The Macabees
16-02-2009, 18:44
The Economist
Loosening the Noose of Keynes
http://www.khastt.com/wp-content/uploads/2008/11/money_money.jpg
The two-year War of Golden Succession (2016-2018) had already taken its toll on the Second Empire of the Golden Throne in terms of economic ruin. It’s most profitable agricultural province, Ruska, was almost completely destroyed in the months of combat fought on its soil. The country’s industry was largely cartelized in an effort to center production on war material, forcing the decrease on the supply of civilian goods and services. In order to pay for the cost of the conflict, Emperor Fedor I and his advisors raised taxes. Ultimately, a large portion of the war debt was paid off by raiding the coffers of SafeHaven2 in the peace treaty which followed after the war (which also saw Safehaven2 losing massive portions of its border territory to its “Northern nemesis”), but this did not necessarily spell the end of Keynesian economic policy. Despite Imperial promises to decrease the size of the military in an effort to cut government spending, the invasion of Theohuanacu in mid-2019 put an end to any hopes of the return of classical values to the Empire. Instead, we have seen a thorough increase in government spending, as it attempts to cover existing debts without allowing new debts to spiral out of control, and as a result an increase in personal income taxes and taxes on consumer goods. Furthermore, in order to keep the prices of military goods artificially low Fedala has subsidized certain companies, despite weaker economic practices. This has led to an actual increase in the cost of the good being procured, given that wasn’t it paid up front is paid through a bail out. These suicidal Keynesian policies have placed the Empire in the beginning of worsening recession, and fortunately the Empire’s administration has seen the error in its ways.
Historically speaking, the Empire has followed an economic policy known as “Absolute Capitalism”, allowing for its totalitarian rule over its citizens while practicing an economic policy as close to capitalism as possible. Prior to the arrival of Fedor I, this meant income taxes and no taxes on consumer goods. The problem, as was found during the War of Golden Succession, was that income taxes did not generate sufficient revenue for the government to pay off its debts; arguably, the largest revenue should have come from taxes on consumer goods. It also pulled the rug from under the consumer; marginally cheaper goods did not present a lucrative offer, given that the consumer was still being taxed too much to buy it (regardless of price). Unfortunately, during the war income taxes were kept steady and taxes on consumer goods put into effect; government revenue increased, but it did not solve the economic problems being suffered by the nation (and, as a result, by nations which had deep economic links to the Empire). Since then, these taxes have only been increased. As the economic downturn became obvious, the government simply blamed increasing prices (which were a by-product of their increased taxes) and cartelized a number of industries in an effort to drive prices down (blinded by their “success” in doing the same for military goods); the result was an even sharper decrease in economic growth. Fortunately, lack of regulation on Macabee industries expanding abroad managed to create some revenue for them and their workers, but the situation at home was only driving companies away (or driving them into the ground).
However, a growing crowd of Classical economist and the worsening situation had shed some light into Fedor’s court. The Emperor and his advisors have begun to take action, in an attempt to correct the situation before it gets any worse. In shocking news put out by the administration’s public relations office, Fedor I decided to completely eliminate personal income and corporate taxes. This hasn’t been expanded to taxes on goods and services, and it likely isn’t. What can be expected is a gradual decrease in these taxes in certain sectors, although the government has to make revenue somewhere. Even with no income taxes, the government is expected to take several trillion Ríokmarks in receipts, allowing them to fund their continued war in Theohuanacu. Besides, the loss in income tax revenue is partially made up by the increase in revenue elsewhere, as demand for goods increase. This radical departure from Keynesian policies is going to take place over the coming months, as the government attempts to juggle the adverse effects of the temporary massive decrease in available funding. Many are scared of the immediate effect on the national debt, although it seems that the Emperor is willing to accept this risk to see if the long-term effects are possible (which they should most definitely be). Nevertheless, it should be taken into consideration that the lack of income taxes will not mean that consumers will begin buying goods that they did not buy beforehand. The market will have to shift in order to provide consumers the goods they want; decrease in taxes will not do everything. But, the government has also taken steps to decrease intervention on factories, including ending most subsidization on private goods and denationalizing certain sectors. This latter fact is possibly the most shocking.
The government had announced the privatization of the central bank, and the privatization of the Ríokmark. Printing money will be done by private institutions, and although the Ríokmark remains the “official” currency (since it is the most widely used), it’s expected that competing currencies will soon enter the market. Invariably, the lack of a central bank also eliminates the government’s ability to regulate interest rates (another positive). This makes the Ríokmart a completely market-driven currency. The move will take some time however, as its removable as a fiat currency will mean that it will actually need to be backed by something of value. In this case, it will be gold, meaning that the Ríokmark, for the first time in its history, will be placed on the gold standard. Since it’s no longer printed by the government, the government can hardly maintain the currency’s value. Competition by other banks and private currencies will also make it difficult for the Ríokmark to be regulated by some type of cartel established by the banks which use it and the government (and it’s likely that the government wants to avoid further deals of that sort). The elimination of federal banking has other advantages, including the elimination of insurance on the bank’s loans, forcing banks to act responsibly or face bankruptcy. The move should also work to avoid easy-money policies in the future.
To cope with the inevitable rise in debt as these policies are put into effect, Fedala has also announced some policies to decrease government spending. The Fuermak (Armed Forces) will be cut, especially the Ejermacht (Army) and the [i]Laerihans (Air Force). For example, the Ejermacht currently operates roughly 320,000 main battle tanks; this will be cut to 150,000 within two years. Soldiers put into the civilian world will have to find themselves jobs, and with the recession this means that many of them won’t, but ideally the creation of jobs in the future will give these unemployed soldiers employment. On the other hand, the planned cuts had forced a schism in the military, as many criticize the government for increasing the amount of foreign soldiers through the creation of auxiliary units and retiring Macabee soldiers. As a result, we may see the downsizing of the military go more slowly than originally planned, to avoid mutiny. Furthermore, the planned size of the auxiliary force was also been reduced in order to stay in line with the new government policies. It should also be noted that the deployment to Theohuanacu will be reduced from 500,000 to 250,000 soldiers, as violence on the island decreases. Several new military programs have been cut in an effort to reduce costs, including the Nakíl 2 tank. The new tank will instead see a development period of several more years and be introduced for production at a later date. The tank’s new gun will still be unveiled at Díensatory this summer. New ship programs have been completely canceled, and instead the Kriermada will focus on upgrading those already in service which have been deemed sufficient enough to guarantee the Empire’s sovereignty at sea. The Kriermada, apart from having new toys taken away from them, will see little of the armed forces reduction, as their job has increased with the need to provide security around Theohuanacu, which has been completely occupied by the Empire.
Costs have been cut elsewhere, as well. The legalization of drugs, including cocaine and opium, has reduced the necessity for counter-drug operatives, and regulation on the consumption of alcohol has been reduced by repealing drinking age laws. The education budget has been reduced; less priority is being placed on working for a degree and more priority has been placed on providing the essential job skills for blue collar workers to compete or to learn a trade, in general. As a result, the decreased budget will also be reworked in order to prioritize community colleges, as four-year universities are increasingly privatized and will have to look for profit elsewhere (normally, higher tuition prices). The Empire is working with the government (well, the only thing left of the government) of SafeHaven2 to allow unrestricted border crossings, although the two countries are still largely at odds over the end of the War of Golden Succession. Given the fall of the central government, this means that Fedala will also have to work with local governments near the border, and immigration will largely depend on restrictions on third party borders.
These new policies will not have a sudden effect on the economy, especially as government spending is inevitable due to existing war efforts across the globe, but it should show a marked change in economic progress and a turn for the better within the coming year. This progress will continue as the Empire decreases the costs of deployments abroad, by reducing the amount of deployments. Economics expansion to other countries will also play its part in helping the “national economy” (if such a thing even exists anymore). The stress, of course, is in the long-term benefits for the economy. There will still be recessions and there will still be booms, but these will follow the natural “S curve” of macroeconomics, and periods of inflation will be met with periods of deflation. In the end, the economy will be much more stable than it is with its current fiat currency and government-driven prices. The advantages of a market-driven currency and a freer-market have already been seen across the world, and were to an extent visible prior to the rule of Fedor I (even though “market economists” were as incorrect in their theories as Keynesians). Even then, it’s basic macroeconomics that a government-forced shift in the supply curve or demand curve will only cause dead weight loss; it’s a wonder that Keynesians still argue for government regulation.
Hopefully, these new policies will travel beyond the Empire’s borders. Many economists hope for a liberalization of the region of Greater Dienstad. Also, many wonder if these policies will expand into the realm of the Fedala Accord, which was seen as an early step towards this direction (the reduction of trade barriers between member states). In terms of regional politics, liberalization of the market could do wonders. A free market in Stevid would allow for a closer political relationship between the Holy Empire and the Second Empire, which had their fall out during the War of Golden Succession. The continued cold war between the two political entities has not been helped by continued government military action in the region. The new demilitarization policies should help build confidence in Stevid with the Empire’s true intentions, and economic co-development through deregulation will bring the two governments closer as their economies become more intertwined. The ultimate ambition is a free market throughout the entire region, ultimately making Greater Dienstad one of most stable regions in the world. The effects of this liberalization on the political stability have already been seen, although to a very marginal degree. These effects will hopefully balloon within the coming years.
D. K. Balonpíe, PhD
Loosening the Noose of Keynes
http://www.khastt.com/wp-content/uploads/2008/11/money_money.jpg
The two-year War of Golden Succession (2016-2018) had already taken its toll on the Second Empire of the Golden Throne in terms of economic ruin. It’s most profitable agricultural province, Ruska, was almost completely destroyed in the months of combat fought on its soil. The country’s industry was largely cartelized in an effort to center production on war material, forcing the decrease on the supply of civilian goods and services. In order to pay for the cost of the conflict, Emperor Fedor I and his advisors raised taxes. Ultimately, a large portion of the war debt was paid off by raiding the coffers of SafeHaven2 in the peace treaty which followed after the war (which also saw Safehaven2 losing massive portions of its border territory to its “Northern nemesis”), but this did not necessarily spell the end of Keynesian economic policy. Despite Imperial promises to decrease the size of the military in an effort to cut government spending, the invasion of Theohuanacu in mid-2019 put an end to any hopes of the return of classical values to the Empire. Instead, we have seen a thorough increase in government spending, as it attempts to cover existing debts without allowing new debts to spiral out of control, and as a result an increase in personal income taxes and taxes on consumer goods. Furthermore, in order to keep the prices of military goods artificially low Fedala has subsidized certain companies, despite weaker economic practices. This has led to an actual increase in the cost of the good being procured, given that wasn’t it paid up front is paid through a bail out. These suicidal Keynesian policies have placed the Empire in the beginning of worsening recession, and fortunately the Empire’s administration has seen the error in its ways.
Historically speaking, the Empire has followed an economic policy known as “Absolute Capitalism”, allowing for its totalitarian rule over its citizens while practicing an economic policy as close to capitalism as possible. Prior to the arrival of Fedor I, this meant income taxes and no taxes on consumer goods. The problem, as was found during the War of Golden Succession, was that income taxes did not generate sufficient revenue for the government to pay off its debts; arguably, the largest revenue should have come from taxes on consumer goods. It also pulled the rug from under the consumer; marginally cheaper goods did not present a lucrative offer, given that the consumer was still being taxed too much to buy it (regardless of price). Unfortunately, during the war income taxes were kept steady and taxes on consumer goods put into effect; government revenue increased, but it did not solve the economic problems being suffered by the nation (and, as a result, by nations which had deep economic links to the Empire). Since then, these taxes have only been increased. As the economic downturn became obvious, the government simply blamed increasing prices (which were a by-product of their increased taxes) and cartelized a number of industries in an effort to drive prices down (blinded by their “success” in doing the same for military goods); the result was an even sharper decrease in economic growth. Fortunately, lack of regulation on Macabee industries expanding abroad managed to create some revenue for them and their workers, but the situation at home was only driving companies away (or driving them into the ground).
However, a growing crowd of Classical economist and the worsening situation had shed some light into Fedor’s court. The Emperor and his advisors have begun to take action, in an attempt to correct the situation before it gets any worse. In shocking news put out by the administration’s public relations office, Fedor I decided to completely eliminate personal income and corporate taxes. This hasn’t been expanded to taxes on goods and services, and it likely isn’t. What can be expected is a gradual decrease in these taxes in certain sectors, although the government has to make revenue somewhere. Even with no income taxes, the government is expected to take several trillion Ríokmarks in receipts, allowing them to fund their continued war in Theohuanacu. Besides, the loss in income tax revenue is partially made up by the increase in revenue elsewhere, as demand for goods increase. This radical departure from Keynesian policies is going to take place over the coming months, as the government attempts to juggle the adverse effects of the temporary massive decrease in available funding. Many are scared of the immediate effect on the national debt, although it seems that the Emperor is willing to accept this risk to see if the long-term effects are possible (which they should most definitely be). Nevertheless, it should be taken into consideration that the lack of income taxes will not mean that consumers will begin buying goods that they did not buy beforehand. The market will have to shift in order to provide consumers the goods they want; decrease in taxes will not do everything. But, the government has also taken steps to decrease intervention on factories, including ending most subsidization on private goods and denationalizing certain sectors. This latter fact is possibly the most shocking.
The government had announced the privatization of the central bank, and the privatization of the Ríokmark. Printing money will be done by private institutions, and although the Ríokmark remains the “official” currency (since it is the most widely used), it’s expected that competing currencies will soon enter the market. Invariably, the lack of a central bank also eliminates the government’s ability to regulate interest rates (another positive). This makes the Ríokmart a completely market-driven currency. The move will take some time however, as its removable as a fiat currency will mean that it will actually need to be backed by something of value. In this case, it will be gold, meaning that the Ríokmark, for the first time in its history, will be placed on the gold standard. Since it’s no longer printed by the government, the government can hardly maintain the currency’s value. Competition by other banks and private currencies will also make it difficult for the Ríokmark to be regulated by some type of cartel established by the banks which use it and the government (and it’s likely that the government wants to avoid further deals of that sort). The elimination of federal banking has other advantages, including the elimination of insurance on the bank’s loans, forcing banks to act responsibly or face bankruptcy. The move should also work to avoid easy-money policies in the future.
To cope with the inevitable rise in debt as these policies are put into effect, Fedala has also announced some policies to decrease government spending. The Fuermak (Armed Forces) will be cut, especially the Ejermacht (Army) and the [i]Laerihans (Air Force). For example, the Ejermacht currently operates roughly 320,000 main battle tanks; this will be cut to 150,000 within two years. Soldiers put into the civilian world will have to find themselves jobs, and with the recession this means that many of them won’t, but ideally the creation of jobs in the future will give these unemployed soldiers employment. On the other hand, the planned cuts had forced a schism in the military, as many criticize the government for increasing the amount of foreign soldiers through the creation of auxiliary units and retiring Macabee soldiers. As a result, we may see the downsizing of the military go more slowly than originally planned, to avoid mutiny. Furthermore, the planned size of the auxiliary force was also been reduced in order to stay in line with the new government policies. It should also be noted that the deployment to Theohuanacu will be reduced from 500,000 to 250,000 soldiers, as violence on the island decreases. Several new military programs have been cut in an effort to reduce costs, including the Nakíl 2 tank. The new tank will instead see a development period of several more years and be introduced for production at a later date. The tank’s new gun will still be unveiled at Díensatory this summer. New ship programs have been completely canceled, and instead the Kriermada will focus on upgrading those already in service which have been deemed sufficient enough to guarantee the Empire’s sovereignty at sea. The Kriermada, apart from having new toys taken away from them, will see little of the armed forces reduction, as their job has increased with the need to provide security around Theohuanacu, which has been completely occupied by the Empire.
Costs have been cut elsewhere, as well. The legalization of drugs, including cocaine and opium, has reduced the necessity for counter-drug operatives, and regulation on the consumption of alcohol has been reduced by repealing drinking age laws. The education budget has been reduced; less priority is being placed on working for a degree and more priority has been placed on providing the essential job skills for blue collar workers to compete or to learn a trade, in general. As a result, the decreased budget will also be reworked in order to prioritize community colleges, as four-year universities are increasingly privatized and will have to look for profit elsewhere (normally, higher tuition prices). The Empire is working with the government (well, the only thing left of the government) of SafeHaven2 to allow unrestricted border crossings, although the two countries are still largely at odds over the end of the War of Golden Succession. Given the fall of the central government, this means that Fedala will also have to work with local governments near the border, and immigration will largely depend on restrictions on third party borders.
These new policies will not have a sudden effect on the economy, especially as government spending is inevitable due to existing war efforts across the globe, but it should show a marked change in economic progress and a turn for the better within the coming year. This progress will continue as the Empire decreases the costs of deployments abroad, by reducing the amount of deployments. Economics expansion to other countries will also play its part in helping the “national economy” (if such a thing even exists anymore). The stress, of course, is in the long-term benefits for the economy. There will still be recessions and there will still be booms, but these will follow the natural “S curve” of macroeconomics, and periods of inflation will be met with periods of deflation. In the end, the economy will be much more stable than it is with its current fiat currency and government-driven prices. The advantages of a market-driven currency and a freer-market have already been seen across the world, and were to an extent visible prior to the rule of Fedor I (even though “market economists” were as incorrect in their theories as Keynesians). Even then, it’s basic macroeconomics that a government-forced shift in the supply curve or demand curve will only cause dead weight loss; it’s a wonder that Keynesians still argue for government regulation.
Hopefully, these new policies will travel beyond the Empire’s borders. Many economists hope for a liberalization of the region of Greater Dienstad. Also, many wonder if these policies will expand into the realm of the Fedala Accord, which was seen as an early step towards this direction (the reduction of trade barriers between member states). In terms of regional politics, liberalization of the market could do wonders. A free market in Stevid would allow for a closer political relationship between the Holy Empire and the Second Empire, which had their fall out during the War of Golden Succession. The continued cold war between the two political entities has not been helped by continued government military action in the region. The new demilitarization policies should help build confidence in Stevid with the Empire’s true intentions, and economic co-development through deregulation will bring the two governments closer as their economies become more intertwined. The ultimate ambition is a free market throughout the entire region, ultimately making Greater Dienstad one of most stable regions in the world. The effects of this liberalization on the political stability have already been seen, although to a very marginal degree. These effects will hopefully balloon within the coming years.
D. K. Balonpíe, PhD