Denomination of Cash Flow (money exchanged/time) as if it were just Cash (A good idea?)

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kmarinas86
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Denomination of Cash Flow (money exchanged/time) as if it were just Cash (A good idea?)

What if our economic activities could be governed by exchanging cash flow instead of cash?

Basically, what I am saying is why not trade allowances, salary, rent, cashflow, and other types of asset flows in exchange for services rendered for indefnite period of time rather than exchange cash for a product or service rendered useful only in a limited time period?

What such a system would mean is that one must have in DEPOSIT a FLOW to receive indefinite services. This is contrary the current use of money, where one must EXPEND a DEPOSIT to receive goods and services lasting a definite duration.

If one were to look at their banking statement, it could look something like this:

_________________________

Salary, Supreme Sales, Inc. +$50,000 / year
Legal Earnings, Smith & Hassler +2000 / year
House, Windchester Homes -$10,000 / year
Electricity -$3,000 / year
Car, Honda -$500 / year
Groceries, Kroger -$2000 / year
Merchandise, Target -$200 / year
etc.

_________________________

As you can see here, the cash flows are completely explicit. Also, it would be easy to balance budgets due to their constant nature. They are in effect tradable annuities. You don't have to have a seperate line for each transaction. Everything of economic value is treated as membership. Services would be rendered on a use-it-or-lose-it basis. All balances would change much more smoothly than now.

There are several ways this will be better in terms of safety of one's assets.

1) If someone steals your DEPOSIT of a FLOW, that person has the problem of exchanging it for a lump sum in turn for some hard cash to benefit immediately from the discounted value of that flow, and the other person who has it then has the problem of not being able to spend the entire value of that flow, until he too exchanges it for a lump sum, and ad infinitum. The result is that some person ends up with that deposit of a flow and only get as much as time passes by. The faster the this deposit of a flow is moved from account to account, then the less value could be extracted out of that flow each time it is an account. For a discount rate of i = 5%, and periods n -> +inf, $1,000,000 translates into $50,000 / year (the same as the first line in the above example).

2) Because of its constant nature, it is easier to track and budget within it.

3) Due to being easier to budget within it, it is becomes possible to live *exactly* at one's means - every day, every minute, and every second!

4) The ability to be exactly on budget will naturally allow others to be exactly on budget. This is in contrast to our current situation, where instead of being on budget, some people live well below their means (spend less than they earn) while the other people live well above their means (spend more than they earn). Rather than this problematic variability of net worth increase/decrease, we should have the ability to DEPOSIT FLOWS not cash, making it potentially feasible that more than 90% can live exactly on budget before, during, and after they retire. More and more people can be free of debt as well as not rely on lending money to others with high interest to live with financial security. Natural interest rates would go down as a result of better ability to balance money in and money out. This means that for the same debt financing costs (interest payments), more money can be lended resulting in greater economic recovery per unit of money added to the economy.

This is why I suggest we look into such an idea for way to stabilize all economies.

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"This is contrary the

"This is contrary the current use of money"

Grammar correction: "This is contrary to the current use of money".

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Hi kmarinas I'll give it a

Hi kmarinas

I'll give it a shot.

Well this seems very complex and I can't say that I completely understand what you are getting at.

In effect you are saying to keep a long term tab going that exchanges 'assets' for services. The key being that a constant amount of assets must be maintained. Is that right?

What strikes me right off the bat is this. Its not possible to maintain a constant anything. Your life and your assets would always be subject to lifes ebbs and flows.

What is the difference between someone expending some of their deposit and having exactly the amount needed at exactly the right time? How is it advantagious or even possible to NEVER expend deposits on hand?

3) Due to being easier to budget within it, it is becomes possible to live *exactly* at one's means - every day, every minute, and every second!

No. This is an impossibility. You can read the future? You can tell when the water pump will go out on your car? You can tell when you will lose your job, become ill, or suffer fire damage?

This whole thing sounds like an academic exercise that is meant to be comical not practical.

 

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 This might not be exactly

 This might not be exactly what you are talking about, this Hour Exchange Portland (Maine) is a very interesting idea, it's more about exchanging service for service (time is the unit), no cash involved.

http://www.hourexchangeportland.org/

 

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 I have to say this scheme

 I have to say this scheme sounds somewhat Soviet.

It sounds like you get paid the same whether you do your job well or just adequately. Would anyone have any incentive to invent or develop anything? How would you take money abroad if they did not use the same system?

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james_knight_chaucer
james_knight_chaucer wrote:

 I have to say this scheme sounds somewhat Soviet.

It sounds like you get paid the same whether you do your job well or just adequately. Would anyone have any incentive to invent or develop anything? How would you take money abroad if they did not use the same system?

What you get paid depends on your manager. If your manager doesn't like what you do, he can fire you. He can also increase or reduce your salary.

Whether you can sell your product depends on your quality. If you charge a certain amount of money and your customer doesn't like the service and/or goods, then that customer can cancel membership.

Anybody who does not use the same system would just receive cash from the other end, as depicted at the top of the diagram above (link: https://docs.google.com/leaf?id=0B4C1RIYfRPYtN2M2ZjJkMTMtYWZkYy00NzE4LWE...).

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https://docs.google.com/leaf?

https://docs.google.com/leaf?id=0B4C1RIYfRPYtN2M2ZjJkMTMtYWZkYy00NzE4LWE...


 

Another point:

Presently, there is no automatic mechanism for saving jobs which might be lost due to loss of purchasing power by others who have been laid off. Instead, many people assume debt here and there, whenever they are affected by the drop in sales due to these job losses. This does not have to happen.

Back to the above diagram: Say the $3,900 / month salary is no longer paid. Then what happens? In this system, all you have to do is print more money to allow the other tasks (above the salary bar in the diagram) by adding it directly at the other end. That sounds awful because It would devalue the currency. But consider the alternative. Right now, the government spends literally millions of debt dollars in attempt to recover each job. Consider that for every job lost, there is a potential cascading effect of even more jobs lost. This is due to the influence of the "employment multiplier" effect. This has been happening before the "stimulus" money had kicked in. So much of the jobs that were lost were in fact the result of prior jobs lost.

Now let us say we could prevent the subsequent effect of losing jobs by printing money and targeting it directly towards the entities depicted at the very top of the above diagram. No matter how many of the contracts below that level would be cancelled, the amount that would have to be covered is only the cash flowing out that is not met by cash flowing in. The reason is that they all share parts of that same inital flow that was lost. The jobs which are in those levels which can be saved (seen as the first and second top rows of solid color boxes at the top of the diagram), with the cost it takes to pay just one job. That is much more efficent than what our governments do now, and in fact it is probably more efficient than having private industry borrow more money here and there which only can save some of the blocks in the top first and second solid colored rows of boxes.

For these additional reasons, I maintain that we look into such an idea for way to stabilize all economies.

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Step way back

Kmarinas

I feel like I've walked in on the middle of a movie.

I think you need to step way way back and explain to us where you are coming from.

Why are interested in this system? What is it? What are it's real world advantages?

Are you talking about a local sytem of banking, a govermental system, is it opptional, does it integrate into existing systems?

IMO this is still really confusing and the graphics don't help at all. What are you trying to hit upon?

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Johnny Oxygen
Johnny Oxygen wrote:

Kmarinas

I feel like I've walked in on the middle of a movie.

I think you need to step way way back and explain to us where you are coming from.

Why are interested in this system? What is it? What are it's real world advantages?

Are you talking about a local sytem of banking, a govermental system, is it opptional, does it integrate into existing systems?

IMO this is still really confusing and the graphics don't help at all. What are you trying to hit upon?

Let me start with the easiest question first:

Q: "Are you talking about a local sytem of banking, a govermental system, is it opptional, does it integrate into existing systems?"

A: Optional. It would be integrated into existing systems.

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Johnny Oxygen

<snip double post>

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Um... LOTS of problems.

Lots and lots of problems. Here are three off of the top of my head:

Problem 1: A dollar is a dollar and that's one of the characteristics that allows it to be used as money (fungible, divisible, portable, etc), but in your system that isn't the case.  These flows of money that you are talking about are not all the same and that's a big problem. Let me give a simple example:

You've got a service that you are selling for $1,000/month. There are two buyers: Buyer 1 and Buyer 2.

Buyer 1 has an annuity from a triple-A rated company that pays $1,000/month in perpetuity. That's what he's going to trade for your services.

Buyer 2 is a drunk who's about to get fired from his job, but in the meantime his job is paying $1,000 month and that's what he's going to trade for your services. 

Once you get the deal done, you are in turn going to sell that $1,000 / month flow of funds to another buyer. Don't you think either you or a future buyer is going to look at those two cash flows very differently? Of course they will. Under this system, a dollar is no longer a dollar. Nope, you have to do tons of due dilligence to verify the credit worthyness behind each dollar of cash flows. That will create a huge burden and make accounting, trading, etc. very difficult because of the differing real values. Those cash flows will then need to be discounted to reflect the varying amounts of risk, but who is going to agree on how much to discount Buyer 1 and Buyer 2? It will become a huge unmanageable mess, defeating the purpose of having money where it is fungible.

Second problem: Because these are paid out over a period of time, it will be complicating when a traded set of cash flows defaults. Let's say you did the deal with Buyer #2 above and then sold those cash flows to someone else. That person then sold them to yet another buyer and then Buyer #2 stops paying his bills. Are you on the hook to make good on the payments? I'm guessing not under your system. Do you then still have to finish your work? If so, then that creates all sorts of goofy outcomes, where the guy continues to receive all his services for free even after defaulting. If you don't have to finish the work, then you've sold that series of cash flows for something, right? Do you get to keep those? Now you are no longer doing your work but you are still deriving the benefit of having sold those cash flows. Does that continue in perpetuity? All sorts of moral hazard are created by these goofy outcomes under this system.

Third problem: Imagine again that you did trade with Buyer #1 above and then you sold those cash flows to someone else. Let's say you then stop performing your services. Is Buyer 1 still obligated to pay for your services in perpetuity even though you are no longer performing the services??? Of course not. But, the buyer of the cash flows thought he had a stable source of cash and now he's no longer getting paid, not because of Buyer 1s credit worthyness but because of you, but he was never buying your risk. Again, it becomes a giant mess. 

Using dollars rather than cash flows gets around all these issues. Now there are specialized firms who will buy cash flows or banks that will loan against them, but those require tons of due dilligence and it is anything but an efficient market, which is what you need to trade.

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Um... LOTS of problems.

Lots and lots of problems. Here are three off of the top of my head:

Problem 1: A dollar is a dollar and that's one of the characteristics that allows it to be used as money (fungible, divisible, portable, etc), but in your system that isn't the case.  These flows of money that you are talking about are not all the same and that's a big problem. Let me give a simple example:

You've got a service that you are selling for $1,000/month. There are two buyers: Buyer 1 and Buyer 2.

Buyer 1 has an annuity from a triple-A rated company that pays $1,000/month in perpetuity. That's what he's going to trade for your services.

Buyer 2 is a drunk who's about to get fired from his job, but in the meantime his job is paying $1,000 month and that's what he's going to trade for your services. 

Once you get the deal done, you are in turn going to sell that $1,000 / month flow of funds to another buyer. Don't you think either you or a future buyer is going to look at those two cash flows very differently? Of course they will. Under this system, a dollar is no longer a dollar. Nope, you have to do tons of due dilligence to verify the credit worthyness behind each dollar of cash flows. That will create a huge burden and make accounting, trading, etc. very difficult because of the differing real values. Those cash flows will then need to be discounted to reflect the varying amounts of risk, but who is going to agree on how much to discount Buyer 1 and Buyer 2? It will become a huge unmanageable mess, defeating the purpose of having money where it is fungible.

Second problem: Because these are paid out over a period of time, it will be complicating when a traded set of cash flows defaults. Let's say you did the deal with Buyer #2 above and then sold those cash flows to someone else. That person then sold them to yet another buyer and then Buyer #2 stops paying his bills. Are you on the hook to make good on the payments? I'm guessing not under your system. Do you then still have to finish your work? If so, then that creates all sorts of goofy outcomes, where the guy continues to receive all his services for free even after defaulting. If you don't have to finish the work, then you've sold that series of cash flows for something, right? Do you get to keep those? Now you are no longer doing your work but you are still deriving the benefit of having sold those cash flows. Does that continue in perpetuity? All sorts of moral hazard are created by these goofy outcomes under this system.

Third problem: Imagine again that you did trade with Buyer #1 above and then you sold those cash flows to someone else. Let's say you then stop performing your services. Is Buyer 1 still obligated to pay for your services in perpetuity even though you are no longer performing the services??? Of course not. But, the buyer of the cash flows thought he had a stable source of cash and now he's no longer getting paid, not because of Buyer 1s credit worthyness but because of you, but he was never buying your risk. Again, it becomes a giant mess. 

Using dollars rather than cash flows gets around all these issues. Now there are specialized firms who will buy cash flows or banks that will loan against them, but those require tons of due dilligence and it is anything but an efficient market, which is what you need to trade.

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Ayala wrote: Lots and lots
Ayala wrote:

Lots and lots of problems. Here are three off of the top of my head:

Problem 1: A dollar is a dollar and that's one of the characteristics that allows it to be used as money (fungible, divisible, portable, etc), but in your system that isn't the case.  These flows of money that you are talking about are not all the same and that's a big problem. Let me give a simple example:

You've got a service that you are selling for $1,000/month. There are two buyers: Buyer 1 and Buyer 2.

Buyer 1 has an annuity from a triple-A rated company that pays $1,000/month in perpetuity. That's what he's going to trade for your services.

Buyer 2 is a drunk who's about to get fired from his job, but in the meantime his job is paying $1,000 month and that's what he's going to trade for your services. 

Once you get the deal done, you are in turn going to sell that $1,000 / month flow of funds to another buyer. Don't you think either you or a future buyer is going to look at those two cash flows very differently? Of course they will. Under this system, a dollar is no longer a dollar. Nope, you have to do tons of due dilligence to verify the credit worthyness behind each dollar of cash flows. That will create a huge burden and make accounting, trading, etc. very difficult because of the differing real values. Those cash flows will then need to be discounted to reflect the varying amounts of risk, but who is going to agree on how much to discount Buyer 1 and Buyer 2? It will become a huge unmanageable mess, defeating the purpose of having money where it is fungible.

There is a way out of that.

I will herein elaborate an amendment to what I am proposing:

This involves an intermediary.

One pays a certain amount into an account managed by the intermediary for a certain period of time. Once enough payments are made on time, a new unit is created, and we can call this a "locked cash flow asset". The "locked cash flow asset" becomes a source of revenue for the seller even when the buyer cannot afford it. When the buyer does cannot afford the pay into the flow the locked cash flow asset will continue to flow to the seller from money the buyer does not have.

Each "locked cash flow asset" can be classed into different levels, each with different rates of expiration. The more experienced user will have a longer expiry period. If a user appears to have become unreliable, this changes the level of future-to-be-established locked cash flow assets, which could, if done correctly, be set up with a simple mouse click, or computer automated by computing an > or < inequality. So instead of measuring the due diligence of a given customer directly, the seller would only need to observe the different level of "locked cash flow asset" being received. Each of these "locked cash flow assets" would retain their original class after they have been established, and thus also the rate of expiration.

As with any method of payment, for it to be accepted, some accommodation would be necessary. So anybody receiving money this way would have to go to through some effort and sign into a site where they would set up how they would receive this money. Such a site could also be one where they set up similar "locked cash flow assets" where they become the one sending the money rather than receiving it.

Ayala wrote:

Second problem: Because these are paid out over a period of time, it will be complicating when a traded set of cash flows defaults. Let's say you did the deal with Buyer #2 above and then sold those cash flows to someone else. That person then sold them to yet another buyer and then Buyer #2 stops paying his bills. Are you on the hook to make good on the payments? I'm guessing not under your system. Do you then still have to finish your work? If so, then that creates all sorts of goofy outcomes, where the guy continues to receive all his services for free even after defaulting. If you don't have to finish the work, then you've sold that series of cash flows for something, right? Do you get to keep those? Now you are no longer doing your work but you are still deriving the benefit of having sold those cash flows. Does that continue in perpetuity? All sorts of moral hazard are created by these goofy outcomes under this system.

The cash flows we speak of here are "locked cash flow assets". So what we have here is Buyer #2 dealing with the seller through a "locked cash flow asset". Let's say the seller wishes to sell this "locked cash flow asset". So the seller can create another locked cash flow asset with a third-party. However, the rule here is simple, "A locked cash asset retains its relationship between the buyer and seller. One cannot trade a locked cash flow asset any more than one can trade their body in for another as they please."

One can have two general kinds of "locked cash flow assets": 1) One that flows to you. 2) One that flows away from you. If you combine #1 and #2, it is almost as if you sold the cash flows to someone else, but not quite. The reason is that #1 and #2 are separate "locked cash flow assets", so if #1 expires, then #2 may still apply. So in this case you are definitely on the hook. Here, you have not irresponsibly off-loaded the risk to a giant pool of risk, but rather you have helped spread the risk by carrying some responsibility for it.

Ayala wrote:

Third problem: Imagine again that you did trade with Buyer #1 above and then you sold those cash flows to someone else. Let's say you then stop performing your services. Is Buyer 1 still obligated to pay for your services in perpetuity even though you are no longer performing the services??? Of course not. But, the buyer of the cash flows thought he had a stable source of cash and now he's no longer getting paid, not because of Buyer 1s credit worthyness but because of you, but he was never buying your risk. Again, it becomes a giant mess.

My response here reflects what I have stated above. These are "locked cash flow assets", in that they are dedicated by a certain fixed amount and only to a specific buyer and a specific seller. If one wants to have a similar function as selling their cash flow by use of a "locked cash flow asset", they must create another one, and they cannot convert it into some other form any more than I could take my debit card and turn it into a Diamond-level credit card with a $5 million credit limit. This limitation is vital in that not being able to sell unfunded liabilities with this mechanism reinforces the priority that buyers live within their means. Some would try to sell them things they not cannot afford, but this is less likely to occur if the immediate seller is on the hook.

Ayala wrote:

Using dollars rather than cash flows gets around all these issues. Now there are specialized firms who will buy cash flows or banks that will loan against them, but those require tons of due dilligence and it is anything but an efficient market, which is what you need to trade.

I hope I explained to some detail that the locked nature of these "locked cash flow assets" does not allow them to be traded, but they can be created or destroyed, which is not at all like money itself which the general populace is not legally allowed to print or destroy.

I would also like to add that, in theory, the use of "locked cash flow assets" can accelerate the money velocity (i.e. the V in the equation of exchange M * V = P * T ) to arbitrary speeds. Thus, it can be possible to support arbitrarily levels of GDP growth with a flat money supply when one installs this system. This property was implied by the "mouse-holes" shown at the top of the diagram I had made:

https://docs.google.com/leaf?id=0B4C1RIYfRPYtN2M2ZjJkMTMtYWZkYy00NzE4LWE...

The knowledge that the money supply M corresponds to the creation of debt in our current fractional-reserve system has encouraged me to find a way to increase the money velocity V of the real economy of the GDP. That is my motivation behind my posts on this thread.

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kmarinas

kmarinas

At this point you should see that your plan is so elaborate and complex that it is impractical.

I would like to hear in a sentence or two what your system aims to do. What is its goal?

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Johnny Oxygen
Johnny Oxygen wrote:

kmarinas

At this point you should see that your plan is so elaborate and complex that it is impractical.

I would like to hear in a sentence or two what your system aims to do. What is its goal?

The system aims to increase the money velocity of the real economy, not that of the virtual economy, so that an economy can survive and even grow when money is scarcest. It aims to do this within our current system by flowing money into to "permanently liquid asset flows" or "locked cash flow assets" which never stop moving money (as long as they remain established), by which allowances (like that a child receives from his or her parents) become the basic commodity for trade for ongoing services and supplies of goods.

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kmarinas86 wrote:When the
kmarinas86 wrote:

When the buyer does cannot afford the pay into the flow the locked cash flow asset will continue to flow to the seller from money the buyer does not have.

Each "locked cash flow asset" can be classed into different levels, each with different rates of expiration.

That's really bad typo there. The above should read:

___________

When the buyer cannot afford the pay into the flow, the locked cash flow asset will continue to flow to the seller from money the buyer does not have.

Each "locked cash flow asset" can be classed into different levels, each with different rates of expiration.

___________

By the way, I fail to see how that is complicated. Perhaps I am writing my explanations so densely such that it is somehow perceived to be complicated? Please explain the alleged impraticality of what I am describing.

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Re: kmarinas

The system aims to increase the money velocity of the real economy, not that of the virtual economy, so that an economy can survive and even grow when money is scarcest. It aims to do this within our current system by flowing money into to "permanently liquid asset flows" or "locked cash flow assets" which never stop moving money (as long as they remain established), by which allowances (like that a child receives from his or her parents) become the basic commodity for trade for ongoing services and supplies of goods.

oh

There is more to an economy than the velocity of money. These 'permanently liquid asset flows' and 'locked cash flow assets' are phony constructs because they have to be subsidized with printed money.

You know just using an adjective like 'flowing' doesn't make your idea a sound economic principal.

Each time natural contractions in the economy take place then the 'flows' would have to be subsidized therefore they are artificial. Once these phony constructs become 'the basic commodity for trade..' then there is increased pressure to keep them subsidized. This is not a free market system.

Contractions in economies are healthy and needed things. They help clean debt out of the system and incourage sound business practice. Your system would encourage debt accumulation and fraud.

I suppose you feel that if your system was implemented there would be a smoothing effect to the economy as a whole and that in turn would lessen the effects of contractions that increase unemployment and inflation but it would actually do the opposite. Your system would, overtime, become a false measure of wealth that would mask huge government money/debt printing that eventually would put us where we are now, saturated in debt. That in turn would create high unemployment and encourage even more debt printing to keep the 'flows' going.

 

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Johnny Oxygen wrote: The
Johnny Oxygen wrote:

The system aims to increase the money velocity of the real economy, not that of the virtual economy, so that an economy can survive and even grow when money is scarcest. It aims to do this within our current system by flowing money into to "permanently liquid asset flows" or "locked cash flow assets" which never stop moving money (as long as they remain established), by which allowances (like that a child receives from his or her parents) become the basic commodity for trade for ongoing services and supplies of goods.

oh

There is more to an economy than the velocity of money.

I do not wish to discount the importance of the velocity of money.

Johnny Oxygen wrote:

These 'permanently liquid asset flows' and 'locked cash flow assets' are phony constructs because they have to be subsidized with printed money.

This is assuming that private industry could not find a way to cover the losses. They do this with loans, so why not "permanently liquid asset flows"?

Johnny Oxygen wrote:

You know just using an adjective like 'flowing' doesn't make your idea a sound economic principal.

I do know that.

Johnny Oxygen wrote:

Each time natural contractions in the economy take place then the 'flows' would have to be subsidized therefore they are artificial.

Again, why must they be subsidized? There should be no reason for that.

These are not literally permanent.

I hope I can find the proper name for these things. Your comments are probably a good reason why I should not use the term "permanently liquid asset flows" to describe these.

Johnny Oxygen wrote:

Once these phony constructs become 'the basic commodity for trade..' then there is increased pressure to keep them subsidized. This is not a free market system.

Again, why must they be subsidized at all?

We see food being subsidized, especially during a recession, yet no one is against the sale of food. That's especially true for corn. How can this argument be a logical counter to this proposal if the same argument, if applied to food, would suggest that the sale of food is contrary to the principles of a free market system?

Johnny Oxygen wrote:

Contractions in economies are healthy and needed things. They help clean debt out of the system and incourage sound business practice. Your system would encourage debt accumulation and fraud.

Debt is a function of a loss of liquidity. If an economy runs trade deficits, it looses money.

If there is a way to increase the GDP without increasing the money supply, it can throw away Keynesianism out of the water. Why? The reason is that Keynesians assume that you must print money to expand the economy. In a way that makes some pseudo-sense. But where exactly does most of the money in our fractional-reserve banking-dominated economy come to general population in the first place? Debt! So if Keynesians wanted to increase the GDP, their decision would be to increase the money supply, M, which increases the debt!

The equation of exchange:

M * V = P * T

There is a better alternative, and that is increasing V. If you believe this equation from economists is correct, the only other way to increase nominal GDP aside from M is to increase V.

The importance of V should not be underestimated:

http://en.wikipedia.org/wiki/Velocity_of_money
http://en.wikipedia.org/wiki/File:M2VelocityEMratioUS052009.png

"Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is a key economic indicator used to forecast inflation." - Money Supply, Wikipedia

If you can technologically increase V to an arbitrary degree you should not need to increase M to stimulate the economy any longer. In fact, you could make M drop without inducing recession, unlike in the 1930s Great Depression where it in fact, due to central banking policies of the Federal Reserve, it did. Also, because the generation of M creates debt, as is practiced in our fractional-reserving lending system, increasing V would be a way out of having to produce more debt to expand the nominal GDP.

My proposal here is just one of my attempts to conjure up a system where, hopefully, we can arrive at the conclusion that, yes, we should have a system that allows V to increase.

The specific idea I have presented thus far, which is not perfect, nor could be, is just one of many possible methods one could devise to achieve this effect. There can be many more credible arguments from more credible people than myself who could come up with alternative answers for the same goal - increasing V to any arbitrary degree.

So if I failed to be right this time, there still remains a hope that there is indeed some way to increase V that can actually succeed.

Johnny Oxygen wrote:

I suppose you feel that if your system was implemented there would be a smoothing effect to the economy as a whole and that in turn would lessen the effects of contractions that increase unemployment and inflation but it would actually do the opposite. Your system would, overtime, become a false measure of wealth that would mask huge government money/debt printing that eventually would put us where we are now, saturated in debt. That in turn would create high unemployment and encourage even more debt printing to keep the 'flows' going.

Increasing V is an alternative to increasing M. Increasing M is tantamount to surrendering to a central bank's policies, for they can control this directly. However, while it may be illegal for the common individual to change M by themselves, it is not at all illegal to change V. If indeed the economy is able to pay its debts, then by definition, V must lead M in growth, for if not, payment transactions (P*T) will never keep up with the debts and interest introduced by M, given that we have a fractional-reserve banking system. In fact, paying our debts to the central bank is impossible without negatively contributing to M, so for the sake of maintaining liquidity the logical thing do to would be default, which you claim is a healthy thing. The healthier thing to do is to systematically avoid debt in the first place rather than systematically generating it only to systematically destroy it.

I think that defaults do not do complete justice. We should limit debts in the first place. Thus, we must maintain the liquidity of the assets of exchange. This generally occurs when they are being used. When they are used, we have then greater potential to pay debts. And because much of our debt is coincident with the expansion of the money supply, it should behoove of us to think about what exactly is the debt being used to support in the first place. If this is in fact a mere symptom of the lack of liquidity in our system, we should think about how prevent that from being induced onto unwitting losers in the game of economic musical chairs.

I do not subscribe to the notion that whatever degree of economic collapse that occurs is somehow natural. To me, there is no such thing as a natural economic collapse in any economic system one can think of or devise. They are all completely artificial to me.

I also believe that economic success is not natural either. It is completely up to the will of each individual to either try or not to try.

Would the same criticisms I have received here for my presentation here apply directly to any future proposals for increasing V to an arbitrary degree, regardless of who presents it?

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