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Comments

Hemlock

Lurking a little bit, but still enjoying the discussion on this site.
FYI - Ray Kurzweil has a short article supporting UBI on his Accerating Intelligence blog @ KrzweilAI.net
-Hemlock

fatcat

Hi KG,
It is a good start. However, while watching the TV show I realised how many concepts you have to convey on that short time frame. The notion of an accelerating economy. Then you have to show why the money supply has to grow with the economy, then the fact that money supply has to grow exponentially following or even frontrunning the rate of the economic growth. And then the fact that we can actually tap into that growing supply. I might be missing a couple of concepts here

fatcat

And just to counter your theory the FED has raised to r today...

Kartik Gada

fatcat,

It is not a counter, the Fed is pushing us to the brink of crisis. They are raising rates when they should have stayed at 0% and kept QE permanent.

Raising rates negates the QE by other countries, putting the world further behind than they need to be. Hence the likelihood of a crisis soon.

computer_guy524

What are your thoughts on Bitcoin? Will it become more popular as a result of rising rates for USD?

Kartik Gada

cg524,

That probably won't be a factor for Bitcoin... Overall, a cryptocurrency has to have a reason for being, and not being backed by a central bank and military prevents wide adoption..

fatcat

Hi Kartik,
i forgot to put the sarcasm tags. I am pretty sure that if Hillary had won the FED would be much more careful on raising the interest rates.

On the other hand it could turn out that ATOM will find another source of liquidity either by accelerating the speed of money turnover or by by some derivative schemes that can monetize the sequestered wealth.

Kartik Gada

fatcat,

On the other hand it could turn out that ATOM will find another source of liquidity either by accelerating the speed of money turnover or by by some derivative schemes that can monetize the sequestered wealth.

Yes, that is certainly true; I just concluded teaching a class at Stanford about exactly that. If anything, there is some very limited evidence of the ATOM trying to force out a few drops from even more exotic sources... But there is no way that derivatives can generate the $200B/month and rising requirement.

Thanks for mentioning that as an alternative source. Very few could come up with that idea given how many different subjects one would have to know about.

But under the current program, the US Fed is negating a portion of the $200B/month that the RoW is doing, even as the $200B/month level continues to fall below the trendline of required easing.... US Nominal GDP remains barely above 3% growth (should be 6-7%, which the US has not seen since the late 1990s)...

fatcat

I have just stumbled upon an article that illustrates how the mainstream economists can't understand why the inflation is so low. Ironically one of the proposed deflating factors is the drop in cell phone prices and plans.
http://www.politico.com/agenda/story/2017/06/13/mystery-economy-inflation-federal-reserve-000458
It is almost verbatim what you have predicted a couple of years ago. And yet the interest rates were raised late week...

fatcat

And that's truly remarkable. To not only capture the general trend but even to hit some details

Kartik Gada

fatcat,

Thanks for that. Note that cellphone monthly service fees, unlike hardware, seemed quite resistant to ATOM price declines (they replaced landlines, after all), but now even that is succumbing.

Remember that they are increasing interest rates *and* unwinding the existing QE. This is going to end badly unless the RoW ramps up to compensate...

Kartik Gada

fatcat (and others),

The author of that article, Danny Vinik, can be reached here :
dvinik@politico.com

I am writing to him, but if some of you can too, that would be great. Then we have a greater chance for more exposure..

It is time for some activism.

Andrew

This news item on CNBC (posted today) is very relevant:

Technology is the hidden driver of low inflation: BlackRock’s Rieder
http://www.cnbc.com/2017/06/28/technology-is-the-hidden-driver-of-low-inflation-blackrocks-rieder.html

Kartik Gada

Andrew,

Thanks for that.

I will try to reach Mr. Rieder. If you can put in a few minutes too in order to send him the ATOM, then we have a better chance of reaching him.

Jay

Kartik,

I understand in general the reasoning for your policy proposal as outlined in the ATOM.

I certainly understand why the Fed keeps missing its target for inflation and, assuming that's a problem, how the problem will be exacerbated as the effect of technology on prices grows exponentially. I'm still wrestling, though, with the assumption that missing a target (on the low side) for inflation is a problem. The assumption, I know, is based on a general consensus that the impact on the economy of a decreasing price level is worse than the impact of an increasing one.

Is that necessarily true under all conditions in both the short and long term, especially given the dramatic impact changing technology will have on prices for certain product and services?

The policy proposal in the ATOM is based on the assumption for moderate price level inflation indefinitely, right? Given that, shouldn't the ATOM explore in more depth the tradeoffs between inflation versus deflation? You touched upon them, but only briefly it seems to me (mainly the real concern in the short run due to the current debt levels). If you believe I'm wrong in that, could you point me to the appropriate reading material?

Thanks.

Kartik Gada

Jay,

Remember that if a person has debt, deflation is catastrophic for them. We have spent a century adding layer upon layer of debt in this society.

In theory, a deflationary system can work if we never had a debt-based model before that. But the existence of so much debt means deflation is untenable.

Beyond that, the entire stock market and entrepreneurial system we have (companies selling at a multiple of earnings) is effectively a leveraging of NGDP growth rates (of which inflation is a large component).

Jay

Kartik,

I understand your debt argument. It's a good one. Your entire discussion and analysis (in both your blog over the years and in the ATOM) regarding the exponential change in technology is excellent. Your policy proposal in the ATOM may well be the correct one.

However, risk/cost exist with your proposal, with the status quo and, as you point out, with a deflationary scenario. My only point is that those risk/cost should be identified and compared against one another to assess properly the trade-offs of one scenario versus the other.

An example of the risk/cost of general price level inflation is in the pricing mechanism. Product and service pricing is an important signaling mechanism within a free market economy. General price level inflation distorts that mechanism, sending wrong or at least misleading signals to investors, buyers, and sellers.

As technology is driving down prices of some product and services, the Federal Reserve, in trying to reach its general price level inflation target, is driving up prices in other sectors.

I thought about this while reading Marc Andreessen's discussion (see link below) about falling and rising prices of different sectors (technology driven versus nontechnology driven) in his 2016 interview with Vox. Marc doesn't address the Federal Reserve impact. Should he? I don't know. I don't know if the size of that impact is big or not. But Marc, or anyone, in not addressing it may be reaching wrong conclusions (or at least not fully adequate ones).

Under your ATOM policy proposal, the distortions from general price level inflation will grow exponentially as technology's impact grows exponentially, right? How large will the distortions be? Are they sustainable?

https://www.vox.com/new-money/2016/10/5/13081058/marc-andreessen-ai-future

Sunny

Hey Kartik
How are you.
Good Appearance's man. I would recommend a blue suit and a white shirt for your next one, would make you look more distinguished and pragmatic.

Question, do you think this scenario (please see link below) is what it will take for your DUES solution to finally come into play and if so do you really think this is what it will come down to. I think the author is talking about scenarios similar to the ones listed in the ATOM stages ?.
Also, Considering it is mid summer and your scenario's from the ATOM are yet to play out, are you changing your timeline ?.

http://www.zerohedge.com/news/2017-07-11/mark-yusko-were-path-another-great-depression

Kartik Gada

Sunny,

I believe my scenario is still in play, because I said it would *start* in 2017, while the eventual bottom is 12-18 months later. We will surely see a start in 2017..

DUES may take a while to come into play, because Central Banks are doing all the wrong things, like raising interest rates.

Kartik Gada

Jay,

Thanks.

No, under the ATOM-DUES, the distortions will be less, not more. This is because the only sectors with inflation are those with excessive government involvement, and obstruction of market forces. ATOM-DUES increases these market forces. The ATOM itself increases the pressure on anything that has high inflation at a given time.

See :
Oil prices and fracking
Taxi Medallion prices and Uber
etc..

Stephen Murray

Idea for AOTM , disruption of Hollywood

http://www.vanityfair.com/news/2017/01/why-hollywood-as-we-know-it-is-already-over

ATOM growth has given the means for smaller companies to produce quality that before was only available to Hollywood.

Kartik Gada

Stephen,

Ah, yes. I have long wanted this disruption to happen. But I wonder if it is underway given that Hollywood was able to block Star Trek Axanar despite being something better than what Hollywood produces at 100x the cost.

But I have long been troubled by how much fame and wealth accrues to 'celebrities', when that profession appears to be far less meritocratic than most others....hence making it ripe for eventual ATOM disruption of $20M acting gigs.

Jay

I agree with your assessment. With more price level inflation, the incentive for competition and technology driven price reductions will be greater. But that only confirms my point (unless I'm missing something, which I readily admit is possible). More ATOM driven price reductions will, in turn, require more inflation (and more corresponding distortions and other risk/costs) to keep the overall price level constant or growing at two or three percent. And that's why the second half of my question: Is ATOM-DUES sustainable?

Granted, the cost of transitioning to a deflationary scenario given the past 100 years could be significant, maybe even as you say, catastrophic but possibly inevitable. Have you thought about the possibility that ATOM is set to disrupt the debt-based model of the past 100 years, regardless of government's attempt to stop it?

Kartik Gada

Jay,

More ATOM driven price reductions will, in turn, require more inflation (and more corresponding distortions and other risk/costs) to keep the overall price level constant or growing at two or three percent.

Yes.

And that's why the second half of my question: Is ATOM-DUES sustainable?

Not just sustainable, but essential. An ever-rising ATOM-DUES is the only way to generate the required inflation to offset the exponentially rising deflation.

Have you thought about the possibility that ATOM is set to disrupt the debt-based model of the past 100 years, regardless of government's attempt to stop it?

That sort of transition would result in the deaths of millions. ATOM-DUES is the only way to ease into something more benign. If tech is set to disrupt the debt-based model altogether, then the next logical question is whether humans are even to continue at all..

Oh, believe me, I can make the case that humans are a few decades away from obsolescence and that the replacement of humans with AI is just the latest step in the grand scheme of things. But that is a different subject.

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