economicmultipliers_155

Economic Multipliers (155)  
 
Do you know what these are?
They help CREATE wealth in systems.
This will never happen (#1):
If it did, it would be a HUGE economic multiplier for the United States.
             
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The federal government is never going to assess a 5 cent fee on every trade that is executed in the U.S. ‘markets.’

Imagine several billion trades being made each day (let’s say 10 billion trades to make the math simple).

Every trade has a buy side and a sell side:  The federal government would receive $0.10 for every trade executed.

Of the 250 or so days the markets are open per year, the federal government would receive approximately $250 billion dollars.

Of course, ‘taking’ this money from investors creates no multipliers.

I would even expect that the total number of trades could drop by 50 percent or more … not the mom and pop or institutional investor trades … the computerized speed trades that tend to create excess volatility in markets.  That would leave the federal government with only about $125 billion dollars in extra revenue.

The federal government is quick to spend money.  Merely spending money with no economic multipliers built in creates no value.

Where are the economic multipliers?

On average, that money would represent about $380 per person for every citizen of the United States (per year).

Since the reason the markets have value is because millions of people get up every day and go to work hopefully to create some sort of value and everyone buys the products and services that support the markets, it seems appropriate that this money be spent on things which directly make everyone’s lives better … at an individual level.

For kids younger than 18 (~25 percent of the population):  Twenty-five percent of the money accrued prior to 18 years of age could be invested in educational accounts which, upon completion of high school, could be 100% tapped for educational expenses or 50% tapped for the purchase of a vehicle at the age of 18+ or 100% tapped for the down payment on a house at 21+ years of age.

For adults 18 years or older (~75 percent of the population):  For individuals making $300,000 per year or less (including all payments which would provide an income stream), 75 percent of the money that would accrue after 18 years of age could be invested in the Treasuries market and 50% tapped for the purchase of a vehicle or 100 percent tapped for rent, a mortgage, student loan reduction, tools tied to a trade, education, business startup costs, expenses which help people live independently or retirement account payments.

Why specify what the money can be spent on?  Why not just distribute this money to everyone and let everyone do with it what they want?

This money would come directly out of a stream of ‘investment’ money where the goal is to strengthen the economy.
  • If you’re a parent who can’t save money for your child’s future education, you’re at a disadvantage … not just because they may get lesser education.  They will most likely make less money in the future and have lesser resources to help themselves, you and potentially others in the future.
  • If you’re an individual who has no employer who provides a retirement account, even if you never got a return on your money (as in interest payments), you’d have a ‘savings account’ accruing something every year.
  • If you’re a young person who has absolutely no means to save because even bare bones living eats up everything you make, some extra money would be there to hopefully help you make some wealth creating choices.
Appreciate, every pool of money is ‘chased.’
  • Who would manage the government accounts and what percentage would they take to do so?
  • How could the money be invested so the core capital would always be preserved?  If you (or any government or institution) invests in the stock market, the very first caveat is:  Buyer beware:  All of your investment is at risk.
And know that the ‘best investors’ will always come out on top.  Individuals who use their money to boost retirement accounts yielding good returns or who invest in growing and thriving businesses or who pay down their mortgage or student loans quicker normally get a better return on their money.

Guess what?  If that return means that there is more investing going on, then ultimately more money will be available for distribution (for everyone).

Of course, this all seems very complex and it’s a lot to keep track of. 

And, it all hinges on a revenue stream that doesn’t exist and most likely never will.

Likewise, if the revenue stream ever did exist, it might make more sense to use it to fund national daycare centers … including long day / overnight / sick children/elders care facilities for working parents who have no good options if they want to stay working.

Remember:
  • The reason that the financial markets exist is because ordinary people go to work every day (and many at night) to produce products and services.
  • The reason that the financial markets exist is because everyone needs and buys products and services.
If the money ever was allocated directly to individual accounts, there would be money left.  Not every child chooses to graduate from high school, some adults will never have an income stream less than $300,000 and some people die prematurely.

What would you do with the extra money?

If a nation was ‘smart,’ it wouldn’t see the extra money as ‘extra’ money or ever consider it part of any estate (unless it was directly used for organ donations and/or burial expenses).  The nation would also recognize that the money was a ‘variable’ stream which could not be relied upon from year to year.

Hence, the most practical thing to spend it on would be replacement projects which have a long-term return.

If 25 percent of any ‘extra’ was allocated to youth, that might mean equipping school libraries with greater resources (from their wish lists), renovating public daycare facilities (on a revolving basis) or helping set up ‘buy community bikes’ and/or ‘repair bikes’ programs.

If 75 percent of any 'extra' was allocated to adults, that might mean renovating public libraries or job centers, helping jumpstart privately run low cost dorms for youth (so they can get themselves grounded even if they’re not headed off to any college or trade school) or helping jumpstart privately run lower cost yet upscale (today this is very possible) housing for individuals with lesser income (with in the future, communities building energy efficient, durable, well-maintained and healthy community supporting projects getting greater weight for future allocations).

Keep in mind, this (today nonexistent) money is ‘investment’ money.

Also keep in mind that the moment anyone gets a dollar in their pocket (including the federal government), everyone who knows about it usually thinks they know how it should be spent (hence my own ability to write this article!).

Of course, something like this will never happen.  It’s way too practical.