How To Calculate The Amount Of Inflation-Free, Debt-Free Money

There are two tools for doing this, the forward calculation and the backward calculation.

Backward Calculation

The change in GDP to dollar quantity ratio is reflected by the inflation rate. Therefore if you want to know how much the GDP has grown, just look at how much prices have changed. This cannot be fudged because anyone can go out and see out much things cost.

If prices fell 10%, and the number of dollars is the same, then the economy must have become 10% more efficient, or 10% more valuable. The GDP grew 10%.

Assume there are a million dollars in the economy and you’re calculating the inflation rate by the retail price of apples, that is your CPI basket of goods consists of a single apple. Assume you want price stability of apples to be $1/apple.

Suppose you build a road which increases the efficiency of the economy and lowers the price of apples to $.90/apple or a 10% reduction. You know that there are a million dollars in the economy which means you can now print up 10% times one million dollars and spend those dollars into the economy to return the price of apples to $1.

So you print up $100k to maintain the roads. You can continually print up money and spend it into the economy as long as the price of apples is below $1/apple. That is, it makes sense to spend money maintaining economic efficiencies.

Forward Calculation

The backward calculation is a safe bet, it shows you how much you can spend into the economy and the worst you’ll do is to simply return the price of apples to at most $1/apple.

However, that assumes that the $100k you spent did nothing to improve the economy, that is, $1 spent in resulted in $0 of increase of value in the economy.

Businesses never operate like that, when they spend $1, they need a return on investment. For instance they spend $1 and get $1.10 back.

Suppose building a bridge across a certain river will greatly reduce shipping costs for apples and that spending $200k building it, will reduce the price of apples by 30%. If you have a million apple economy that’s $300k savings a year in shipping costs, so it makes sense to build that bridge, even though the backward calculation doesn’t say you have money to build it.

You build the road, possibly experience temporary inflation, but then the price of apples will fall back under $1.

Because the forward calculation may result in temporary inflation, there would need to be political checks to keep it from becoming a chronic issue. For instance, if the price of apples is over $1 for three years in a row then the current Congress is not eligible for re-election.

Negative Taxes

Keep in mind that if you spend the money you created in the backwards calculation correctly and get a greater than 100% return on investment, then you may never need to use the forward calculation. That is, if the backwards calculation tells you to spend $100k, you then spend it and create $110k in value in the economy, then you can do that year after year, forever and never have to tax.

You’ll be able to have negative taxes and pay the citizens with the money left over. This will create an incentive for people to do things that make the economy more efficient even though they aren’t getting paid directly for it. It would be a type of economy where people could go into private business for themselves, or they could charge nothing for their services and just collect the negative tax and live on that.

I am not sure how a non-fractional reserve system would work? How are the banks going to make a profit? since they don’t produce anything for GDP technically. If they are private wouldn’t they still be siphoning off money out of the system? The way I see it banking should be a non profit activity of the state. Any interest would go to off set taxes. Or better yet have a Gov Bank that handles non commercial laons and small business and the private handle the large commercial like the Glass/Stegale Act

You just tax banks on profits they made on fractional reserve loans. The banks can siphon all they like, but then the govt just siphons it back into the public fund, so the banks do not have more economic power than the govt.

Excise Tax wouldn’t that cause inflation? I mean the government always wants more money so they tax the businesses then the business raises the price on goods. Plus some companies would lobby to be exempt.

I’m kind of ambivalent about excise taxes. If the govt does things correctly it won’t need excise taxes. They are ok as a last resort for things like cigarettes and alcohol, or things which are possibly more harmful than good.

I like the idea of taxing imports to be the same price as local items! People say this will start a trade war but that is only a worry for globalists. But oil is the problem again. If we depend on imported oil other countries who don’t like our tariffs will pressure the oil countries to raise their price on oil for USA…. If we were not imported oil dependent, it would work perfectly . I think. But it is worth a try! It couldn’t be worse than it already is!

There are plenty of alternatives to oil. It’s just a matter of price. People would rather bomb and murder in order to steal oil from other countries rather than developing alternatives. We’re spending a billion a day on wars for oil, that same money could go to subsidizing ethanol or any number of alternatives. It’s just that Americans like to feel important with their aircraft carriers and nuclear submarines that we don’t do that.

Forcing the US off oil completely would be one of the best things for it, right up there with returning to a debt-free currency and eliminating direct domestic tax.