Cause Bond-based Political Cycle Government, NGDP optimization and Budgeting

An Endogenous and Integrated Model of Cause Bond-based, Sustainability-consistent Budgeting within a Tri-partite Political Cycle Government

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GangaPrasad Rao¹

Summary and Caveat

The Nominal PV paradigm adopted globally by populist governments has brought about a polarized and inequitable society. Continued reliance on such biased paradigm is bound to exacerbate financial and environmental unsustainabilities and cause nation, even global socio-economic turmoil. This manuscript presents a holistic, goal-based, quantitatively-optimized, Real-Nominal design that attempts to elucidate FV, BV and EV non-monetary streams beyond PV operations. It offers a tri-partite Political Cycle Government built around tacit participation by the impenured Government Opposite Group, GO, in the context of a Gold-collaterallized and Gold-mediated trading in the internal SGDP-NGDP Bond market and the external Bullion-FD market. A dynamically-adjusting, quantitative, optimizing framework is presented that permits dual-control of the nominal economy around M2dot and Government Spending to achieve pre-set political, and economic ‘Cycle-objectives’. Further, a second-stage optimization offers the tantalizing prospect of endogenous and closed-form, analytical determination of optimal sectoral outputs, sectoral capital allocations, and annual NGDP targets. The manuscript introduces ‘Nominal Sectoral Interests’ - an annex market within the ambit of NGDP Bonds, and indicates how it could be leveraged to justify incremental issue of liquidity, and optimize budgetary allocations.

While retaining and asserting all intellectual property rights, the author cautions outcomes are contingent upon formal and proper formulation of Cause Bonds and their diligent operation, including and in particular, the distribution of non-monetary FV BV and EV Streams. By the very nature of designs, the scheme presented here is subject to author’s perspectives and inclinations. Outcomes would necessarily vary with changes to design variable and monetary/non-monetary streams.

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Introduction

Some would deem it the most important day of the year, certainly more important than the tax deadline, and almost as important as IPL Final-Four. But for the rest of us, the annual drama around the nation's economic budget – the legislative expression of the nation’s long-run, public, socio-economic agenda, strategic political campaign promises, and short-run Private pursuits - is as obscure as it is significant to our monthly expenditures. It is, in fact, the budget that reveals the government's mind on various policies in the domestic politico-economic-, and international macroeconomic context. But does the Government plan its finances from year to year? Such year-to-year budgeting that reacts to transitory, exogenous political-, social- and economic shocks, oblivious of ong-run socio-economic sustainability is untenable in a globalised world in which nations anticipate, plan and invest for the long, even the very long-run. Surely, a nation of many peoples and demographies, and with many technological, resource and natural opportunities, socio-economic ir-reversibilities and constraints, would anticipate its future better? One hopes there exists a political- and social strategy around the nation's long-run socio-economic agenda and strategic/short-run finances that anticipates risks and strategizes to exploit future opportunities. In this manuscript, I broach an unconventional, if not hitherto an unexplored market-based, quantitative optimization strategy, that derives from the Sovereign and the Prudential, that has the potential to offer a stable, and long-run ‘Political-term’ government, that fosters robust Financial institutions, as well as FV & PV capital markets, which obtains egalitarian social progress while internalizing the inter-generation strategies of the impenured, and which radically re-aligns the budget-making process toward economic efficiency and socio-economic sustainability.
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For the rest of 56 page manuscript,try this link: The full text..... rather, the pdf.

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Concluding Words

Textbook macro-economics has, with few exceptions, focussed on PV-institutions – the Government, the voting Middle Class and its democratically-elected government, the Landlord-Bankers, and Capital markets, to enunciate its theory around political governance, and public policy around a consumerist society. Public governance and policy has focussed on facilitating free markets for the supply of factors of production – Capital, Labor, Energy and Materials, toward a PV Nominal economic paradigm that seeks to maximize PV-profits and Consumer utility. This design, however, is inherently short-sighted, and exploits the impatience of the empowered citizen-investor-consumer. The Nominal paradigm is further exacerbated under a multi-party democracy when politicians exploit voter impatience and helplessness to offer a debilitating populist economy that enslaves to feed. The society enlarges to perpetuate the Nominal, but without a direction or purpose; the paradigm causes and perpetuates inter-generational inequity and environmental externalities that threaten its very stability, weakens the nation’s currency, and forces an expansion of gold prices. But for lifestyle-raising technology, the net gain to the society from the singular pursuit of the nominal is debatable.

This manuscript offers a credible alternative to the Nominal market-based PV paradigm. It conceives a larger, globally-aligned Real FV society that drives the PV Nominal economy through a Cause Bond-based mechanism that weaves Real and Nominal interests together to obtain a larger societal and national Cause. The proposed design has many attributes to commend it. Built around existing institutions, markets and instruments, it models the realities of a Political Government, including the oft-neglected Government Opposite, GO, and accommodates strategic party-politics within a framework of short-run nominal markets and long-run real society. It permits flexible, yet optimizing path to SGDP and satisfies the various interests – the long sovereign institution, the polar political parties, the voters, the GO, and indeed the capital market, en route its Cause goals. It broaches a new instrument – Nominal (Sectoral) Interests – to anticipate the future economy, and justifies monetizations toward its realization; it also offers a tantalizing means to synchronize FX-conformable liquidity increments with Government Spending, anticipate budgetary re-alignments, obtain optimized NGDP targets, and budgetary allocations-expenditures. It even offers a rationale to combine Sovereign budgetary lines with FDI inflows as (Public-Private) Government Spending while pseudo-conforming with the GO FX Compact. The integrated design elucidated in this manuscript has the potential to fundamentally realign and dovetail popular politics with emerging technological opportunities and exploit the same under a nominal paradigm while subserving the social cause, the priorities of the perpetually impenured GO, and indeed, the Sovereign agenda.  

1 MSc, M.Tech, MS, PhD(Penn State); gprao64@gmail.com; gprasadrao@hotmail.com