Stand Corrected
Correction: El Nacional sneakily got ahead of me by running a correction for the article I accused them of not correcting, mooting pretty much this whole post. The one bright spot is, I didn't need to change the title!
Sigh...esta semana no pego una...
http://www.caracaschronicles.com/themes/img/lquote.png); background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; background-position: 0% 0%; background-repeat: no-repeat no-repeat; ">"We journalists are human, and as such, we make mistakes. The trouble is that everybody hears about them, because they end up in the newspaper."
This bon mot is from a tweet by Alejandro Hinds, the journo whose by-line graced the Gazapo del Año - El Nacional's logic-bending front page (above the fold!) claim that purchasing power has dropped 162% in eleven years.
Now, without wanting to make too, too much of this one incident, I want to say this:
Of course journalists and editors are just as human as everyone else on the planet. And of course they will make mistakes. The real question is, how are you going to deal with them? Because a complex organization like a daily newspaper needs some institutional way of processing mistakes, holding people who make them accountable, and dealing squarely with the public when they're made.
In English-language print journalism, there's an elaborate mechanism for dealing with mistakes: the correction. Casual readers have no clue about the institutional machinery behind those little correction boxes they get in page six of their morning papers. But journalists sure do. By the time you see a correction in a newspaper, a mistake has been brought to an editor's attention, a meeting has been held, the story has been re-reported by a different journalist, the facts re-ascertained and the whole thing has gone into the offending journalist's permanent file.
As a journalist, you can't not care. Your correction history will come up. It will come up when management is considering promotions or assignment to a sensitive beat. It will come up at salary reviews. It will come up when you hunt for another job. Too many corrections over too many sloppy mistakes and your career will suffer. Everybody inside the newspaper knows this, and so everybody's on guard. Not because of any pure-hearted concern for the Noble Truth, but simply because piling on corrections sucks. For your career. For your reputation. For your standing in the office.
I've seen foreign journos go through the process of having to run a correction, let me tell you, it's not something they enjoy.
Now, back to that El Nacional blunder. I try to picture what would've happened up north in a similar situation. We're talking about the lead story in the whole paper: front page, above the fold. This is the most sought after real estate in journalism, the spot journos are meant to be competing for. You're using that space to run a claim that wasn't just false, but actually mathematically impossible!
In a first world newspaper, this would be a firing offense. Or, if not a firing offense, one with serious consequences for the careers of all involved. It would set off an intensive review by management: what happened? How? How can we avoid it happening again? The correction would be only the beginning. There'd be hell to pay.
In Venezuela, not only is the original story never corrected, but the entire thing is put to bed after a single, weak ass, non-apology-apology delivered via tweet by the journalist involved. Management review? Hell to pay? Qué?!
El Nacional does have a "Defensoría del Lector" - a readers' Ombudsman - and I guess he does sometimes shine a spotlight on serious errors. Does the prospect of being named and shamed by the Ombudsman keep El Nacional's journos and editors in check? I don't see it...
But then, we already have a word for a journalist with "no real incentive to check". We call that a blogger. ¿O no?
Juan Cristobal
Francisco Toro
lgg.jpg)
.gif)
Editor wanted on isle 4
Quico: "El Nacional does have a "Defensoría del Lector" - a readers' Ombudaman"
You're confusing Ombudaman (the superhero with Buddha-based powers) with Ombudsman (the superhero who always travels on bus).
I expect a correction to follow shortly :)
And we need smileys.
Y otra vez al bate...
This sentence of yours:
But then, we already have a word for a journalist with "no real incentive to check". We call that a blogger. ¿O no?
Is completely and utterly unwarranted FT. It means that bloggers, by your definition, do not care about their reputation, and that argument my friend, IMHO, has no legs to stand on.
Sheesh, cranky much, Alek?!
Yow, humor fail.
For what it's worth, I think what I meant is perfectly clear: reader's expectations when reading a blog are different from their expectations when reading a newspaper. And rightly so When you read a newspaper, you expect it to be fact-checked, edited, vetted. You expect due diligence, you understand it as the output of a group of professionals working to a set of recognized professional standards. That's journalism.
When you're reading a blog, you know full well you're reading the output of some guy in his pyjamas somewhere. You know there's no copy-editor, you know there's no fact-checker, you know there's no professional organization behind it, and so you expect mistakes: mistakes that would be utterly intolerable in a newspaper are part of the blog game. (Ahem, you only need to scroll up to see how that shakes out...
When you read a blog, you know that a lot of the due diligence is going to be post-hoc. When somebody points out a mistake, I always try to correct it fast, and in the same space where the original piece showed up. That's a blog's specific advantage in these things.
Not at all FT
Again, no need to put down guys in pyjamas, or indeed bloggers, anywhere to advance the notion, incorrect in my opinion, that news outlets have more credibility than bloggers. We all bear witness to the huge mistakes and appalling reporting that major media outlets, with all those fact-checking mechanisms in place, have published over the years about our country.
Granted, they have more system in place, as you've rightly pointed out, but that does not mean they are infallible. No one is. Neither the pyjama-wearing nor the suit-wearing-journalism-title-carrying articulista.
Not been cranky here, just defending my corner that's all.
could the irony be richer?
You are completely wrong about the premise of this article. Will you run a correction?
El Nacional today, under a full-sized headline on page A5:
Economía
ACLARATORIA
Nuevo cálculo
Poder adquisitivo acumula pérdida de 19,4% en 11 años
ALEJANDRO HINDS
A propósito del artículo publicado el viernes 12 de marzo en El Nacional (cuerpo Ciudadanos, página 4) sobre la caída del poder adquisitivo durante el gobierno de Hugo Chávez, es preciso aclarar que la cifra presentada se debió a un cálculo errado como consecuencia de un problema de comunicación entre el periodista y el economista consultado.
La caída real en la capacidad de compra es 19,4%, pues la manera apropiada de hacer el cálculo es tomando en cuenta la relación entre las variaciones acumuladas en los últimos 11 años en el índice de precios al consumidor (733%) y el índice de remuneraciones a los asalariados (571%). El economista José Guerra explicó que el cálculo presentado en el artículo no es correcto porque, aunque la diferencia entre la inflación y el aumento de los salarios efectivamente es de 162 puntos porcentuales, esto no indica que el poder adquisitivo haya caído 162%.
Reputation and bloggers
First, Quico goes after the BBC for not using the Ñ in Pinera, while calling Piñera, in the same post, Santiago instead of Sebastián.
Second, Quico goes after El Nacional for not making a correction without even checking if they actually made one.
Arrogance, incompetence and laziness. A lethal combination.
We expect a correction.
Ay papá...
Arrogance and laziness? Guilty as charged! Mea culpa. Qué papelón de verdad...
But the incompetence is theirs: these jokers don't link to the correction from the original piece, which stays online forever! Y
Conventional Use of Purchasing Power Formula Among Economists
Okay, I have a couple of comments just to clarify some matters of language and what I would describe as the "expected norm" of the use of Purchasing Power statistics among economists.
The 162% figure represents the net decrease in real income for the average venezuelan over the past 11 years, which is calculated as the difference between the percentage growth in nominal income and the percentage inflation rate. For the formula, see (look at the second box with "Real Income" in caps):
http://financial-dictionary.thefreedictionary.com/Real+Income
Therefore a 733% inflation rate subtracted from a 571% growth in nominal income will equal a -162% decline in real income for the average venezuelan.
With respect to purchasing power your math is correct, but your use of language presenting it needs to be clarified--just a moment, while I demonstrate. What you have actually shown in your calculations is the "change in the purchasing power of average (or mean) nominal wages in Venezuela over the past 11 years" which is a useful, and indeed valuable, statistic, and it is -22% as you have shown. But it does not represent the "change in the purchasing power of the bolivar" which is the statistic most economists would look for when examining the economic trend of purchasing power in Venezuela over the eleven years of Chavez's tenure of office.
Before I continue, let me put up a link:
http://en.wikipedia.org/wiki/Purchasing_power
Purchasing Power is read in a specified number of units of currency from a base year (that's the 100 bolivars in your El Nacional example) projected forward over a specified number of years (which is eleven in this example), adjusted for an annual inflation rate over the specified number of years (which is 733 divided by 11 or a 66.64% average annual inflation rate) returning a figure representing the change in the purchasing power of the specified number of units of currency from the base year--not the ending year, which is what you have done in your example.
In other words, the purchasing power calculation most economists would look for would be based upon how many potatoes the 100 bolivars (in the El Nacional example) purchases today, after 733% inflation over 11 years, which would be calculated (where P = Purchasing Power of the bolivar) as:
P = 100 / [(1 + 66.64) * .11]
P = 13.44%
So the Purchasing Power of the bolivar today is only 13.44% of what it was eleven years ago, which represents a decline in the bolivar's purchasing power of 86.56% of its original value.
Check it against your El Nacional example. If 100 potatoes go for 733 bolivars, or 7.33 bolivars per potato, then the wage earner can only buy 13.64 potatoes (100 / 7.33 = 13.64) with 100 bolivars eleven years later, decimal discrepancy of .2 is due to rounding percentage figures.
I'm not about to let Chavez hide that 86.56% decline in the purchasing power of the bolivar over the 11 years of his tenure in office. That's why I put this up. I'm not trying to be nit-picky here. I like the topic.
StJacques
Are you The One?
Perhaps you're the one to explain an age old question of mine: is it purchasing power equivalent for a government to tax money versus print money if the amount printed is chosen to be equivalent (as percentage of the new total amount of money) to the percentage that the taxed money represents of the total money of the nation? That is, in a nation with total money of 90, is it the same for the government to print 10 than it is for the government to tax 9, both values being 10% of their final totals?
--
Rookie on this board missing the "Repy" link
Torres,
Sorry for not clicking "reply" in my response to you, which is below.
The word "larger" at the end of the quote in my response which reads:
"though you can create one that is at least so on paper, (as opposed to reality) larger"
should be stricken. I did an edit within my writing and I did not completely remove the previous text. Just ignore the word "larger."
StJacques
Correcting Myself on Real Income
Please forgive me for what I have in my opening, I was in such a hurry to get to Purchasing Power that I did not pay attention to what I wrote on Real Income.
I wrote:
"Therefore a 733% inflation rate subtracted from a 571% growth in nominal income will equal a -162% decline in real income for the average venezuelan."
LOL! Maybe I can work for El Nacional after all!
These figure for inflation rate should have been the 66.64% average, not the cumulative.
"Therefore a 66.64% inflation rate subtracted from a 571% growth in nominal income will equal a 504.6% growth in real income for the average venezuelan."
I am so embarrassed. If my Quantitative Analysis prof saw this he would have me shot.
StJacques
Your professor would still be upset
There's another, major problem with your math, or rather your concepts. Since inflation compounds, you can't calculate average inflation by dividing the new price by number of years. The correct formula is something like this:
p=(1+i)^y, where p is the new price (which started at a base of 1), i is the inflation rate, and y is the number of years. In our specific example, that would be:
7.33=(1+i)^11. Solving for i, average inflation is 19.85%.
I don't even know what to make of this equation: P = 100 / [(1 + 66.64) * .11]. Why .11 instead of 11? Why * instead of ^? Where's income in this equation? Plus in this last post, you compare average inflation to 11 years of nominal income. That never works. The right decrease in purchasing power is 19.4%, as noted in the aclaratoria posted by anonymous on 3/13 at 18:07 - and also in one of my comments on the original post (I think I didn't "sign" that one). (By the way, dividing 733 by 571 accounts for compounding in both numbers.) Jose Guerra is a smart guy - I met with him a few times when I lived in Venezuela - and we would all do well to take his calculations at face value.
AIO
Reply to Torres
Torres,
I had to think about your question a bit, and in all honesty I am still thinking, but one way or another the answer can only be "no, they are not equivalent decisions" in real life--and what I'm trying to answer in my head is what distinguishes a "real life" model from a theoretical one here--because in real life the supply of total money (money in circulation) is always greater than the value of goods and services produced. So making a decision to expand an oversupplied monetary system even further will do far more harm, and I'm trying to avoid a lecture on that, than taxing outright, which still does its own damage, but certainly far less.
With reference to your question, the difficult thing to understand here is that the government cannot create a money supply that is worth less than the value of what is produced because the value of what is produced will simply change if the money supply is shrunk, in other words, prices will go up. "Real money" is always equivalent to the value of what is produced within an economy and there is no way to create a money supply that is worth less than what is produced--though you can create one that is at least so on paper, (as opposed to reality) larger--because if what is produced is then consumed, then whatever the value of consumption is becomes what we would calculate as real money. The value of money is therefore always relative to the value of what is produced.
By simply trying to print new money to avoid taxation the government would therefore not get the value it calculated, in either of your two scenarios, nor could it adjust its calculations accurately to compensate for an expected error because the only true value of money is based upon what is produced. Direct taxation would always be a preferred method, but hopefully in the smallest amount possible (which never happens of course).
StJacques
Uh... clarification
Points you've made that I'm trying to piece together:
1) the value of money is always greater than the value of goods and services produced.
2) the indirect effect on the purchasing power of the consumers from increasing the percentage of excess:total money is worse than the direct effect on the purchasing power of the consumers from taking the same percentage increase away.
3) the value of money is always relative to the value of what is produced, therefore, the government could not get a value it calculates
4) conclusion: direct taxation is the preferred method.
Would the conclusion still hold if the printing is done by frequent, tiny amounts (e.g., daily, print 1/365ths of the yearly budget adjusted to the daily value of the budget)?
Note that by eliminating taxation, all the costs of reporting, collecting, and policing taxation are also eliminated (e.g., all personnel in finance departments would need to reconsider their careers). These overhead savings, together with the increase in educated work force, on top of the international value of a tax haven, and the decrease in the costs of starting and running businesses, are all considerable effects. Also, are you considering that printing devalues the money of all holders of the currency, including foreign holders, money launderers and tax evaders, all of whom currently escape taxation?
Having pointed the above out (and there's more), do you still hold that the effects on purchasing power of direct taxation are still clearly less evil than the effects on purchasing power of devaluing currency? Perhaps I'm way off in assuming that printing money is interchangeable with devaluating currency? Aren't they interchangeable?
--
Response to Clarification
Okay, I just re-read my reply comment and I see I left something out, so the confusion is on me.
Response to Point 1: There is an important distinction between "real money" in an economy, which is the value calculated as the aggregated total prices for all goods and services produced (real money=GDP) and "circulation money" which includes additional money dumped into the economy by the government either through printing new currency or just making cash available through central banking practices or through other "fiduciary" means. With respect to the credit that money generates this is also the distinction between "commodity credit" which is the credit accorded to "real money" and "circulation credit" which is the total credit available. In the real world circulation credit has always been greater than commodity credit.
Response to Point 2: Purchasing Power is relative to a fixed amount of income, not increases or decreases in the total amount of disposable income before and after taxes. If you take $100 before the government dumps new printed currency into the economy and compare it with $100 after new currency is dumped, then the latter figure will buy less and its purchasing power is therefore reduced. Disposable income, not purchasing power, is directly reduced by taxation, not by adding new money into the economy.
Continuing Point 2 response ... I think the real question you want to ask is "Which is worse, reducing disposable income by direct taxation or reducing purchasing power by a similar amount, calculated as a percentage of the before tax income, through the creation of new money by the government?" To that question I respond that it is worse to reduce its purchasing power because it is easier for entrepreneurs to calculate accurately and efficiently when the value of money (as calculated by its purchasing power) is stable and, acting with greater certainty, they can anticipate the interest returned to capital investment. In other words, decreased purchasing power leads to greater economic uncertainty and slows economic growth more than does reduced disposable income, provided of course--as your question anticipates--that we are discussing reductions of either disposable income or purchasing power by at least roughly equal value amounts.
Response to Point 3: You're sticking to a definition of "money" here, which it appears to me is something equivalent to "available cash" or "available currency" in the economy (I don't want to misstate your argument). Though the following is a highly technical article, I could recommend "There is Money and Then There are Money Substitutes" at:
http://mises.org/daily/3958
Go right to the last paragraph for the conclusion. Commodity credit cannot be expanded, only circulation credit can be grown by government action, using what are called "fiduciary media." And Commodity Credit is that credit created by "real money" (which is called "money certificates" in the article) which is money generated from what is produced and sold. Circulation Credit is generated from what are called "fiduciary media" in the article, which can include printing new currency or expanding money in circulation by a central bank or issuing new bonds and more.
So, if the government avoids direct taxation and takes its income from printing new currency in an amount calculated as a percentage of the value of money before the new currency is added, then "yes," it does not get the value of the money it calculated it would receive because its value is changed by the mere act of adding new currency into the money supply.
Response to Point 4: Direct taxation, in a roughly equal value amount to what could be printed as currency, is definitely preferable because it does not increase economic uncertainty as much as a reduction in purchasing power. Economic uncertainty freezes entrepreneurs in place because they do not know what is coming and they "play it safe."
StJacques
My turn to clarify
1) "If you take $100 before the government dumps new printed currency into the economy and compare it with $100 after new currency is dumped, then the latter figure will buy less and its purchasing power is therefore reduced." From what you explain later, are you saying that the amount of reduction is not directly and predictably related to the amount printed?
2) "I think the real question you want to ask is Which is worse, reducing disposable income by direct taxation or reducing purchasing power by a similar amount..." Not exactly. My end goal is to answer the question Would it be better to have a nation that has no taxation, which *replaces taxation completely* (thus the enourmous positive effects to be taken into account) with tiny, predictable daily purchasing power reductions?
3) "easier for entrepreneurs to calculate accurately and efficiently when the value of money (as calculated by its purchasing power) is stable..." This is precisely why I am trying to find out if printing money can be done in a such a way so as to have its effects be predictable, such as by printing tiny amounts on a daily basis.
4) "provided of course ... that we are discussing reductions of either disposable income or purchasing power by at least roughly equal value amounts." Not quite. We are discussing the government printing the amount of money that buys it the equivalent (non tax-related) goods and services that money from its taxation would buy it. So, when seen from the citizen perspective, we're talking a *much, much* lesser reduction of purchasing power to all money holders than reduction of disposable income to the taxpayers.
5) "it does not get the value of the money it calculated it would receive because its value is changed by the mere act of adding new currency into the money supply" Understood. But going back to points 1 and 2, doesn't an increase in fiduciary media cause a reduction in purchasing power that is highly predicable? I have the impression that it does from the almost arithmetical predictability of FOREX rates when nations devalue their currency.
6) "Direct taxation, in a roughly equal value amount to what could be printed as currency,..." Not quite, because the government would not be incurring costs related to taxation, so it would not have to print money to cover those costs. Also, since the market would no longer report taxes, the overall savings from all the related overhead would translate to lower prices which would imply an increase in purchasing power, so even less money would need be printed. On top of that, since all the tax-related workers (not just the government side but also the market side) would enter the workforce in other areas, production would increase (i.e., GDP), increasing purchasing power, so even less money would need be printed, in comparing taxed money versus printed money to buy the same (non tax-related) goods and services.
7) 'Economic uncertainty freezes entrepreneurs in place because they do not know what is coming and they "play it safe." ' This refers back to the predictability of 1 and 2, but also touches on point 6. Entrepreneurs would love not having to report, let alone pay taxes. Are you sure that the amount of uncertainty created by a not so great reduction in purchasing power would cause greater rejection than the attraction that the reduced costs and difficulties of doing business in a tax-free nation?
--
Torres, I'll get back to you
Torres,
I could scream right now.
I just spent an hour carefully typing a response and when I clicked "Preview" I got a message telling me "The website is too busy to take your response" and I lost everything I wrote. It wasn't there when I returned.
I'll have to come back later. There are some things I must do.
StJacques
bummer!
That happened to me with my post, above, though I did not lose it because I've gotten into the habit of selecting all and copying before clicking preview, because it's happened so many other times. But I do know the feeling. bummer.
Thanks, by the way, for your patience in explaining what must seem so basic to you. Very appreciated.
--
Response to Clarification
Okay Torres, sorry about the delay, let me try this again. I'm typing this in Notepad first so I will not have to contemplate hara-kiri if I lose it again. :)
I want to post your first question and respond at length, because I think this will cover just about everything else you asked.
Your Q: "From what you explain later, are you saying that the amount of reduction is not directly and predictably related to the amount printed?"
The reduction in purchasing power is directly related to the amount printed but it is NOT predictably related, because of its impact upon circulation credit. To put the latter part about predictability in better perspective I should say that it becomes less and less predictable with each successive "printing." And the short answer as to why relates to its impact upon credit rates within an economy and specifically who gets to manipulate credit to their advantage, how they manipulate it, and what the consequences of its manipulation are for the economy and, to keep to the topic at hand, the government.
As I mentioned earlier, some economists (see that link I posted earlier) distinguish between credit that is created as a consequence of production of goods and services and credit that is created by the government's expansion of the money supply, usually through central banking practices. You and I Torres, have credit that is determined by our income and our income reflects what we produce. Provided that we have a history of paying our bills, our ability to use that credit is limited by the value of what we produce. That is "commodity credit" and it is directly related to GDP, which is the measure of what I have referred to as "real money." You could say as a result that commodity credit is "earned credit" because it is backed up by production. And the government cannot inflate commodity credit directly, they can only encourage its expansion by encouraging production, which they try to do, but often in harmful ways-I'll skip that topic to stay on point here.
The other type of credit is "circulation credit," which is created by the government's expansion of the money supply, either by printing money, or issuing bonds, or most often by manipulating interest rates through central banking institutions. In the model you suggested, where the government pays itself through the printing of new money, circulation credit is expanded because there are no goods or services produced. But keep in mind that those who use commodity credit, producers like you and me, only have very limited abilities to take advantage of circulation credit. And the reason why is that circulation credit usually is manipulated through exchange markets. I'm not just referring to stock and commodities exchanges here, though they are part of it. There are all sorts of instruments of financial exchange which enable the manipulation of circulation credit and some of them are very complex; such as Derivatives, Collateralized Debt Obligations, Reinsurance, various types of options, and more. These are at times necessary financial instruments, but they are rarely used by anyone outside of financial institutions, investment bankers, and others who are big enough to take advantage of the manipulation of interest rates by central banking institutions, like the U.S. Federal Reserve, who offer "overnight loans" and other arrangements to maintain "liquidity" in financial markets. These various instruments, which are called "fiduciary instruments," are the principal means whereby circulation credit is manipulated.
Now; when you or I or any other producer takes out a loan to buy something, unless we're buying a fiduciary instrument (and we rarely do that), we are using commodity credit to increase demand. And the increase in demand we create originates in our own production. And whoever sells what we buy with the loan usually makes a profit and, as a profitable enterprise, they attract investment capital. That is the way capital investment flows in its most healthy fashion, it gravitates to those businesses who do the most efficient job of satisfying real demand. And no one knows which enterprises do this until consumers like you and me tell everyone by purchasing whatever it is we do with either our income or our credit, and in the case of the commodity credit we use, it's the same thing because commodity credit originates with our income and our income is determined by our production.
But the manipulation of circulation credit is entirely another matter. Investment bankers take overnight loans from the Fed (central bank) and buy derivatives or some other fiduciary instrument so that they can trade it, i.e. "exchange it," later at a profit. And they sometimes make very good profits indeed. And guess what? Those profits become part of GDP, even though the only "demand" that was satisfied was the "demand for fiduciary instruments." They contribute a significant amount to GDP in fact, and their trading is boosted by the expansion of circulation credit. And one more thing here, these enterprises post their profits and as a consequence they begin to attract investment capital, much of which gravitates to them, instead of to the enterprises you and I were supporting whenever we purchased whatever it was we bought when we took out a loan. Two conclusions follow: 1) The expansion of circulation credit by the government raises GDP beyond the rate of growth which reflects consumer demand, since circulation credit is not manipulated by consumers to any significant degree; and 2) Those enterprises who manipulate circulation credit through their handling of fiduciary instruments attract a significant amount of investment capital, because their profits are huge.
Finally--had enough yet? LOL!--we come back to the government continuing to pay itself after all of the above have occurred using GDP figures that have been inflated by the manipulation of circulation credit on exchange markets by those who trade in the fiduciary instruments. When the government makes its next decision to pay itself, well, it uses an inflated figure of GDP. In other words, its statistics are flawed, therefore it cannot calculate what it should take without doing damage.
And eventually the economy will "contract" in order to re-establish a more efficient flow of investment capital to enterprises who do a much more efficient job of satisfying real consumer demand, moving it away from those who manipulate circulation credit to their advantage through the exchange of fiduciary instruments. That is why we have recessions, they are a natural mechanism for redirecting investment to healthy businesses. And when a recession comes, what does the government do to pay itself under your model? Oops!
It's a far better idea to collect taxes directly to protect the value of money and to direct investment flows to enterprises who do the most to satisfy consumer demand.
StJacques
Final question.
But before a final question, thank you, thank you, thank you. Fabulous reply! I will print it for future reference.
The reason I can't help myself asking this final question, by the way, is that I would definitely prefer starting a business in a nation where I would not have to deal at all with taxes, and I can't imagine others at least not identifying. I also see so many advantages to eliminating taxes that I find it difficult to imagine that printing money instead is *that* much worse.
Perhaps you are not aware, but the idea of replacing taxation with inflated money is part of a bigger proposal that includes forcing the government to transfer *all* its income into a rolling-average fund (as was FIEM), then *exclusively* spending from that buffering fund in the following order:
1) anti-poverty cash distribution (e.g., 2USD/day to each citizen)
2) GDP% budget (e.g., a very strict yet-to-determine percentage of GDP for national maintenance and development)
3) citizen cash distribution (i.e., *all* remaining income, as allowed by the buffer fund, distributed evenly to all citizens in addition to the 2USD/day).
The only government income would be from:
A) frequently renegociated concession rates to natural and/or limited national resources (e.g., drilling, mining, land, geostationary orbits, electromagnetic frequencies, etc.), and
B) the printing of money which we have been discussing but would *only* be allowed when used for complying with points 1 and 2.
So my final question is:
given the government and market savings and advantages (which are huge) of not having any taxation system,
given the above limitations on income and spending (i.e., no fiduciary instruments unless the nation has been in a long enough slump that the buffering fund cannot provide for points 1 and 2, and *no* overspending above the GDP-determined percentage),
and given the attractiveness of a duty-free, tax-free, unrestricted currency, competitive, *consumer-based* market, with zero poverty,
would you maintain that the unpredictability brought about by the printing of small daily amounts in a nation run as per above is still determinant in deciding whether it would be better to rarely print, versus always taxing?
Once again, thanks for your patience and knoweldge sharing. Very appreciated.
--
Reply to Final Question
Torres,
I have seen your reply and, while I know I will argue against inflating the currency under any circumstances, I do see that you are attempting to deal with a serious matter for a developing society. Inflation of any kind is a very bad idea for developing societies, but I will skip that subject for the moment.
But I am willing to engage you in a more pointed exchange via e-mail if you would like. I have studied international development at some length and I understand that the need for innovative solutions is of paramount importance. You are obviously trying to address both the administrative constraints upon collecting taxes from individuals as well as the likely political repercussions that can undercut the programs tax collections from individuals can create. I see the need as well.
If you wish, you may contact me at stjacquesonline@gmail.com and we can go over the matter more carefully. My real name is Jacob Sulzbach.
StJacques
Thanks.
Will shoot you an email tonight. I look forward to your continued input in helping to produce an out-of-the-box, but sound proposal.
Thanks, again, for the time you've already dedicated.
--
BTW, Quico
Thanks for having allowed the off-topic use of the comment section. That's also very appreciated.
--