[MOO] The Velocity of Money (Day 1179)
Day 1,180, 11:34
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Published in Canada 
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by
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by Addy Lawrence
Why do you need money?
To buy things.
Is the supply of money fixed?
Yes. Once money is printed, it exists. Some money is taken out of circulation when a player "dies" with money in their account, otherwise, money cannot be physically destroyed.
Does the supply of money affect anything?
Yes. Like any situation where there is supply and demand, when there is an increase in quantity of supply, quantity of demand increases as well. An increase in the physical supply of money will trigger an increase in the demand for money, this is done via a price increase.
What is the velocity of money?
The velocity of money is a measurement comparing the ratio of the money supply to the amount of the transactions using that money.
V = Velocity of money
T = Transactions using that money
M = The amount of that money in circulation
V = T / M
I am reading talk of increasing income taxes in congress in an effort to strengthen the CAD. The theory is that the increased taxes will make their way to the government where they will stockpile the cash and strengthen the CAD. This will work and I must admit it, it will work. That said, a bicycle will also get you to work each day. So will a taxi. So will a bus. So will a car. Long way to say that there are faster and better ways to strengthen the CAD through tax policy. You can use fiscal policy and issue debt but I've beaten that horse for two days, I may as well beat another horse that is a better performer.
Consider that if you raise income taxes by 10%, you are splitting $1 of wages a different way, there is still only $1. Nothing has changed in our Velocity of Money algorithm:
V = T / M
T used to be 95% for you, and 5% for the government + 5% VAT.
Now, if you raise the VAT by 10%, you are increasing the cost of transactions by 10%. You will increase the velocity of money:
V = T*115/105 / M
By increasing the VAT you will increase the velocity of money by 115/105 or 9.5%. In addition, the additional taxes will make their way to government to be stockpiled, just like the proposed income tax stockpile. This will work, and it will work faster than increasing income taxes.
I don't make this stuff up, its legit economic theory and its actually quite interesting to apply it to a little micro-economy like eRep.
The side effect of this VAT-centric approach is that it will pick up tax revenue from the purchase-bots that admin has created. Purchase-bots will not pay income tax, and isn't that the largest tax evasion that eCanadian congressmen should be chasing?
So what should I do with this information?
Support an increase in VAT in congress. Kill the notions in congress about increasing income tax.
Denoument
There is talk in congress of raising income taxes in an effort to strengthen the CAD. I don't agree with this, we should consider mortgages before raising taxes. Regardless, I am only one voice and apparently I'm only in it to get rich so the focus has shifted to minimum wage and raising income taxes. Well, neither of those ideas are even second best, increasing VAT is the second best solution. It creates more demand for money and it takes money out of circulation, so long as the government doesn't spend it on food programs because noobs can't find jobs because businesses can't afford to pay Level 4 and below employees a minimum wage.
Consider joining Ministry of Opportunity (MOO) today. MOO is committed to keeping income taxes low, keeping product prices low, and keeping wads of money out of the hands of government. Join the MOO forum.
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Comments
I support this, increase the VAT not the income tax.
The mathematical reasoning behind this is now starting to sink into my non-mathematical head. I get it now.
MOO.
all of the ideas that are being put out are good ideas, but with every single one, there is one blaring consept coming to my mind each time. now my opinion may be wrong or incorrect, that would be because I am only about 2 months old in this game. to my point:
all you are doing is stockpiling the money, but will there not come a point when all that money looking you straight in the face, whether it be the government or just the average player, make it too tempting and someone will take the money, and spend it like crazy, sending it back into circulation, lowering the value of the CAD again, therefore making a rollercoaster with the CAD, worse than any other country in erep. It is like sitting in a boat in the middle of the lake with a hole in it filling with water, what Canada is trying to do is bail the water out with a bucket, it will work, until we get tired of it, when we need a break, and the water will come back into the boat because we have done nothing about the problem, we have been trying to take the shortcut to getting the water out.
What we need to do is plug the hole in the boat, or in the actual case, literally take money out of the game, which will cause a permanent increase, not a temporary increase, creating a roller coaster. That is my opinion.
MOO!
sorry for the long comment 😉
You are right but there is no mechanic currently to burn currency except for the purchasing of land.
which is a part I left out, I know it is not right to create multi's but it is the only way I could think of so far, and I've been thinking this through ever since the idea of having people stockpile their money was raised. Create multi's/operatives, give them a lumpsome of money, and then let them die out. It is not a good idea to try and run money down by buying out land, because, as you build companies, you will start putting more supply on the market, which will give that bot more to buy, creating more currency, which means the more land we need to buy, and so on, until a huge snowball is formed, and the markets will be swamped as well.
Wow, I get it! Hahaha
MOO!
The nominal value of the CAD is directly related to the velocity and supply of CAD. For a working manager, either the real value of CAD goes up (better Gold conversion) or inflation goes up (goods cost more). Win-Win methinks.
MOO!
The gov't buying land is the perfect way to make sure money is destroyed - meaning, can't be stolen. You can't steal land, and you can't cash it in for currency.
Tl😉r addy's my daddy ;P.
"Purchase-bots will not pay income tax, and isn't that the largest tax evasion that eCanadian congressmen should be chasing?"
The truth is that largest income tax evaders are those with higher skill levels working in slave pits for $3 a day being paid in weapons, food, and training gold. but only paying 16 cents tax a day
So who do we believe, that's the problem. We have multiple sides to this argument, all saying similar yet different solutions to this economic problem in eCanada.
Alaricus, some people in the past would have flipped a coin to decide what to do. These days the debates in the media show there is active interest in finding solutions and discussing them before implementation. These different sides to one issue are all good stuff in my books.
hey i'm some people and at the time we probably would have made some progress with that method.
Do you people ever stop with the subtle jabs. I love it.
voted !
good info for all countries.
@Rican
I hope some countries put this to use, eCanada doesn't have the vision to act on this stuff.
We didn't rent a region when titanium was big and we completely missed the boat. We wouldn't rent Sask to Poland when they needed grain and now we are no longer in the same alliance. eCanada has a long track record of not answering the door when opportunity knocks.
hehe, you got that Rylde. On Facebook we poke people, but here all we can do is jibber-jab.
Much food for thought. Hopefully, my muddled brain can digest it. MOO!
Approximately 2500 Canadians eack got 3 free land plots. If the gov't gave each person $1000 to buy each plot, this would remove about $7,500,000 in currency from circulation. It could be done on a gradual basis as money becomes available through taxes etc. The gov't would need a watchdog to make sure the cits actually buy the land. Possibly include a citizen pledge not to use the land to start another company.
Umm No Bought Votes Here. Unfortunately Petz's latest article on cartoon farm animals has just received more votes than this. Unfortunate.
Non, mais c'est quoi cette obsession socialistes que de vouloir augmenter la valeur du CAD?
Laissons le LIBRE MARCHÉ agit en toute liberté.
"the additional taxes will make their way to government to be stockpiled"
"MOO is committed to keeping income taxes low, keeping product prices low, and keeping wads of money out of the hands of government."
???
Rather than creating an account to funnel money to and then let die, why not choose an old account that has been dead for a long time and has almost no chance of returning?
Dereck, good idea. If someone had an account that was going inactive, we could just dump a ton of CAD into purchasing a dozen plots of land. The citizen would disappear along with all the land.
The land idea is a great one, would make a lot of sense, unfortunately land cannot be transferred.
Also, the CAD raised through mortgages isn't to be spent. If the government spent that money, the mortgage holders would not be impressed and would form a block looking to overthrow the government.
Hopefully the mortgage goes get thefted
morrtgage is bad idea. it's out side of game mechanics and totally flawed. come on Anddy think inside the box.
I like this article!