the ‘knee of the curve’.
• The world economy has been underperforming for years, with growth rates continuing to register well below the aforementioned trendline rates. This is due to the silent suppressive effect of some outdated policies and macroeconomic assumptions.
• Technological deflation, while easily accepted when one is a shopper for a new computer, is almost entirely ignored by macroeconomists, even as effects of this deflation on economic data are pervasive and rising.
• Technological disruptions across disparate areas are all interconnected with each other, and mutually reinforcing. There is a fixed but rising amount of aggregate disruption that is underway at any given time, in accordance with the accelerating rate of technological change.  These first five bullet points effectively describe what we define as the ‘ATOM’.
• Monetary expansion by central banks has served to merely offset the accelerating deflation that technology is generating across the economy. This deflation is international in nature, and so is most monetary expansion, no matter which country originates a particular expansion program.
• Artificial Intelligence (AI) will be able to move many types of productive output into tax-free locations, eroding the tax base of high-tax locations. The borderless and untaxable nature of AI will effectively tighten the screws on nations and jurisdictions that tax productive output excessively.
• Excessive fear of inflation, and assuming that even 3% inflation is high, has led to a chronic decline in the growth rate of Nominal GDP. This is a source of many types of malaise in the economies of wealthy countries that ‘Real’ GDP will not detect, and is constricting the rate of technological progress and productivity gains.
• The ATOM will react to ensure technological progress reverts to the trendline rate, bypassing or toppling obstacles such as inadequate fiscal, monetary, and regulatory policies in the process. This will begin to happen in the 2020s, and may accelerate after that point at a speed far too rapid for many governments to react to.
• Barring the preemptive adoption of the technology-friendly monetary policies recommended here, another major financial crisis and deep recession remains an ongoing risk. Existing methods of monetary expansion will prove ineffective due to saturation of the inefficient methods used by central banks to date.  In reality, the solution to the problem is elegant, simple, and ushers in a new era of rapid growth.
• Central bank monetary expansion has to be made permanent as a policy, and openly declared as such. There can no longer be one-off programs tied to an assumption that each one is the final round of Quantitative Easing.  Assets stored on central bank balance sheets can never be sold back into the market, so the balance sheets themselves are moot.
• Western central bankers have been taught very outdated principles regarding the risk of inflation from monetary creation, rendering them virtually incapable of seeing these truths, even as they are evident to the technology industry, small business owners, and more.  Hence, the fact that $23 Trillion of cumulative monetary creation since 2009 has not caused inflation is still a complete mystery to Economists with formal credentials.  
• Monetary expansion has to be of a direct, diffuse nature. Current methods of bond-buying used by the US Federal Reserve are well into the point of diminishing returns, and end up concentrating the QE in very few hands.  The only real discussion and analysis should be about the rate of annual increases.  The US Federal Reserve has not yet been granted this power by the US Congress, which restricts the Fed’s ability to do what is necessary.
• Monetary expansion has to rise at a compounded rate of 16-24% a year, possibly higher, to offset technological deflation and keep the Wu-Xia Shadow Rate in step with the size of the deflationary force. Current patterns of monetary expansion and the absence of inflation already supply the data to support this conclusion.
• Since most government spending in the US and similarly advanced nations constitutes direct payments to individuals, these payments can and should be consolidated and formalized into a Direct Universal Exponential Stipend (DUES) that is paid equally to all citizens, and is funded by this central bank monetary expansion.
• This DUES constitutes a dynamic and rapidly strengthening safety net, as well as a catalyst for entrepreneurship. Unlike negative interest rates, this does not punish savers, and is more scalable in accordance with accelerating technological deflation.
• Federal income taxes can be phased out gradually and systematically, with all Federal government spending covered by monetary expansion, which itself is mostly the DUES.
• This sort of reform taking current levels of technological progress and the associated deflation into account to create tax, monetary, and regulatory policies far more favorable to entrepreneurship transcends both socialism and capitalism. It is also the only way to harness disruptive technologies, such as AI, into a vehicle of broadly increased human prosperity.
• Barring the first-choice avenue of ATOM DUES, the second-choice avenue of the Sovereign Venture Fund (SVF) is easier to implement politically, and still a huge improvement over the current status quo.  The SVF carries a tremendous first-mover advantage, since a country can capture the entire world's technological deflation for domestic benefit as long as it is the first country to do so.  The size of the SVF can be the same even if done by a relatively small country, hence delivering very high assets per capita.  
• The US is not going to be the first nation to transition to such a new policy era, and certainly not before the next crisis. Hong Kong, Singapore, Canada, and Switzerland are more suitable candidates to be the first countries to reform in favor of 21^st century economic forces.
• Few individuals, even if they work in the technology industry, have trained themselves to think like an active part of the ATOM. This mindset can be very profitable once adopted, and will become one of the core skillsets that an adult needs to have in order to prosper.

If you read this entire publication, I thank you, and if some points are unclear, I urge you to read the text and view the associated video again.  It is not easy to make what is essentially an economics textbook into something interesting.  Given the urgent importance of getting these ideas to the people in power, I chose to post it online for free and add videos, rather than expand this to the length of a full book (or thrice again that length, like Thomas Piketty’s 700-page book) and market it as such.

I intend to devote a significant campaign towards bringing more exposure and debate to the ideas contained in this publication.  I am embarking on this journey because I believe these concepts and policy recommendations can eventually benefit billions of people.  When someone has the opportunity to make that sort of difference, it is their duty to devote a portion of their lives to such an endeavor.  If you feel that some of these ideas have merit and should get in front of the right people, I invite you to join me and bring your talents to this campaign.

Our civilization has to upgrade to the next era.  It is time.

Continue to : 14. The Campaign to Make This a Reality

Comments

[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..

[MSimon]

Geoman,

A college education is a waste. I became an aerospace engineer without one. In 1986. It is much easier these days.

Now what?

[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.

[Drew]

This is another section with 2017 predictions to be updated or explained. Only half joking - with the technology progress since this was created, why not create a version that is twice as good? Thanks, Drew