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Satisfied that she understood the basic dynamics of her new monetary system, Governor Hill set out some operational parameters prior to the first Earthly financial quarter of 1963.
- Governments = 1
- Consumer Households = 110
- Producer Households = 100
The ‘Dwelling Security & Protection’ tax was set at 37% of all consumer income with a correctly assumed consumption function as follows:
- Proportion of disposable income: 60%
- Proportion of (agent wealth) at the opening of the period (quarter): 40%
The governor made a decision regarding purchasing and informed her officials. Republic purchasing that is to take place on the first day of each financial quarter, she said, will match dollar for dollar, the growing government expenditure 1 of Earth nation, the United States of America. No arguments; get on with it.
Consumer Agent Rating and Employment
In every financial quarter, each producer agent (100 in total) will receive an equal share of the republic’s official expenditure (the purchasing of tea crop & other services). Each producer will subsequently employ (by random choice) one of the 110 consumer agents. A producer agent will check to see if the consumer agent is currently unemployed (has not been previously employed by another producer agent), else the random selection is repeated.
Consumer agent (rating) approval, disapproval or ambivalence towards the government of the republic will depend on individual wealth (money equity) at the end of each financial quarter. A consumer agent will record an ‘approval’ rating if it has achieved a new wealth ‘high’ at the end of the current financial quarter. ‘Ambivalence’ is recorded if the agent does not achieve a new wealth ‘high’, but on communicating with another random consumer agent, discovers that its wealth is greater than that of the other consumer agent. ‘Disapproval’ is recorded when a consumer agent does not achieve a new wealth ‘high’ and on communicating with another random consumer agent, discovers that its own wealth is either less than or equal to that of the other consumer agent.
The year is 2019 and Hill wanted to analyse the dynamics of her monetary system.
- What did the money supply look like over time? (See outcomes 1 & 2) Right click link to open in new tab, if required.
- What did the macro indicators show? Last but not least, were the consumer agents happy with their finances? (See outcomes 1 & 2) Right click link to open in new tab, if required.
From her analysis, Hill noted two key points.
- Money supply as a percentage of republic income (GDP) had been erratic since inception. Worryingly, money supply as a percentage of all economic activity had since the year 2010 remained consistently below 60 percent of the long-term (all-time) average figure.
- The percentage of consumer agents completely approving of government expenditure remained consistently (in every quarter) in the 10 to 20 percent range until Q1 1987. Since Q1 1987, consumer agent approval had regularly dipped below 10 percent, remaining consistently below 10 percent of the population since Q3 2012.
It was time to rethink republic expenditure.
1 Total managed expenditure (quarterly) data source: U.S. Bureau of Economic Analysis, Government total expenditures [W068RCQ027SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis - https://fred.stlouisfed.org/series/W068RCQ027SBEA, April 12, 2019.↩