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Geoman

25% of college students will not be returning to school this semester. They will seek jobs, or take a break, whatever. Harvard, Yale, etc. will be fine - they have large endowments and can dip into their waiting lists. UCLA, Berkeley are state sponsored and will be struggle, but survive. Small liberal arts colleges will face widespread ruination.

For my three kids:

One is at a small expensive liberal arts college that is unusual because it has a massive endowment. They are charging standard prices and will survive. They added $3k to her scholarship (already $40k a year) to get her to return. That puts her all in cost at maybe $11k a year.

One is at a state school charging exactly the same despite 40% of classes being on-line. Lots of complaints from parents, but it was never a super expensive school (Maybe $14k a year all in) so I'm not as up in arms as some people.

The other is charging the same, but offered a massive increase in scholarship support. Seems like, with 25% fewer students, they can offer much more scholarship money. Since she got straight As lasts semester, with her new scholarship, her school year is likely to be <$5,000 all in. Crazy cheap. Hell, they even gave her an $850 allowance for books. And most of her courses will be on-line.

Interesting times. You could say that 2 of the three schools is participating in massive discounting via scholarships.


Kartik Gada

Geoman,

Thanks for the real-world info.

I was speaking to a well-known retired CEO who is a trustee of a university. He said that until now, they had a mandate of saying their costs rose at a rate 2% higher than inflation, each year. He told them that any company that operated under that mandate would go under. They refused to change, except that now, for the first time, they are being forced to back away from that stance.

As adaptations with online learning happen, along with tighter control on Chinese students coming here, the entire sector has to shrink, with Tier 3 institutions bearing the brunt.

Geoman

College is all about the "college experience."

This year, what is actually left of that experience? If classes are on-line, and there are no dorms, no sports, no recreational activities, what then? What is the college experience anyone is going to miss out on? Getting COVID19?

And once these kids are gone, that 25% that leaves this semester, will they ever come back? Statistics say no, only a small % will ever return to traditional college. once you quit you rarely go back.

Kartik Gada

The 'college experience' has been a myth rather than a reality, for a long time. Past nostalgia is the only thing keeping it going.

The institutions are now entirely dominated by radicals who are completely disconnected from mainstream American life.
The horror stories are rife, and entire (kangaroo) court systems now exist, for the purpose of instituting their own 'laws' independent of US laws in the areas around them.

Economics Professor barred from teaching class critical of Marxism :
https://www.thecollegefix.com/economics-professor-barred-from-teaching-class-critical-of-marxism-to-student-body/

The drift away of the college experience from career preparation is very high. The institutions may never recover.

Kartik Gada

The GA Tech MSCS has crossed 10,000 students :

https://iblnews.org/georgia-techs-omscs-program-surpasses-a-milestone-10000-students-enrolled/

Recall that this was an early ATOM AotM in Feb 2017 :
https://www.singularity2050.com/2017/02/atom-award-of-the-month-february-2017.html

The question becomes, why not to a BS degree as well, and combine the two into a BS/MS that trims the fat and is compressed down to 4 years and just ~$25,000 in total cost ($6250/yr)?

Jay

Kartik,

Good analysis.

Do you think the rising cost of education (and resulting massive resource misallocation) has been a major factor in offsetting the decrease in technology-driven costs, keeping overall inflation for the US in the 1% to 2% range?

And if you're right about education now heading toward a deflationary mode, aren't we about to see misallocation and price increases in another industry given the Federal Reserve's 2% overall inflation objective?

Care to speculate which one that might be?

Drew

It's interesting to see the divergence between k-12 and college - I think it shows how K-12 is daycare as much or more than education. Parents have many more and less expensive ways for 17 yearolds and above to take care of themselves.
I think that eventually there will be more specialized focus on the college experience as it becomes less of a career focused step - how do parents want their children to transition to living outside the home, but focusing on this makes it harder to justify ever increasing costs.
On Jay's question, this may reflect my stage of life - but there is more that enough entertainment out there for me and I could keep busy just dipping into the backlog rather than anything new being produced. I expect that entertainment has peaked, especially as AI apparently can already do mediocre writing and it won't be long before it can do mediocre animation/acting/music.
Medicine is the big one that we don't know when it will deflate.

Kartik Gada

Jay,

Pls refer to the ATOM publication. There is always net technological deflation, hence the need for ever-rising QE.

Kartik Gada

Drew,

Yes. Remember that the Prussian model of education is from 1870.

I do think families can form clusters where one parent just keeps an eye on 10 kids who are all learning online. If the parents take turns and 'timebank' (thereby removing the ridiculous layer of income tax, where the payer has to pay $2 for the recipient to receive $1), it can work, and as a 12-months-a-year model, is better than schools. As with everything, upper-middle-class communities will pull away from lower class due to the discipline needed for this model.

Plus, the videoconferencing revolution might enable families to live where a sufficiently large home can be financed on the husband's income, and the wife can spend more years at home, if so chosen. Silicon Valley engineers earn $300K these days. That is more than enough for a home anywhere in the other 95% of the United States, and is fat city relative to housing costs even in Dallas, Cleveland, Pittsburgh, most of Florida, etc.

Medicine is the one sector where there may never be net sectoral deflation, since while individual procedures can deflate and commoditize, we have a practice of spending half of a person's lifetime healthcare money to extend their life by an extra three months. As more advanced treatments emerge, all that advancement goes into another 3 months of life. Hence the deflation in basic services (MRIs, blood tests, genomics, etc.) is to no avail for the entire sector in combination.

There should be a market of choice, where the insurance company says :

a) We can cover the costs to keep you alive for 3 months, or
b) Choose to die now, and your family gets $300K

The insurance company/medicare would come out ahead with option b), but as it is a choice by the patient, it is not a 'death panel'.

Geoman

That is an interesting concept.

Right now, at the end of life, with insurance, there is every reason for the family to demand you do everything possible to extend life by one more week, hour, and minute. It is "worth it" for the family because their cost is zero. But if insurance companies started saying, well, the cost with this diagnosis to extend 1 week is $500k, we'll happily give you $250k to give up active care one week sooner, well, not sure how that plays out. "By every means possible" means something different when your own money is potentially on-line. heck, leave it to the patient to decide.

My own mother, who is 85, would certainly say "Pft! - take the money stupid." So would my father, who has passed. Both very practical people.

So would I for that matter. If the insurance companies way paying the bill, heck yeah I'd want to live an extra week. If I knew I was going to die anyway, and my family would receive a substantial financial windfall if I just it let go, I agree in a heartbeat.

What a weird way to build wealth in families.

Kartik Gada

Geoman,

What a weird way to build wealth in families.

But it is so obvious that no morons in government/policy think of it. It is a CHOICE by the INDIVIDUAL PATIENT. This is why they would oppose it.

But nonetheless, it would save trillions in healthcare costs over time, and introduce a lot of new deflation. The assumption is that the payout is 50% of the estimated insurance cost, which gives the insurance company an incentive to offer it.

The euthanasia should also be done professionally and painlessly too. That is a hell of a lot better than a few more weeks of suffering as a Stage 4 cancer patient.

Jay

Kartik

I read the ATOM and liked it. I understand the benefits of technological changes. You did a great job explaining how disruptive they can be. Your blog does a great job too.

Your proposal for dealing with the monetary aspects of the changes is intriguing. My understanding is that your ATOM proposal is designed to keep general price level inflation relatively flat or slightly positive, but much more effectively and efficiently than current Fed practices. Definitely some good rationale in that.

But reading the ATOM was what generated my question. According to the ATOM, we can expect to see a growing percentage of technological deflation within the economy. To me, that means we will continue to see a growing number of industries with specific price level decreases.

In order for the general price level to remain constant or slightly positive (i.e, general price level inflation), we will also continue to see offsetting specific price level increases in other industries. If so, that could mean negative consequences, just like you mentioned with the misallocation of resources for education over the years.

I was wondering if you had any ideas as to where those specific price level increases might occur.

Kartik Gada

Jay,

Your proposal for dealing with the monetary aspects of the changes is intriguing. My understanding is that your ATOM proposal is designed to keep general price level inflation relatively flat or slightly positive, but much more effectively and efficiently than current Fed practices.

Yes, that is correct.

According to the ATOM, we can expect to see a growing percentage of technological deflation within the economy. To me, that means we will continue to see a growing number of industries with specific price level decreases.

Yes, that is correct. The deflationary stream becomes larger and appears in more and more places over time, which is why the level of monetary creation also has to rise exponentially.

If so, that could mean negative consequences, just like you mentioned with the misallocation of resources for education over the years.

Yes. But a sector with much higher inflation than the rest of the economy also attracts more disruptive pressure from the ATOM. Forces shielding the status quo can hold off disruption for years or even decades, but it gets harder and harder with time as pressure from the ATOM rises. Government itself is the biggest entity clashing with the ATOM at the moment, unsurprisingly.

I was wondering if you had any ideas as to where those specific price level increases might occur.

It is harder to predict where further price increases may spiral. It is easier to predict which sectors are getting hammered the most by the ATOM, and may see a toppling and resultant deflation.

But in general, the more ta sector is shielded by the government, the more likely that particular sector may still have inflation. This shielding takes the form of regulation, obstruction of technology, obstruction of construction of new buildings, subsidies for higher-ed to create more bureaucrat jobs, etc.


Fatcat

If some sectors have realtiveley high inflation or price increases it might be an due to Baumol's cost disease which causes relative price increase to sectors and professions that don't get technological improvements but require higher compensation to offset the opportunity cost of not working in other more efficient sectors.


Drew

Baumol's has definitely been driving a lot of that inflation, but I think it may be topping out from both a lack of resources and technology finally kicking in. I've been musing if BLM might be recast as "Baumol Lives Matter" as just like Occupy Wall Street, many of the participants may have been anticipating rewarding careers in the "caring" industries that are not occurring. Drew

Jack

Excellent article.

I was wondering what you guys think about the renewed interest in UAP or UFOs? Russian, Chinese?

Kartik Gada

The college death spiral :

https://www.powerlineblog.com/archives/2020/08/the-college-death-spiral-chapter-2.php

Geoman

UAP or UFOs? Russian, Chinese?

Nope. The UFOs are not Chinese or Russian (both are far behind us on aircraft tech, both mostly copying us).

If they are aliens they are extra solar. Their behavior make no logical sense - if you could build vessels that travel between the stars, you could build a secret base on the moon to observe the earth, and send micro probes, basically tiny, undetectable drones, to collect all your on site data. No one would ever know you were there. Or you would simply announce yourself and make contact. The half in/half out model of buzzing aircraft, but not announcing yourself, makes no sense at all.

Personally I think it is just a form of fata morgana. Temperature differentials creating visual and radar reflections. In many cases, what is being reflected is the aircraft itself. Navy aircraft are chasing their own shadows! It also explains how such an craft can seemingly violate the laws of physics. a reflection can move at the speed of light, suddenly change directions, etc. You can certainly photograph it, and distortions will make it look vaguely like an aircraft. Also the temp differential from the exhaust of the airplane with the surrounding air might be the source of the reflections.

The more we fly around, the more UFOs we see.

It's the simplest answer, and accounts for almost all the data.

Kartik Gada

Geoman,

Thinking more about your first comment up top, I wonder if there is more data about how universities are dipping into their endowments to create price discounts, while 'keeping up appearances' by keeping the list price of tuition the same.

If the true cost to students has fallen 20% or more, that is something. If they are discounting the top students more, that is something too. Another aspect of the entire 'emperor has no clothes' situation is that the best students actually need universities the least. If corporations just hired 18 year olds in the 99th percentile of SAT scores (and perhaps looked at their extracurriculars a bit), and then mentored them, then the employer is hardly taking any risk vs. a 22 y/o with a college degree.

Jack

Geoman: Does it account for them getting a lock on it with their weapons systems? https://www.youtube.com/watch?v=PkPn-YMp9vI
And why does the military not just say it is probably a reflection?
Maybe it is something very classified (US tech)

Jay

Kartick,

Yes, I agree. Government services and regulated industries are the places to watch for offsetting specific price level increases.

Here's something that's counterintuitive maybe, but important to keep in mind:

1. The ATOM will cause a growing percentage of technological deflation (large specific price level decreases) within the economy over time.

2. The ATOM deflation impact coupled with the objective of 1% or 2% general price level inflation, will also cause a growing percentage of inflation (large increases in specific price levels) within the economy over time.

3. As a result, government (and the inefficiencies and misallocation of resources associated with it) could very well, either directly or indirectly, become a larger percentage of the economy over time.

Kartik Gada

Jay,

1. The ATOM will cause a growing percentage of technological deflation (large specific price level decreases) within the economy over time.

Yes.

2. The ATOM deflation impact coupled with the objective of 1% or 2% general price level inflation, will also cause a growing percentage of inflation (large increases in specific price levels) within the economy over time.

No, this does not happen. As technology spreads to more sectors, there is more innate deflation in the economy. Hence, more QE is needed to offset the deflation.

3. As a result, government (and the inefficiencies and misallocation of resources associated with it) could very well, either directly or indirectly, become a larger percentage of the economy over time.

That has already been going on, but we might be closer to a peaking of that effect than we think. Government itself can be disrupted. Many government services can be automated with AI, and registered on a distributed ledger. Hence, the cost should be one or two orders of magnitude lower than the current price.

The US will never be the first to do this, but smaller countries that are under constant pressure to stay competitive will do this, which in turn exerts pressure on larger countries to modernize.

Jay

Kartik,

It seems to me that the simple math behind 2 makes it a correct statement. Are you saying that the 1% to 2% annual general price level inflation objective may not be met?

Stephen Murray

Kartik, great article as usual and great insight. How about your take on the next big ATOM disruption - healthcare? Stagnant now for decades, I'd imagine the ATOM has hungry eyes on it

Kartik Gada

Hello Stephen,

Thanks.

Healthcare is certainly the sector that is among the most overdue, and which the ATOM is exerting very high pressure on.

That does not mean the disruption is very soon, however. The longer it takes, the more sudden and startling the eventual correction, but the turning point may well be some ways away.

Many things will be enabled by faster computing, as well as more powerful cameras and sensors in smartphones, which can then download apps to perform basic diagnoses at home.

Kartik Gada

Jay,

They keep doing QE in order *to* keep CPI inflation in that range. Without world QE, it would swiftly fall below that range.

That is effectively the whole point. World QE will keep being done, just to keep inflation in that range. The amount of QE needed to offset deflation, and keep inflation in the 1-2% range, keeps rising exponentially.

I fail to see what your question is. If technological deflation is -2%, then to achieve +2% total, the level of QE done must be equal to +4%. -2+4 = +2.

fatcat

Kartik,
the COVID confinement has accelerated tele-medicine which was technically possible even 15 years ago, albeit a bit clumsy. Now the main obstacle is the legal framework and the lack of experience and established practices. For example, just a few months ago it would require showing up in person to get prescription renewal. Recently, I had a phone-appointment with my doctor. While a small change from technological POV, it was unheard of from legal/administrative POV last year.

Now about the cost structure of the health care. The fact is that there are many medical advances that are permitting us to live for much longer than a few decades ago. The longer we live , the more we get sick, since we just extending the old-sick phase. And the need even more healthcare for the elderly and sick, and the more care they have the longer they live and we close the vicious circle of spiraling costs. The model of commercial health "insurance" is broken in the sense that you can insure against random and rare events. However, as we age we require much more and more expensive maintenance that just cannot be paid using insurance paradigm. If there were treatment to dial back the morbidity and risk back to at least 40-50 something the ongoing costs could be maintained since the cured people could return to the workforce.

Fixing this root problem will require a series of breakthroughs. And once those breakthroughs are made the world will be a very different place.

For example, if we had a functioning nano-technology able to repair each tissue, if not single cell, then once the initial R&D are amortized the fixing any organ and tissue , except the brain, would be as costly as a LASIK procedure. Far from free, but perfectly doable. The brain neurons will require more effort and deeper knowledge since we cannot simply start replacing sections without modifying or even killing the original person. However, all the supporting brain tissues, except neurons, are conceptually doable with the magic nanotechnology. It might be wetware based, and not nano-mechanical, for example.

All this is at least 30 years away.

Geoman

Kartik,

The invoices I received this year from the universities are so convoluted and strange. Multiple "scholarships" we didn't apply for. Discounts, weird price increases. I have an MBA and I had trouble following what they are doing. So they are certainly not being clear or honest about it.

"I wonder if there is more data about how universities are dipping into their endowments to create price discounts, while 'keeping up appearances' by keeping the list price of tuition the same."

I don't think they dip in - many universities have more than sufficient funds in their endowment not to charge any tuition, or charge very low tuition. They charge more because they can get more, and because a high price conveys prestige. One of the many immoral aspects to university pricing - the most expensive colleges have the largest endowments, and therefore the least need to charge anything. I read an article a long time ago that 50 of the top universities could easily go tuition free, including all the Ivy league schools. By what sort of morality do they charge $60k a year then?

"If they are discounting the top students more, that is something too." All my kids would qualify as top students, so hard to tell.

Kartik Gada

Fatcat,

You are right. We talked about telemedicine two months ago :

https://www.singularity2050.com/2020/06/march-15-2020-the-netscape-moment-in-economics.html?cid=6a00d83452455969e20263e951bc3a200b#comment-6a00d83452455969e20263e951bc3a200b

Thanks for reminding me.

I bet half to two-thirds of all the cars in the typical hospital parking lot at any given time are for brief visits that could be handled through telemedicine, and thus internationalized, with the cost of the telemedicine consultation dropping to under $10 with a proper English-speaking doctor in a poor country. Insurance becomes moot for many basic GP visits.

All this is at least 30 years away.

Agreed. It was 30 years away 30 years ago as well, but now it really might be just 30 years away. Many aspects of this are dependent on a new breakthrough in Computing, since the distinct saturation of the existing paradigm is very obvious now.

A lot of the breakthroughs that were hyped up as 'imminent' 20 years ago, but have not happened, were just to excite grantmakers to extend grants. A mere visit to the archives of MIT Tech Review from 2001-08 reveals this pattern. 90% of the things that should have happened by now, particularly in medicine, have not happened yet.

Geoman

Hey Jack,

"Geoman: Does it account for them getting a lock on it with their weapons systems?"

Yes, it does. Weapons are radar based. Radar is simply electromagnetic radiation. You can have a visual reflection as well as a radar reflections. The old term for them was "angels" - localized changes to the refractive index of air. They have been known about since, well, radar was invented.

"And why does the military not just say it is probably a reflection?"
I think they have been saying that for many years. But nobody believes them. the military detects something on Radar. Send up a plane, which spots a visual reflection. They chase the reflection for a bit, but it zooms away at impossible speed and disappears. Just like a reflection would, as the angle between the plane, the sun, and the target changed.

It is hard for us to think of air, which is clear, as acting as a mirror. But we KNOW this can happen, in fact we can make it happen in a lab. Also, in the sky, it is very difficult to correctly gauge size and distance of things.

"Maybe it is something very classified (US tech)" highly unlikely.

The seemingly obvious conclusion to me is they are some type of natural phenomena. Likely a reflection of some sort. Anyway just speculating myself. It just seems like a much more likely explanation then any of the alternatives.

But there is a random thought, if it is a natural phenomena, then perhaps we could harness and control it for military purposes, creating confusing visual and radar reflections to baffle the enemy. heating and cooling parts of the air to create the correct conditions for a reflection. Keep the bad guys busy chasing ghosts.

Jay

Kartic,

"I fail to see what your question is. If technological deflation is -2%, then to achieve +2% total, the level of QE done must be equal to +4%. -2+4 = +2."

We're in sync. Point 1 and 2 of my comment taken together we're getting at the same netting as your example above. When I read your comment the first time I didn't understand what you meant, so that's why I asked the question. I just went back and read your comment the second time, I can see that we just had a miscommunication. I should have been more clear.

Kartik Gada

Jay,

No worries.

The point is, as the ATOM gets larger, it gets harder and harder for any sector to sustain truly high inflation for too long, as the disruptive pressure against them keeps rising exponentially, on top of there being too few remaining targets to convert from low-tech to high-tech.

But the endgame is not reached until Government itself faces real, persistent pressure.

Drew

Two thoughts and a question

I thought that even more amounts of resources would be poured into anti-aging as the boomers aged (and I was expecting to take advantage of as a generation Xer), but the institutions have been slow.

One of academia's problems has been "physics envy", that in order to get tenure you have to make discoveries, even when there isn't really that much to discover in say, Shakespeare, so future English professors keep going to more and more specialized studies or focus farther and farther from the classics. As Physics research has been spinning without new great discoveries for a while (where someone like Bezos decides he's not smart enough to make a difference in physics), I wonder if there is going to be a shift to more implementation/engineering. Discoveries are being made in biology, but the interest (at least mine) is in what can be done.

Tyler Cowen had an interview with Nicholas Bloom (I'm skipping the link, because they seem to send me into spam) in which Bloom said that the efficacy per researcher is declining by 5% per year. It is a contra-indicator to ATOM (like construction productivity), but it varies from field to field and much of it could be researchers focusing in areas in which the "easiest" research has been done, but the institutional structure to focus is still in place. Also, as they point out, increasing researchers is a straight forward option to make up this difference, so it is not an unbearable problem. What are your thoughts on this? Drew

Geoman

I like to think of the ATOM as a living creature, that needs to "feed". What it "eats" is inefficiency. It converts inefficiency to profits. If we think of the ATOM as a emergent super intelligence, it is searching for and calculating mechanisms for cost reduction. It is a narrow focus AI.

The problem with government, academia, and medicine is that it is poor food for the AI. The gains from improved efficiency are not distributed into the ATOM itself. It can't convert inefficiency into much profit, because these are institutions that do not have traditional forms of profit. Who makes money from more efficient government or universities?

I sincerely hope that several existing cities and states go bankrupt. First to serve as an example to others, but also to force the government to implement cost savings measures in order to climb back out of bankruptcy.

fatcat

And here is an ironic article showing how video streaming is eroding cable and tax revenue: https://arstechnica.com/tech-policy/2020/08/cities-sue-netflix-hulu-disney-claim-they-owe-cable-franchise-fees

Cities sue Netflix, Hulu, Disney+, claim they owe cable “franchise fees”
Cities demand 5% of revenue, claim online video uses "public rights of way."

Kartik Gada

fatcat,

Cities sue Netflix, Hulu, Disney+, claim they owe cable “franchise fees”
Cities demand 5% of revenue, claim online video uses "public rights of way."

Heh. There is no way cities can win that lawsuit. The service providers may just decline to serve those cities. Those cities are in Indiana too (and only one is big) so they really have no bargaining position.

The quarantine has accelerated remote work practices, and the speed at which Silicon Valley types are moving to the nearest part of Nevada (Incline Village and Reno) is substantial. The difference between the tax rates of CA and NV are by far the largest of any two neighboring states, and that too only because the lines are drawn such that Nevada is 200+ miles away from the major jobs concentrations in California.

Zoom, etc. has now broken the dam here, and clusters of executives are helping each other make the transition. Including State Tax, the cost of living quite literally falls by over 50% by operating out of Nevada and coming to Silicon Valley one week out of five, or one day per week, or whatever.

The same is true for many cities. If Zoom now enables one to live even just 70 miles from their job (3 days a week in person), all sorts of big, corrupt cities lose their tax base. As Geoman says, many cities and states need to go bankrupt.

Geoman

I haven't been into the office in six months. I suspect I'll never go back. I live in a small (300k), fairly well run city. My commute is just 20 minutes of pleasant driving. I often ride my bike to work. If they can't get me back, who can they get?

It makes the decision to allow repeated rioting and nights of unrest of cities like New York, Chicago, Minneapolis, Seattle, and Portland even more baffling. People are going to leave those cites by the tens of thousands. Perhaps hundreds of thousands. And they will be preferentially the highest segment of the tax payers. Without the night life, the restaurants, the museums, the shows, what possible reason is there for anyone to live there? Especially if the alternative is a estate in the Hamptons?

One of the huge problems is pensions - the taxpayers leave, but the pension obligations continue. To meet the pension obligations on a reduced tax base you must reduce services or increase taxes. People pay more and more to get less and less. It was what killed Detroit.

I suspect they'll soon have a new twist - pensions must be collected in person, and the recipient must live in the state and city the pension is from. They'll make the recipients prisoners.

Fatcat

Hehe. Hereby I predict, or rather foretell, that will will be witnessing soon(next couple of years) many news like this where the corrupt governments and monopolies will try to fight legally or by avoiding their market position the changing economic landscape.

Fatcat

Kartik,
Some of the major companies have declared that they will be paying less to people living in cheaper locations. On the other hand, if everything can be done remotely some middle level specialists will be in a big surprise when they get outsourced or at least nearshored. If one can successfully run a phone scam ring from Nigeria or Bangalore then so can be fine for the help desk and most of the office jobs. There will be some major turbulences from one side the costs of services will be calling sure to outsourcing, on the other there will be job losses and originally new ones created. In the long term will have global salaries becoming more or less equal. But in the short term there will be a lot of shocks. The OECED countries will see downward pressure on the salaries but will have much better social safety nets. The developing countries will have booms and busts which will be leaving the jobless in the cold.

Jay

Kartik,

"If technological deflation is -2%, then to achieve +2% total, the level of QE done must be equal to +4%. -2+4 = +2."

Based on your estimates of the ATOM's technological deflation in the coming years, what will the number represented by 4 in the example be in 5, 10 and 15 years?

Kartik Gada

Jay,

See here :
https://www.singularity2050.com/2019/08/timing-the-singularity-v-20.html

Fatcat

Karthik, in the light of the increased market cap and valuation of the technological companies (Apple hitting 2T$ and other major players not being cheap either) what percentage of the economy or GDP. would you attribute to ATOM growth rate?

Kartik Gada

Fatcat,

About 3% now. See the link in the comment right above yours.

4% is not far away (~5 years).

Kartik Gada

Another ATOM deflationary adaptation :

The lockdown has forced people to learn how to be their own barbers and hairstylists. This demand was met with supply, in the form of a flood of videos on YouTube for how to give yourself a haircut, or for how a man can trim a woman's hair and vice-versa. Links to good clippers on Amazon right below the video. As a result, millions of people have learned how to do it, how to navigate the learning curve with minimum damage, etc.

Many won't ever go back to their barber or hair stylist again at all.

Including the transportation to and from, this saves some money. It is very similar to how quite a bit of auto maintenance is now easy to DIY because of YouTube.

Eventually, more and more DIY will sprout up. DIY migration is very deflationary, and even if the end product is not high-tech, the enablement of it was.

Geoman

I am a strong advocate for DIY videos. Not to mention the fact that all the parts can be easily ordered for just about anything, on line, and arrive at your door within a few days. I bought a new ice maker for my refrigerator. Installed within a day, works perfectly. $70 saved me $800 for a new fridge.

Another benefit is what I like to call, "know when to fold them." My dryer went on the fritz. I went on line a correctly diagnosed the problem. While it was technically fixable, it would be a very difficult repair for me to do. And a repair person would cost more than the dryer was likely worth. Instead of wasting time and money with the repair person, I decided to move on and buy a new dryer. It cost $850, but I saved the $150 (minimum call out) for the repairman to tell me what to do.

I decided to add a new sink to the garage. I purchased all the parts myself (why pay the repair guy mark up?) determined exactly the right location and method to install the sink, then hired a professional and told him exactly what I wanted. He finished in half the normal time, saving me $300+. I learned all that from DIY videos.

These types of discounts pile up quickly, saving a savvy consumer thousands a year.

My solar power system covers most of my needs on sunny days, saving me around $5 a day. On cloudy rainy days this might be $1 a day. Overall I'll save approximately $1,000 a year. System costs mean my maximum payback is 13 years, but that assumes no increase in electrical costs. With inflation, I suspect my payback will be more like 7-10 years. Given the system life is 30 years, I expect 20 years of free electricity, halving my anticipated electrical costs.

Drew

Exxon Mobil was just replaced on the Dow by Salesforce.com. You can argue either its a reflection that people are our greatest resource (at least selling to them) or that its a clear sign of a tech bubble. Probably both ;) Drew

Kartik Gada

Drew,

It could well be a sign of either or both of those things.

But it is, in addition, also a sign of ATOM progression. Tech companies are a larger percentage of the economy as per the structural trendline (even if things ebb and flow above and below the trendline). Oil, while still important, is much less so, also due to the ATOM.

Remember that $6T was printed in response to Covid-19, and all such printing finds its way into tech companies.

Kartik Gada

Geoman,

The range of things that are now possible for DIY (or at least ONE person in the household learning how to do it) is ever-widening. I think the removal of the hassle of to-and-from transportation is significant too, as is waiting time.

Consider the savings of after-tax monies too. Saving $10 is like earning $18 (or $20+ in CA).

Note that when all your cars are eventually EVs, then even your auto fuel is from your solar panels. Remember, when the US was importing a lot of Middle Eastern oil, 15% of that oil was consumed just in the extraction, transportation, and refinement of that oil. A huge waste.

Geoman

2021 will be the year of the electric car - they year when there are more then 40 models to choose from, from multiple manufacturers, in multiple automotive segments. Sales in the united states will surge near 1 million units. This is in a 15 million car market, but post 2021, EVs will begin eating a greater market share each year, gaining several % per year. By 2025 they will dominate the market (> 50% of all sales).

50% of all the oil consumed goes to transportation. Something like 40% is gasoline. Gasoline will experience double digit % declines in sales, year over year, starting before 2025.

By 2030 our gasoline consumption could be cut in half, resulting in a 25% decline in our oil consumption. This is going to happen fast and be a huge shock to many people.

The market doesn't price things as they are today, they price things based on what they think is going to happen soon (within 5 years). The bombing in Saudi Arabia of the oil facilities didn't budge the price of oil, which was a huge psychological shock to the market. I believe I said at the time it was the beginning of the end. The second was Tesla increasing sales during the epidemic, while all other car companies saw decreased sales.

Who wants Exxonmobil stock?

I can't see anything stopping of changing this. It can go faster or slower, but in the end, it will still get above 50% of sales in a very short period of time, which will inevitably cut oil demand. if robo taxis become a thing, this happens much faster.

Kartik Gada

Geoman,

Certainly. Plus, remember that the US is the market where shifting to an EV is the *least* compelling (and thus where there is some illogical emotional resistance to it).

In many other countries, gasoline still costs $7/gallon, AND their oil is imported (this is true for the EU, China, Japan, India, South Korea, etc.).

EV sales worldwide are already well ahead of the US as a percentage of total car sales. The US is 3% but worldwide is closer to 5% already.

fatcat

it seems Goolg is reading your blog. They are introducing certification program to replace university degrees : https://www.nextbigfuture.com/2020/08/google-career-certificates.html

Geoman

Kartik - not to mention, most countries are much smaller than the U.S. Korea is 200 miles top to tip. An EV with a 400 mile range can drive the length and back, no problem. You can drive from anywhere, to anywhere, and back, and never stop at a charging station.

Most people don't drive as far as Americans. >400 mile range is somewhat pointless for a majority of the world. Currently every EV can make 200 miles, most over 300. 400 is well within our means. After that, range doesn't matter much except in the U.S.

Kartik Gada

Fatcat,

I hope so. I did give a Google Talk on 12/2/2016.

The thing is, Google has to start hiring some of the people who complete these certificates. That sets the market value in the workforce.

Fatcat

Geoman,
There are quite a few places where the range counts. Australia, Canada, Russia, Brazil, or even European Union where one can drive from Netherlands to Greece for vacation(in a pre- covid world, post covid we might be staying local for a while)

Kartik Gada

What is interesting to me is how the prices of slightly used ICE vehicles is going to plummet. There are still 220 million+ in use in the US alone. But what will be the price of a 2020-model ICE vehicle in 2025? This is an unavoidable event even of production of 2021 and 2022 ICE models are greatly reduced, since all 2020-and-earlier ICE cars are already out there.

Many used US cars will find a market in Latin America, but even there, there are not enough buyers to take them all.

It will sort of be like when an electronic product is in a massive glut. By 2025, a lot of 2020-model ICEs may be worth half of what their current owners expect, even if the cars are in tiptop mechanical shape.

This, of course, is another form of deflation, and one that will cause panic among people who see too much devaluation on something they made payments on (or still are). The government, unfortunately, will do a targeted bailout, when what is needed is something universal (such as ATOM-DUES), which is specifically meant to cushion the macro effect of this, without bailing out people who made poor decisions.

Geoman

Drive 'em till the wheels fall off and don't sweat resale value. That is the easiest answer. And if you must buy an ICE vehicle buy something highly reliable, and low price. Spend less to lose less. every functioning car has a residual value of around $2-5k.

I bought my kid a used Toyota corolla with 36k miles for $12,500. Paid in cash. That thing will last 200k miles (10 years) and still be worth $2,500 when she ditches it. By then, who cares? She'll have gotten more than enough use out of it.

I think the transition to EVs will happen fast, and ICE re-sale values will fall, but it won't be a wipe out. I'd predict luxury ICE models will lose value much faster than economy cars.

Weird thing about EVs, the price differential between a luxury edition and the regular is going to be small. Because part of the up brand charges is better mechanical components. Say, a six cylinder engine rather than a four. Doesn't matter much for EVs - it just doesn't translate the same way. A bigger battery? That impacts range. What luxury brand has ever advertised range? An extra electric motor makes it faster, but electric motors are already screaming fast. You just don't get the same performance bumps.

Look at the cybertruck. Base model with RWD, 250 mile range, and zero to 60 in 6.5 seconds is $40k. Next step up, for $10k more, has AWD, 300 mile range, and 0-60 in 4.5 seconds. That is not a lot of money for a huge jump in performance. You can even more to get even more, by why bother? Ina way, an EV is like having a phone with apps. more apps don't cost a lot more money.

If you have to have an ICE car, lease. Let the dealer take the depreciation hit. 3 year lease, then switch to an Ev when it makes sense.

I'll make another prediction - ICE vehicles will remain popular for some time in cold, northern, and rural areas. Advantages of EVs are not so pronounced there. They will also remain popular with people who don't have off street parking. Charging will remain a choke point for those people for the next 5-10 years.

Drew

I agree with Geoman's predictions.

I was also thinking about when they and other predictions will become conventional wisdom - for example I think it will be 2025 when the convential wisdom will be that electic vehicles are the future and energy descent is not happening.

My prediction is also 2025 for when the current university process is no longer the default assumption for a middle/upper class life.

I will predict 2030 for when automation (and with it the singularity and ATOM) are accepted because by then there should be both the autopilot vehicles and robots surpassing unskilled labor in cost and effectiveness, with many examples of automation improving or bettering skilled labor. I'm assuming that the vision/lidar/space awareness improvements for autopilots will also carry over into robots grasping items, etc.

I am sort of thinking 2027 as my alternative pick for that last one, because of the pace of change.

Drew

fatcat

There's more to a car than the engine. The ICEs are highly complex but mature technology. And probably the engine+transmission have production cost of a few thousand dollars. The rest is the body/electronics/R&D and various markups. A lot of thins in the car are "luxury" cash-cows. Heated seats (Tesla sells activation codes, so making those is a loss leader in the hopes to sell it to a sizable percentage or the user base).

The TCO has to contain suspension , breaks (regenerative breaking might help but might turn more expensive), replacing the motor windows and other moving, non-engine parts. (panoramic rooftops are very fragile, for example) . There are ACs, lights, moving seats, mirrors, and various overpriced electronics.

Having said all this, what is the cost differential to have an EV vs ICE-V ? Even if we eliminate completely the ongoing cost of gas and the (production) cost of the engine the cars will still be expensive. For a 35K sedan, the factory cost for a sedan is probably 5-7K.

On the other hand, Teslas are among the best selling cars in US, so with more affluent population the shift might happen for non-economic reasons too. Sometimes the specter of banning the ICEs might be enough to avoid investing in an expensive car which might become unusable in the big cities in 10 years, therefore unsellable.

Drew

On the downside KG, you may end up like Mendel - once people will credit you after a re-discovery. At least you will still be alive for the credit.
Drew

Kartik Gada

Geoman,

Oh, ICE's won't fully go away for a very, very long time.

But the downward revision of used ICE pricing could happen quickly. Currently, US consumers buy 18 million ICE cars a year, with 220 million+ in use. When only 9 million a year are demanded, but there are still 200 million+ in use, the glut is going to manifest.

Particularly, as you say, for lower mpg vehicles that are otherwise not luxury cars. Luxury cars are pretty resistant as gasoline is not as large a percentage of ownership costs, even if their mpg is low. I would say luxury cars face an electronics-depreciation problem more than an ICE vs. EV fuel cost problem. Mid-level SUVs, minivans, and family sedans will take the biggest hit.

It is true that anyone worried about pricing of used ICE vehicles but who still wants an ICE should either lease or buy cars 8+ years old. Then, by 2023-24, they can evaluate again.

Geoman

Drew - I agree with your predictions as well. And Kartik - various people will have various strategies. Me, I've always gravitated to the no frills cheap reliable car. With expensive cars you are paying for the name and exclusivity, which are ephemeral things that quickly lose cache. A cheap car is closer to the clearing price. It will never go to zero, so my potential loss is hedged.

Fat cat - the margin on most ICE cars is measured in the hundreds of dollars. Maybe $1,000. The exception being trucks, big SUVs, and luxury brands - they might bump to 15%. It's why american automotive companies focus there - it's the only place they can make any money.

Tesla margins are reportedly in the thousands per vehicle. The cheapest model 3 has a 25% margin. That is $8,000 bucks. They have an immense ability to discount.

And logically, EVs should be MUCH cheaper to build. fewer moving parts. Lordstown Ev trucks are promising to have just 4 moving parts. The wheels. Think about that. Less moving parts, less wear and tear. Higher tolerances.

Just as an aside, not recommending Lordstown at this time - hub motors have had a lot of problems over the years, and it remains to be seen if they can pull this off. But if they have - well it potentially changes the game, even for Tesla.

Kartik Gada

Geoman,

Tesla margins are reportedly in the thousands per vehicle. The cheapest model 3 has a 25% margin. That is $8,000 bucks. They have an immense ability to discount.

Indeed. Tesla's market cap is now $420B, while GM and Ford combined are just $70B.

Similarly, the CFO of GM (a 41 y/o Indian-American woman) just left to become the CFO of Stripe. Stripe is a company that vastly fewer Americans have ever heard of relative to GM. Yet, Stripe's market cap is almost the same as GM, and as a tech company, the CFO is probably being paid more in the new job vs. the old one.

But remember with EVs, the inflection point is when the government and commercial vehicles shift over. That makes the economies of scale happen. Recall the Dec 2018 ATOM AotM :

https://www.singularity2050.com/2018/12/atom-award-of-the-month-december-2018.html

The US has 800,000 police cars, 210,000 USPS vans, and a variety of other government vehicles. On top of that, private enterprises include 110,000 UPS vehicles, 60,000 FedEx vehicles, and perhaps over 300,000 pizza delivery vehicles. As these transition, observe how many gasoline stations shutter.

Geoman

UPS, Amazon, and Fed-ex are already in the process of switching over. This is in the next 2-3 years.

"The company plans to electrify 42 FedEx stations in California, making it one of the largest deployments of integrated charging infrastructure by a single commercial fleet to date. FedEx announced the addition of 1,000 Chanje V8100 electric delivery vehicles to it's fleet in November 2018."

"UPS announced today that they are investing in UK-based EV startup Arrival and ordering 10,000 electric delivery vans from them in order to electrify their fleet."

Both are estimating a >20% reduction in overall operating costs. Which...is huge.

Matthew G Menashe

As an employer the only reason I choose to look for college applicants is to identify those that are capable of showing up consistently and following directions for years on end and no other reason

Kartik Gada

Matthew,

Indeed. There are many other ways to assess a young person's ability to complete tasks. Building a website or YouTube channel about any subject partially related to their employment goals are in fact a far better measure of their abilities, and costs way less than college (it maybe even nets them a slight profit). Taking MOOCs associated with their field are another form of verifiable credential. A YouTube channel will also reveal their appearance, voice, and speaking style, which a resume cannot.

$200,000 of cost and four years of time for just this first-pass filtering function are way too much.

Kartik Gada

Pinterest pays $90M to terminate lease on unbuilt SF office complex :

https://www.sfchronicle.com/business/article/Pinterest-cancels-huge-SF-office-lease-in-unbuilt-15523170.php

$90M is not a small number for Pinterest, since their revenue is just $1B and they operate at -$100M/yr in losses.

This is evidence of a work-from-home revolution, and demolition of office space (which is simultaneous with the demolition of retail real estate as well).

Remember that land is being freed up for residential real estate, even as it is easier than ever to live far from work (and even in a lower-tax state). There are now at least 3 factors working against urban real estate prices. This will cause more ATOM deflation and thus more QE.

Geoman

Many cities have long assumed that they can get away with shoddy services, high taxes, crime, cronyism, poor schools, filth, etc. And they could and did, for decades. because...cities created the type of collaboration that sparks new invention and businesses. The government could get away with lousy service because there was no alternative. They were parasitic.

The government has long been immune to the ATOM. But perhaps the ATOM has found a way to break the government - communication allows people to ignore the cities. Their prime reason for being is evaporating. To retain people they are going to be forced to cut costs, innovate, and deliver better services. Those that don't will die. Look at New York and SF...no one wants to live there any more. The advantages are heavily outweighed by the disadvantages.

For a city to win it must be clean, safe, relatively inexpensive, and have relatively low taxes, and offer cultural experiences that can't be gotten elsewhere. Between terrible mismanagement, COVID19, and the communications revolution, none of these things are happening. look at the stock market - no one NEEDS to be in New York to trade any more.

I look at the cavalier attitude toward COVID19 closures and riots some cities have - they really feel no fear that people might get fed up and leave. Never to return. Their arrogance will be their undoing.

Geoman

For a city to survive, and thrive, going forward, it must offer a higher quality of life for the residents then the many alternatives. It can't just be about business anymore - business can be anywhere. It has to offer unique food and culture, be safe, be clean, have good educational opportunities, be a tourist mecca.

Riots and COVID19 are non-starters.

Look just at New York - they have no plan to reopen the schools. they don't even seem to have thought it through. Boarded up shop windows, trash in the streets? No worries! Riots? heck, we won't even arrest them. How about closing every single tourist site? No problem! they just think there is no way things could collapse, but there is a way.

They are in desperate, dire condition, yet seem to be blissfully unaware. They believe the sheep will return to be fleeced on their own recognizance.

It will be SO much harder to come back for New York this time. Because no one HAS to live there. Hence you'll have to fix things before the money floods in, not after.

Kartik Gada

Geoman,

The obliteration of their tax base will have huge effects.

The thing is, people are still thinking of WFH in terms of their existing homes. When one needs to be in the office just one day a week, many workers can live in entirely different (low-tax) states, let alone cities.

Silicon Valley and Los Angeles workers can live in Nevada.
Boston workers can live in New Hampshire to a much greater extent than now.
NYC workers can live in Scranton, PA

The ability to tax people because they are trapped in a certain city or even state is now much lower. Forward-thinking companies can even have a chartered bus for the Monday all-hands day, or whatever.

NYC also has 41 skyscrapers over 150m that are partially completed (7 of which are over 300m). I wonder if a number of pipeline projects get cancelled. They also completed at least 100 new skyscrapers in the last decade (lowering the average building age to just 37 years in NYC) :

http://www.skyscrapercenter.com/city/new-york-city

This could well be the long-awaited ATOM disruption of government. It had to start the smallest level (cities) before creeping up to states and eventual Federal government.

But even in other countries, since they can't tax citizens who reside outside, countries like the UK and France could see an exodus to nearby tax havens.

Geoman

It is fascinating to wonder how much government services actually cost versus what is charged. What is the premium for governmental exclusivity?

In New York private elementary school average is $12,776 per year. Public education is ...$28,808k per student. And naturally, the private school is better in every way - smaller class sizes, less violence, better teachers. Public schools manage to pay twice as much for a vastly inferior product.

Imagine being a teacher in a 100% safe school. Having your retirement belong to YOU, not in some promised pension. Having smaller classes. Being able to discipline students.

If the public schools simply all went private - vouchers, leased the buildings out to private schools, they could save half their budget each year. Given their total budget for schools is $34 billion, you could save easily $15 billion a year. Their entire city budget is $84 billion. Take that extra money and devote it to just three things - public safety, cleanliness, and transportation. the streets should be spotless, and the public completely safe from harm, and people could travel anywhere cheaply and safely.

And naturally I imagine the rest of that $84 billion budget has similar bloat. It could easily be a $50 billion budget with much higher levels of service for a much lower tax burden.

Then, cities like SF and New York could lean our their role as destinations, cultural centers, their natural beauty, their excitement, their possibilities. There would be no reason for anyone to relocate away from them. people would be begging to live there.

It is such a simple recipe for success.

But I suppose we'll have to endure the collapse of some cities so other might learn.

Kartik Gada

It is fascinating to wonder how much government services actually cost versus what is charged. What is the premium for governmental exclusivity?

In some cases, it is huge. Vehicle registration renewal costs $60-$300/yr, depending on the state. If the renewal were on a distributed ledger, it should be almost free of cost. Of course, the fees are for all the make-work jobs at the DMV. The same goes for other fees at other agencies.

Most government spending is a transfer scheme to politically favored groups. Public schools and the associated teacher's unions are very, very high on that list.

But all that cumulative inefficiency weighs down the total economy. Eventually, the ATOM has to clash with this, and we have just witnessed Round 1.

Stephen Murray

Several AToM concepts discussed here, such as deflation being exponential and money printing needing to be exponential printing to offset.

https://www.youtube.com/watch?v=YMx6SwRyWZ4

The ideas are leaking out....


Stephen Murray

So Jeff Booth has written a book that contains many atom concepts.

https://www.amazon.co.uk/Price-Tomorrow-Deflation-Abundant-Future/dp/1999257405

Its good, but doesnt tie in economics in the way the ATOM does, and was written 4 years after the ATOM. Kartik was well ahead of the pack as usual

Kartik Gada

Hello Stephen,

Yes, thanks.

I have not tried to contact him yet. It remains to be seen if he wants to collaborate or not.

But it is true that he has no real workable solution to the deflation issue, which to me at least, has at least two obvious solutions.

I actually wrote the ATOM later than I should have, since the 'Technosponge' article was all the way back on 7/1/2010 :

https://www.singularity2050.com/2010/07/the-technosponge.html

This is long before Central Bank monetary action was even a significant feature of the monetary system.

Drew

Technosponge may be the best way to get people in the door for the full ATOM program. I still find KG's explanation the best for why we didn't have massive inflation in 2008 or now. It's what I consider his most impressive prediction, after his oil price prediction. How best to share this is the question. Drew

Palamas

Gentlemen! Nice to see you all posting again, and with much more interesting and convincing ideas, this time. I just reviewed the last post I had (as I have not been here for quite a while) in the last blog entry, and was amused to see that Geoman thought I wasn't a natural born citizen (I am in the pure sense) ... let alone being a medical professional of the highest level. No, I don't care about that either, it doesn't make certain positions matter more, or have anything to do with convincing arguments, or use of logic.

What ends up happening to all the people in cities with all of these marxist changes is truly fascinating, beyond how destructive it is to the economy and our country. I love reading your back and forths.

Kartik, you should consider that the lack of productivity in the current scenario of this central banking manipulation and QE, both of which are deflationary, is due mainly to that point of not being able to increase the velocity of money. Why? Increasingly stodgy and concentrated money does not go to business expansion and consumption. It stays with the rich, or the oldies, and that is what will continue to happen.

So good to be back! (-:

Stephen Murray

Kartik

Yes, he sings the praises of deflation but the DUES solution is much better, and will stave off the social unrest that we see is coming

Interestingly, Jeff Booth follows your twitter, so I'd imagine he has read the ATOM, or is at least aware of it.

Stephen Murray

As these ideas continue to leak out, when do you think we will see implementation of DUES? Could we see it in the next few years?

Kartik Gada

Stephen,

Yes, he follows me on Twitter (and I him).

He sings the praises of deflation, but does not have an answer about how all the debt (mortgages, student loans) transitions, and also how there will be new startups when equity premiums are much lower.

We will probably not see the implementation of DUES that soon, as it is too big of a leap of thought for politicians. Plus, all the lawyers, lobbyists, and favor-selling politicians like the tax complexity, and the public is too far from grasping that increasing attempts to 'tax the rich' just cause much greater systemic cost than what could ever possibly be collected from the targeted wealthy people.

The best way to circulate money that the ultrawealthy possess is to make it attractive for them to hire people. There is no other way.

More likely is that some smaller country does the Sovereign Venture Fund, as that is the most immediate solution, and the size of the country does not restrict the amount they can print.

Geoman

Palamas- I was trying to explain your frequently confused syntax. I haven't a clue why you write the way you do. In addition your constant inveighing on medical issues made me think you had some direct experience driving your beliefs, but your ignorance on such issues is hereby noted.

Kartik - Aren't we doing the DUES, now? The additional federal unemployment checks have helped whither the economy - certainly my wife's business is having trouble finding workers in a time of 11% unemployment. Way too many workers have said they'd prefer to stay at home and forgo a $15/hr. wage.

I'm an old fashioned flat tax guy. Taxes must be simple, the tax code should be at best a page or two long. No one should be exempt. Everyone should be able to easily read and comply with the tax code - no accountants necessary.

Want to make hiring attractive? Make firing simple and no risk. That is what changes the equation. Employers are much more willing to try someone out if they know that, if it doesn't work, they can let people go. It is why unions are such a disaster - the basic concept is good, but they lean to far into the job protection racket, protecting bad employees from getting the ax. It drags down entire industries.

Kartik Gada

Geoman,

Kartik - Aren't we doing the DUES, now?

They are being backed into it without realizing it. But they are still doing it in a horrendously inefficient and convoluted way.

The additional federal unemployment checks have helped whither the economy

But this is FISCAL payouts (i.e. from taxpayers), not monetary. Simultaneously, central banks keep printing, but this is only going to the very richest (people like Bezos, Musk, and Zuckerberg have seen their net worth double in the last 12-24 months), and is not percolating down to average people at all.

The linkage between these two should be obvious, but the government is still nowhere near to getting it.

Taxes must be simple, the tax code should be at best a page or two long. No one should be exempt. Everyone should be able to easily read and comply with the tax code - no accountants necessary.

All true. Hence, the best income tax rate at the Federal level is 0%. The cost of current collection and levying is already more than actual dollars collected. The second best tax rate is a flat tax, with a max dollar cap (which will short-circuit the incentive structure around complexity).

22% flat tax, and a $200,000 maximum dollar cap. No household should have to pay more, no matter what their income. Many will screech that the super-rich will have a tax rate under 1%, but they already have that, and the cost of tax complexity costs millions of jobs. There are entire countries that survive as nothing but 'tax havens' that exist because of US tax complexity. I say make a grand bargain with the super-rich so that this ridiculous trench warfare where we pretend to tax them but really don't, ends, since the cost of this is huge (the economy could be 40% larger from this alone).

This also clears the pathway towards 0%.

Drew

If the money is being printed, I don't think there really is a difference between fiscal and monetary payments. As I've said before, we will back into this by running large deficits before handing cash out. The next step is finding a political path to more straight handouts rather than increased unemployment benefits/stock market protections and their associated negative impacts on the economy. It sucks for employers who do want employees working for low wages now to compete with high unemployment payouts, but I do think that this has prevented a lot of stress on the poorer parts of the population - and a provided some experience of DUES.

Kartik Gada

Drew,

If the money is being printed, I don't think there really is a difference between fiscal and monetary payments.

The line is blurring, but at the moment it is still super-indirect, convoluted, wasteful, and structured such that all printing goes to the wealthiest, who already pay little income tax.

Remember that the features of DUES are i) Universal, ii) Permanent, and iii) Exponentially rising.

Anything that is temporary and not universal does not have that effect. Even the $1200 that the IRS sent out was just a one-off, was from taxpayer funds, and was not available to those who had AGI above $75,000. Hence, that was still socialism. DUES is universal and has to be paired with a lowering of income tax, eventually down to 0%'.

Drew

I agree that the low to negative interest has most benefited those who have access to credit and need it least. I think there will be a ratcheting of spending on government benefits from one side and tax cuts from the other until a larger group realizes that its best to cut the knot and go straight to direct payments and no taxes to lower distortions to the economy.
Sadly, I will reference my earlier prediction and say that this will occur after 2030 or maybe after 2027. Drew

Kartik Gada

Drew,

Sadly, I will reference my earlier prediction and say that this will occur after 2030 or maybe after 2027. Drew

Yes, I agree. What is economically and technologically possible is not politically possible (in the US). I said the same above, responding to Stephen.

A smaller country will do it first.

Geoman

Kartik - I agree with your prognosis. We are doing a version of the DUES now, but in the most convoluted and absurd way possible.

Complexity favors the connected. So many people don't realize that is the whole point of having complex rules and regulations - it is not for your benefit, it is so they can exempt their friends. It favors the wealthy.

Want cheap health care? 1) Buy a hospital 2) create an endowment for the hospital 3) provide free health care. Rinse and repeat as necessary. It doesn't have to be any more complex than that. As more of the system provides care for free, insurance costs drop, as do costs at fee hospitals and doctors, who have to find efficiencies or go out of business.

Tax deductions favor people with taxes that can be deducted. That is not the poor, or increasingly the middle class. Whenever the politicos come up with a silly scheme to soak the rich, they never realize that the rich have the money and accountants to avoid any such scheme. Or the ability to just buy their way to another country with less onerous taxes. Once the tax cost exceeds the avoidance costs you get nothing - the rich will pay $20k to avoid a $50k tax. Low tax rates on the rich mean avoidance is not worth the money.

Kartik Gada

Geoman,

Once the tax cost exceeds the avoidance costs you get nothing - the rich will pay $20k to avoid a $50k tax. Low tax rates on the rich mean avoidance is not worth the money.

So true. When entire countries (some of them not even very small) exist only as 'tax havens', and produce nothing other than being a destination for low taxes for tax refugees, the farce of the US system, with all its tax complexity, becomes evident.

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