Macroeconomics has remained substantially unchanged since 1971 when gold and the dollar were uncoupled. Whether this pivotal change in the early 1970s was the end of economic sanity or the beginning of a great era of prosperity is a matter of opinion. In any case, half a century later, change is upon us.
There isn’t an economist breathing who doesn’t agree that the one-two punch of the 2008 mortgage crisis and the COVID-19 pandemic have rocked, if not cracked, the foundations of conventional economics. These momentous events have opened the canopy for new ideas.
Four transformative ideas are now putting economic theology through its paces: Land Value Taxation (LVT), Modern Monetary Theory (MMT), Universal Basic Income (UBI), and Bitcoin (BTC). Let’s examine why.
LVT: Job losses and bankruptcies have reduced tax revenue to the point that new sources are being explored. Governments will increasingly be forced to replace taxes on jobs, businesses, and sales with rental value capture. The German state of Baden-Württemberg has recently moved to land value taxation.
MMT: Government expenditures need not be—nor should they be—balanced off against tax revenue. Economic health is best achieved by injecting liquidity into under-performing economies and removing it from overcapacity economies, ignoring deficits and debt.
UBI: The problems of increasingly precarious employment, robotics, and the high cost of administering support programs can be cost-effectively addressed by implementing a basic income or citizen’s dividend like the successful and popular Alaska Permanent Fund.
BTC: Computer money doesn’t require “trusted third parties” to facilitate transactions. Block-chain technology solved the Byzantine Generals Problem and has now begun releasing people and businesses from the whims of central banks, chartered banks and governments.
Interestingly, these four disruptive ideas are complementary and symbiotic.
- While MMT releases national governments from double entry booking, LVT suggests that liquidity is best removed from an overheated economy by capturing economic rent rather than by deadweight taxes on jobs, business and sales.
- As pandemic-related job losses accumulate, it becomes obvious that a UBI is fair, efficient and doesn’t make people lazy. It should become permanent. LVT can fund UBIs without resorting to economy-damaging taxes.
- Impotent interest rate policy has central bankers on tenterhooks. Wreckless quantitative easing (QE) is gushing into asset prices making the Gini coefficient go parabolic. As if on cue, BTC has become digital gold and is serving as a global currency immune to central bank devaluation. The existence of BTC discredits chartilism.
- LVT captures the societal surplus which UBIs then distribute to all, denying asset holders unearned windfalls. LVT collects the rent for the global commons which rightfully belongs to all as a condition of citizenship. Economic rent is a natural UBI.
- MMT calls for QE until full employment is achieved. Taxes are a deflationary tool rather than a revenue source. LVT drains liquidity traps (land and resources) and uses recovered QE to finance infrastructure, making it self-financing.
- Under MMT, government deficits mean private surpluses while government surpluses cause recessions. LVT deflates asset bubbles while UBI can distribute this unearned increment nationally and globally, delivering monthly payments via BTC to the banked and unbanked alike.
- BTC would serve as a superior global reserve currency, extending this massive benefit to all humans. Everyone will benefit financially when the unbanked are included in the formal economy. Polluter pay legislation (LVT) collects the rent of the global commons which is best shared globally (UBI) using BTC.
- MMT debunks the arguments that concern over inflation and recessions forces governments and central banks to deny public services and public infrastructure. MMT challenges the need for international borrowing. BTC will allow for the discovery of the natural interest rate.
Not only are these four emergent theories mutually supporting, they are interdependent. MMT cannot be successful without LVT and a UBI. Rental value capture is needed to effectively remove damaging liquidity from inflationary economies and a UBI is the optimal way to inject economic stimulus. As a global reserve currency, BTC is ideal for settling international accounts plus its high stock to flow ratio makes it an alternative to inflation-prown fiat currencies.
MMT explains how central banks around the world have behaved for decades, treating taxation and spending as unrelated. LVT explains how to avoid damping the productive economy and how to prevent QE from quickly capitalizing into the purchase price of land and resources. The two theories work in lockstep.
Catastrophic events and disruptive technologies often upset the status quo, re-order the power structure, and change social morays. The decline of the dollar as global reserve currency and the corresponding decline of US military, manufacturing, and financial power has thrown the world into flux, the outcome unknown.
What was a slow relinquishing of superiority, the pandemic and global financial crisis have accelerated. MMT is challenging neoliberalism, LVT insists on universal usufruct, UBI aims to make poverty history, and BTC mocks central banks. A century could become a decade.