This section of FAQs compiles the answers to these questions that are already in other chapters, into a resource for quick reference. More questions and answers will be added as patterns of repetition emerge.
What qualifies you to come up with an idea that the established experts have not come up with?
Some would say 25 years of career experience across technology and finance is a sufficient qualification by itself, but I do not, for there are thousands of people worldwide with comparable resumes. Instead, my 14 years of successful predictions at The Futurist, and proprietary research into this subject is where the intricate connections between seemingly unrelated topics began to emerge.
One truth of the Third Millennium Economics is that a ‘credentialed’ person is no longer the authority on his subject, as the Internet always contains more knowledge than any one person can have. Furthermore, orthodoxy creates blindspots, within which a disruptor can operate unnoticed until the disruption is already underway.
Refer to every prior instance of a major disruption to an established order. The disruption always originated from the outside, and from someone who was not shackled by existing assumptions of ‘what cannot be done’, particularly when what may have been impossible at a certain technological level often does become possible with further technological improvements.
Most great innovations have been by outsiders undeterred by the ‘conventional wisdom’ of that particular moment. I am quite certain that policies similar to my ideas will be the norm in some major nations by 2025.
Why is it called ‘Third Millennium Economics’?
Many of the assumptions in traditional economics textbooks were inherent to the second millennium. Products involved complicated supply chain and transportation networks, and this led to factors like inventory management, etc. being significant determinants of economic conditions. This created conditions where increasing the money supply caused inflation. The lower prosperity of the second millennium also led to assumptions that most people had no discretionary spending and thus spent all of their income. Furthermore, the minimum viable size of a profitable business was much larger, due to fewer tools and lower economic complexity.
However, in the third millennium, the accelerating rate of change has reached a gradient of steep progress where dematerialized products are becoming an ever-rising share of the economy. Since such products have almost no variable cost of production, and have infinite supply, they can cater to infinite demand without shortages, and have no inventory or shipping constraints. As these products can advance at faster rates than older types of products, and are converging to an ever-rising share of the economy, a whole host of macroeconomic assumptions have to be modernized. This includes a revision of government to implement automation, thus greatly reducing the cost of government, and funding this cost from the monetization of the output of automation, rather than the taxation of human output. These new principles are going to be the foundation of Third Millennium Economics. Formal economics as taught in universities, and as drawn upon to guide government decisions, is outdated, and the breakage this is causing in our existing system is evident.
Hasn't money-printing caused a lot of inflation in other countries in the past?
While there have been examples of money-printing causing high inflation, those instances were in a time where the percentage of world GDP comprised of technology was far lower than now. Even in 2008, the technological component of the economy was too small to offset monetary creation. This is the primary reason formal economists are opposed to the Third Millennium Economics set of ideas, because they have studied these past examples, but do not understand the technological component as a new factor. Furthermore, the ATOM-DUES program calculates the appropriate amount of monetary creation on a monthly basis, rapidly adjusting for any ebbs and flows in inflation or deflation.
Many PhD Economists have studied past examples of how money-printing caused inflation in poor, low-tech countries (such as Weimar Germany and contemporary Venezuela), and so are trained to overlook the much more recent examples of high-tech economies with technology-derived deflation. All the examples they cite are from long before high technology was even 0.5% of the economy, let alone the solid 3% that it is in 2020. Remember that PhD Economists have predicted about 100 of the last zero bouts of inflation in the last 35 years.
Why are formal Economists (with PhDs) hostile to this idea? Surely they know the most because of their credentials.
If incumbents with a vested interest in the status quo were the ones who could originate paradigm-changing ideas, then Uber would have been founded by someone who ran the taxi medallion commission for the New York City municipal government, and Tesla would have been founded in Saudi Arabia. The truth is, the establishment in any industry or field has a vested interest in perpetuating the status quo, and little reason to innovate or even listen to any ideas outside of their miniscule, incestuous echo chamber.
But there is another barrier in addition to the above. The Economics profession is almost entirely immersed in academia and closely associated organizations. Hence, it is exclusively populated by those who could excel within the narrow skillset required from academia, have never been outside of that since the age of 18, and thus have no inputs from people who make decisions of consequence in the real economy. Consider the following fact : innovative companies that produce a value-added product that sells in the free market have been started by Engineers, Doctors, Lawyers, Salespeople, ex-Military Officers, Finance professionals, college dropouts, and more, but never by someone with a PhD in Economics. Even if we restrict the criterion to financial services or FinTech companies, this group has contributed no entrepreneurial value. This damning indictment is exceptionally revealing, and indicates that Economics has a more extreme 'egghead' component than any other field of consequence, and thus there is no field where the establishment is more out of touch with the effect of technology on their subject matter. Their utter lack of curiosity about why their predictions continue to be wrong compounds the problem.
See the two images below to grasp how while science and technology has the full 7-layer stack that translates basic research into consumer products, finance and economics has a huge vacuum in between, and hence the pure theoreticians are tapped as ‘experts’ when they are nothing of the sort.
Furthermore, the Federal Reserve has a vast herd of 600 Economics PhDs on its staff, yet was exposed as recently as mid-2019 for deciding that the only determinant they use on whether to tighten or loosen liquidity is the unemployment rate. No other metric, such as the CPI or yield curve, was even used. Even worse, they actually say things like "too many people have jobs". Who speaks like that? Why do the taxpayers have to pay for 600 PhDs to tell them this sort of thing? Also, they brag about how they send four highly-paid PhDs to a pizza parlor to 'study' the effects of a $15/hr minimum wage law on their business. The owner of the pizza parlor told them that it was forcing him to raise the price of pizzas and pricing him out of the market. Hence, the four PhDs concluded their three-month study, with a finding that anyone who has ever run a pizza parlor, coffee shop, or barbershop could tell them. To have PhDs in Economics running a Central Bank is no better than expecting a business school professor with no corporate P&L experience to step into a CEO role at a Fortune 500 company. As a further example, consider that most PhD Economists were full believers in 'peak oil', all the way until the price started to crash in 2014, but never admitted their error. They also never evaluated the reasons for their extreme inaccuracy in making predictions, and thus still make similar predictions about other shortages. Having predicted 100 of the last zero bouts of hyperinflation in the last 35 years, they have led us down a strange, winding path to a dark, ugly place, and still insist that they know what they are doing.
Therefore, if the Federal Reserve decided monetary policy based on 100 small business owners who just cast their votes once a week (i.e. none of them are full time on the taxpayer trough), we would have a far more durable and productive economy than with a Federal Reserve staffed by 600 full-time PhDs on the taxpayer payroll who just reinforce each others' outdated assumptions. Your own net worth could be twice what it is now.
Why are productivity gains so sluggish? Is that not evidence of slowing technological change?
Chapter 4 addresses this in detail. Technology leads to productivity gains, but with Nominal GDP (NGDP) so low, there is not enough of a tailwind in economic growth for technology startups to receive valuations as high as they might. Valuations for ambitious technology ventures are heavily dependent on the trajectory of the stock market, which depends on earnings growth, which is a function of NGDP, not 'Real' GDP. Hence, low NGDP indeed leads to less technological progress and thus lower productivity gains.
Technological progress may return to the trendline rate by forcing central banks to increase NGDP through more monetary creation, which may be forced via a major stock market correction and deep recession. To avert this crisis, policymakers must focus on elevating NGDP in the US from the current 3% back up to the 6-7% seen prior to 2006. The increase will not merely be comprised of inflation, but rather a rise in 'Real' GDP as well simply due to a restoration of the trendline rate of technological progress.
Isn't inflation always bad, and thus deflation always good?
Economics is far more nuanced that that. First of all, if you have debt (such as a mortgage), inflation is your greatest friend, and deflation your greatest terror. If your income keeps up with inflation, then inflation is not a problem. But if you have no income and live on savings, then deflation is better for you.
Countries like the US have forced too many people into too many types of debt (mortgage, student loan, auto). Each debt payment may be fixed, which means the borrower's ability to service it with increasing ease depends on a rising income. Hence, inflation of 2-3% is better for the US economy than inflation of 0% or less.
Even if commodity, and thus goods prices, are always pushed downwards by technology, what about the price of services?
This is a complicated subject, since 'services' have a much higher wage component than goods. That said, see Chapter 4 about the impact of automation on wages, as well as Chapters 6-10 for the clash between technological disruption and income taxation (i.e income taxes on human output are a large part of what makes humans uncompetitive with AI). Nonetheless, wage-heavy, government-intertwined sectors such as education are experiencing massive deflation from technological alternatives, and the disruptors are making impressive money despite the low end-user cost of the new, high-tech alternatives.
As always, the rate of productivity gains, and the scale of delivery, are determinants of services pricing, and technology can assist both of those factors. The decline of services pricing in the private sector will pressure governments to follow suit, no matter how unwilling they may be.
Why was March 15, 2020 the 'Netscape Moment' for Economics?
In the midst of the stock market crash triggered by the Covid-19 pandemic, the S&P 500 declined over 40% in a matter of days. In past recessions, peak-to-trough durations were 30 months in 2000-02 and 18 months in 2007-09 respectively. Over here, it happened in mere days, forcing the Federal Reserve to abandon their outdated dogma about 'high inflation' that never seems to arise. They were forced to lower the Fed Funds rate from 1.5% to 0%, and authorize over $2 Trillion of new monetary creation. They simultaneously abandoned the practice of only buying Treasuries and MBSs, and moved closer towards a more diffuse, granular type of monetary transmission (albeit stopping short of the true necessity - sending money directly to people and in equal amounts irrespective of their past or present income). March 15, 2020 was the exact day on which most of these major actions were taken, and the European Central Bank joined in with $820 Billion of their own. These are actions that the hundreds of PhDs at the Federal Reserve would never have imagined they would undertake, just two weeks prior.
If you recall the first Internet boom, the Initial Public Offering of Netscape on August 9, 1995 was not just highly successful on its first day, but it triggered a cascade effect of new Internet companies and an Internet boom 4.5 years long. Even after the boom ended, the speed of everything was faster due to the permanently higher trajectory the Internet placed the economy on. Hence, that was the original Netscape Moment.
March 15, 2020 was a comparable day, for it was the exact day where outdated economic thinking was unceremoniously swept aside and replaced with Third Millennium Economics. 'Egghead' Economists in their ivory towers still don't realize it, but now the eventual normalization of Third Millennium Economics principles and policy retooling across the world is not merely inevitable, but it is not very far off. Hence, what the Internet did for commerce and communication shifted into a higher gear on August 9, 1995, and the same is about to happen for economics, specifically the economics of technology, through an analogous historical event.
Economic growth may have grown exponentially, but what if we have reached some fundamental limit at this point?
Bottlenecks to economic progress are often attributed to factors such as finite natural resources, human intelligence limits, and political will. The first two of these three are not going to be obstructions, because of the rise of Artificial Intelligence.
Artificial Intelligence is quickly subsuming many laborious tasks that humans used to do, generating the same output for far lower input. Furthermore, the rate at which AI improves is much faster than human learning, so that continues the matching acceleration of economic growth rates.
Regarding the third factor, that of political will, the Direct, Universal, Exponential Stipend (DUES) combined with an elimination of all income tax (and associated processing and disbursement wastage) will re-align incentive structures towards productivity and entrepreneurship, allowing technology to return to its trendline rate of progress, bringing economic growth with it.
It is possible, however, that once AI can advance entirely without any human assistance, technologies that increase human living standards may plateau. This is unlikely to happen before mid-century, and is a topic beyond the scope of this publication.
How do technological disruptions in one area increase the strength of disruptions in other areas?
Technology is about lowering costs of something that was too expensive, either through replacing or bypassing the existing obstacle. When technology succeeds in one area (such as lowering oil prices), the money saved by those who paid too much for oil instead creates new demand elsewhere, enlarging a previous market and attract more competition, and hence innovation to it. This is explained in Chapter 3.
It may appear that there is no connection between oil and natural gas fracking innovations in the central US, and an e-commerce revolution in India that modernized banking, retail supply chains, and high-speed Internet access, but the former was absolutely what accelerated the latter.
Of the two ideas presented, is ATOM DUES better or is the Sovereign Venture Fund better?
Both are vastly better than our current mid-20th century fiscal and monetary framework and pre-software assumptions. However, ATOM DUES is both the far more broad-based prosperity enhancer, as well as the one that will encounter the most resistance within policy circles, since it involves reworking the entire taxation and spending system. For this reason, the Sovereign Venture Fund, which can be done completely detached from taxes and spending, is the one more likely to be implemented first. Alas, the Sovereign Venture Fund is less able to deliver a permanent structural improvement to working-class people than ATOM DUES.
How on Earth can income taxes be gradually phased out under ATOM DUES?
Consider the following three points.
- 75% of all US Federal government spending (if you exclude deficit spending, it is 96% of all income taxes collected) comprises of payments to individuals.
- Federal Reserve QE has to be permanent and rise exponentially.
- The only way for this QE to be fully effective and enable technology to have enough fuel to progress at the trendline rate, is for these funds to be given directly to people.
When these three points are combined, replacement of current spending with QE money becomes natural, and with it, the gradual cessation of income taxes to fund this government spending. The phase-out of taxes will provide an immense boost to economic growth, even though the safety net is far more robust than existing programs. Read Chapter 7 for full details.
Isn’t the DUES just another ill-conceived ‘Universal Basic Income’ or ‘living wage’ scheme?
The DUES greatly transcends those schemes and removes the primary negatives of those schemes. First of all, those programs rely on increased taxes on productive work. By contrast, for the DUES to work, it has to be simultaneous with a phase-out of all income tax, so technology can generate enough productivity to allow a certain level of central bank money creation without inflation. Anyone who calls this 'socialism' has to explain how the Third Millennium Economics program can require 0% income taxes (and no increases in consumption/sales taxes), and still be 'socialism'.
Secondly, those schemes do not provide for rapid annual increases in their payouts, whereas the DUES is fused with the ATOM and enables annual increases of an estimated 16-24%/year. Other such programs have no provision for rapid annual increases.
Thirdly, those schemes are still seen as a form of welfare or anti-poverty program, whereas the DUES is a complete win-win for all levels of society, since it continues to reinforce the same technological progress that enables an increase in the DUES.
How is this different from Modern Monetary Theory (MMT)?
Third Millennium Economics is vastly more advanced than MMT, since MMT is not really a new idea at all. The problems with MMT are two-fold. First, MMT does not account for technological deflation, so it cannot see that monetary creation by central banks will not cause inflation. Second, MMT does not include an awareness of the Accelerating Rate of Change, which leaves MMT ill-equipped to take advantage of the exponential progress of technology and its ever-rising proportion of the economy. Hence, MMT still comprises of just tinkering around the edges, and does not provide a substantial improvement to the human condition.
Won't the DUES program merely create a massive leisure class, with no incentive to produce?
Definitely not, as explained in Chapter 7. The reasons for this are :
- The Federal income tax rate will be gradually reduced to 0%. This creates a huge increase in incentives relative to what exists today. The return on productivity is twice as much under a 0% tax rate as under a 50% tax rate. Many people will be thrilled to work harder than they are now.
- The removal of the tax filing burden and a large portion of regulatory complexity creates a far more favorable climate for entrepreneurship.
- A worry about a large leisure class is mutually exclusive with a worry about technological elimination of jobs, and with a worry about rising healthcare costs. For someone to worry the former implies they are no longer worried about the latter.
- The range of professions that exist, and of talents that can be monetized, is ever-rising, as discussed in Chapter 9.
- Moving from a dreary or humiliating job in an expensive area to a life of leisure in a low-cost area is hardly a bad thing, including for peripheral people.
I don’t pay much in income taxes, so why should I be interested in a tax phase-out for the rich?
You may not pay a lot in income taxes, but your first, second, and third level bosses certainly do, and this is money that instead might go towards giving you a raise. Your customers also pay income taxes, which prevents them from buying more of what you sell, instead of being mandated to 'buy' what the government sells. Plus, the hassle of filing and calculating one’s tax prevents employers from creating new jobs, as described in Chapter 6. If you are unemployed, and people who might hire you instead have to worry about taxes, then they are specifically sending to the government the funds that instead should be used to hire you.
Some argue that 'trickle-down' economics has not worked, but the truth is :
- 'Tax cuts' are reductions in published rates, which do not affect the ultra-wealthy, as they have the means to avoid reporting income on their 1040s to begin with. An increase in income tax rates hits the upper middle class, not the ultrawealthy, as explained in Chapter 6.
- Tax complexity remains the same after a reduction in a tax rate, and tax complexity is the biggest drag on this stimulus effect.
- Nonetheless, when tax rates were lowered (such as in the early 1980s, in 2003, and in 2019), there was a sudden boost in economic activity.
Why is an extremely complicated tax code bad, if I have Turbotax anyway?
A complicated tax code has four primary problems :
- It is complex specifically to hide various loopholes designed to enable the ultrawealthy to avoid paying income tax or estate tax. There are so many loopholes that even tax lawyers don't know about all of them, but rather each specializes in just a small fraction of them. Many legislators can thus be bribed into creating a loophole for just one big donor. Add up over 100 loopholes, and the tax code becomes incomprehensible, contradictory, and impossible for the IRS to enforce fairly.
- The cost of tax complexity costs over 20% of tax collected, and that is even before accounting for the even larger cost of suboptimal business decisions driven by tax reasons.
- The loophole-utilization industry enriches a few elite tax lawyers and tax-haven countries. When you realize that there are over two dozen small countries that exist for the express purpose of capturing a cut of the net savings gained by an individual or corporation through the avoidance of US income tax, you realize how much in the way of time and resources are wasted in this bizarre process of pretending the entity pays more tax than it does.
- Unfortunately, the ultrawealthy will never agree to paying income or estate tax, and the street-level socialist activists make no distinction between a surgeon and a billionaire in terms of the reviled 'wealthy' that they want to tax, and thus cannot grasp that raising the 'retail' tax rate does nothing to separate the ultrawealthy from their money, and in fact ensconces them deeper by chopping down the mere millionaires who might have been their competition.
See Chapter 6 for more details.
Does this program correct the US National Debt?
Yes, it does. Under the ATOM DUES program, we could hypothetically get to the point by as soon as 2025 where income tax has been phased out and all government spending is funded with Federal Reserve QE instead of taxation (most of it consolidated into a DUES). Hence, there is no spending in excess of taxes, which is where the annual budget deficit and resultant issuance of debt (US Treasuries) arises. For this reason, there is no new addition to the existing National Debt.
From here, we move on to the matter of the existing National Debt, which currently stands at about $23 Trillion and will continue to grow by the time the full transition to the ATOM DUES is phased in. As the existing Treasuries mature and expire, they will, for the first time, not be replaced by newly issued Treasuries since the US government is no longer issuing debt to finance a deficit. Hence, the existing pile of Treasuries will continually expire without replacement, ensuring that the existing bond holders see the debt instrument end after the expected duration even as the debt gradually shrinks. If there is full DUES implementation by 2025, the existing National Debt will shrink to a negligible portion of US GDP by 2035.
What is the Upgrade Paradox?
See the article here. The technology industry is effectively a victim of its own success. There are too many products the average household now has to upgrade frequently, as the number of exponentially improving nodes per household is now in the dozens (see Chapter 3). Since people are expected to spend more and more to upgrade their entire family's PCs, smartphones, tablets, television screens, and even cars, but are not receiving any significant share of the gains made through technology, it is becoming too expensive to keep upgrading. This means that the speed of technology diffusion ironically slows. This is why a more direct and democratized monetization of diffuse technological progress is crucial, and ATOM-DUES enables technology to return to the long-term trendline of progress it has failed to keep up with.
I am not a technology expert. How do I begin to improve my life and career through Third Millennium Economics?
One does not need to be tech-savvy at all to become an expert ‘lifehacker’ through targeted Internet research. A number of people have already figured out the solution(s) to most of your challenges, and have posted the material online.
The best way to start is to think about all the challenges you have in life, and all the examples of how someone else managed to obtain what you want. Then, begin the metamorphosis into a search demon who reads as much as possible about how others achieved your goal. You will become better at searching once you practice search engine optimization, algorithmic AI, and speed reading. With more practice, you will know how to identify the right blogs, and the right people at message boards who have valuable information, and with your own rising ability to contribute information of value to others, some knowledge will find itself pulled towards you. The more of this you do, the better you become.
The other key component is confidence. Don’t assume that a highly credentialed doctor, lawyer, or financial advisor will always know more than you can mine from the web. See them as components of a solution; beacons to help point you in the right direction of discovery. In this age, knowledge is highly decentralized with ever-lowering barriers to access. This, not coincidentally, is why knowledge is expanding faster than before.
What asset classes should one keep their money in, if they believe in the Third Millennium Economics thesis?
Historically, people have assumed that gold is a hedge against inflation. While this may have been true prior to the modern era, today, that is one of the worst allocations a person can make. To believe that gold is going to be the beneficiary of permanent monetary creation is to have no understanding of technology. For one thing, technology will rapidly increase the supply of gold if the price rises to a point where this is economical (as happened with oil). Secondly, gold is an inert commodity that has little practical, essential use in the economy (people need oil to get to and from work, but there is almost no one who cannot survive for four days without gold).
By contrast, technology equities are the biggest beneficiaries of Third Millennium Economics. A simple observation of the price change in gold vs. in the Nasdaq 100, since QE began, reveals the essence of Third Millennium Economics truths. Even in just the five years before the v2.0 release of this publication (i.e. from May 31, 2015 to May 31, 2020), the huge divergence in the trajectory of gold relative to the Nasdaq 100 is evident. This divergence will continue, as per the foundational ATOM principles. Note that this refers to a broad index of technology companies, such as the Nasdaq 100, not any individual company's stock.
Why does the QE from one country flow to another country?
And how do you avoid a competition where every country is printing more than enough?
Posted by: Jenny | November 13, 2020 at 05:01 AM
Hello Jenny,
Why does the QE from one country flow to another country?
Because technology is borderless. It is just like sending an email with an attachment to a multiple recipients in multiple countries.
And how do you avoid a competition where every country is printing more than enough?
That would be a good problem to have relative to where the world is now, but the answer is that at that point, some allocation agreement across major economies will have to be reached.
Posted by: Kartik Gada | November 13, 2020 at 11:08 AM