A Citizen Dividend

A nagging macroeconomic question of the past 10 years concerns China’s ever-growing foreign reserves, now $2.4 trillion, entrusted predominantly to an unreliable geopolitical actor whose money-printing ever-depreciates the denomination.

An evolutionary economics analysis would suggest a "national dividend" of 15,000 RMB per citizen in the form of a voucher to purchase foreign goods (somewhat similar to how corporations distribute excess profit to shareholders), so as to invest in micro-improvements to GNP, and hold the last $200 billion for national cash flow.

The reasons to favor immediate divestment are generally known:

• Absence of contract enforcement mechanism – China cannot recoup its principal should the U.S. renounce the debt. That the U.S. might cancel the serial numbers held by China to render bonds instantaneously insalable and unredeemable - this rather obvious geopolitical risk - would alone make investment unwise. Within the country, the physics force of the police enforces the legal contract; but such a third party does not exist between countries (and the U.S. possesses 7,000 nukes to China’s 200... with further elaboration unnecessary.)

• Manipulated, artificially low return - The U.S. government creates front groups (e.g. incorporations in the Cayman Islands) to artificially bid down the interest rate on note issues. For instance, an issue that might clear at 4% interest gets shilled to 3%, to scam government purchasers such as China with zero price-elasticity (i.e., it may be discerned from trade figures China would buy $100 billion in notes a coming month, regardless of yield.)

• U.S. inflates away its debt at a 15% annual rate. The dollar's reserve status is exploited to impose a planet-wide inflation tax, a tax which falls heaviest on Chinese citizens. Unlike a country such as Zimbabwe whose money-printing dumps the inflation within-borders, U.S. money-printing dumps everywhere via Trade and the dollar-denominated Exchanges of equity-stock, commodity, gold, and oil, the magnitude of which the following price changes since 2001 reveal: oil ($25 to $75) and gold ($300 to $1,100). Since 1997, U.S. money supply has increased 10% to 20% per annum, well in excess of the 3% country growth rate, and which suggests the Federal Reserve and U.S. Treasury Department have judged a ~15% rate of increase as indefinitely sustainable. Assuming constant velocity, etc, a first-order approximation suggests the U.S. filches 12% (15% minus 3% growth) of the $1.7 trillion held by China, or $204 billion dollars annually. This is the 1,067 RMB involuntary annual tax each Chinese citizen pays to the U.S.government, under the present policy.

• The U.S. builds a military to conquer the world; to colonize countries. The U.S. does not need to repay anyone if it has conquered the world. The federal budget has doubled in the past decade mainly to expand the military, the nuclear, and foreign spycraft (military budget: $294 billion in 2000, $895 billion in 2010; overall budget: $1789 billion in 2000, $3,720 billion in 2010.) Such activities have a negative rather than neutral or positive impact upon China’s welfare (e.g., compare with U.S. investment into pension or domestic infrastructure).The U.S. acts with open hostility to China on core issues of Taiwan, Tibet, Xinjiang, and population because the geopolitical endgame isn't the "containment" of China but its final annihilation as a sovereign entity.

Government unable to preserve principal and get positive return

Half-cognizant of the aforementioned, the government has sought to transform paper into real wealth, with only limited success. The barriers that have arisen:

• Prohibition on the purchase of prime foreign assets - China finds itself legally blocked from the purchase of quality foreign assets, e.g. Unocal. (Incidentally, the intent of CIA-promoted “liberal economics” was again revealed; a one-way island flow model where China sells everything strategic in the first round, buys none in the second round and beyond.)
• Only bad or overpriced foreign assets selected for sale - In the rare cases of approval, the deals were often one-sided; e.g. the purchase of 9.9% of Morgan Stanley months before its implosion; the alleged purchase of an IBM sub-division by Lenovo, which actually featured a minor, money-losing IBM unit seizing managerial control of Lenovo.
• Foreign assets remain vulnerable to expropriation - Were China allowed to buy quality overseas assets (e.g. a huge Saudi oilfield), it still lacks the military to enforce the property right. (The U.S. does this by installing puppet governments, plant military bases, a huge military build-up - things that China is too weak or geopolitically illiterate to do.)

Distribution mechanism: The Goods Catalog

A simplified, template solution: The government creates an online Catalog of imported goods from participating corporations – to sell German appliances, Japanese cameras, Italian apparel, Swedish furniture, etc.; also copper, gold, platinum, and silver ingots, and designate an import-export firm such as Li Ka-shing’s Whampoa handle the procurement and shipping process. Each of 1,300,000,000 citizens would receive a 15,000 RMB voucher to purchase items from the Catalog.

An injection of $2.3 trillion of real capital into the country would grow real GNP and total factor productivity at the micro-level. Examples of possible improvements:

• Increased business formation: A youth might purchase a computer for 3,000 RMB, to learn programming, later found an IT business; an artistically inclined person might purchase a high-end Japanese camera to found a photography business, etc. Such domestic business creation makes for highest-quality GNP growth - the opposite of the export-dependent, low-tech, pollutive, foreign-owned GDP.
• Human capital improvement: A family that can purchase, over time, 15,000 imported chicken eggs at 1RMB apiece to feed two children an extra egg a day from birth to age 18, would tend to raise a healthier, prettier/more-handsome, and more intelligent cohort - so far as concerns the nutritionally constrained portion of the population.
• Time-savings: Knowledge workers may engage in higher-return activities with the purchase of a faster, 700 RMB bicycle or 2,000 RMB motorbike.
• A recently married couple may purchase Swedish IKEA furniture, which would raise career and household production.

Those with too much money may buy several of these:



Or 100 of these:
  


A uniform 15,000 RMB per-citizen dividend doesn't present the best allocative solution - only a better one (almost any change would improve on a de facto U.S. spend-down.) A best-solution would distribute on the basis of marginal return-to-investment: Honest workers to receive a standard sum; married households with young children, students and graduates of top universities – such citizens who have shown responsibility in the use of capital, a more lavish sum. The demonstrably irresponsible such as prisoners, drug addicts, or the unemployed to receive nothing – e.g., a wino who spends 15,000 RMB on French fine wines literally pisses away the wealth to entropic nothingness, a minus-100% ROI for the country.

I have not discussed secondary details, such compensation of domestic manufacturers with subsidy…

Or timeline, such as a five-year or 15-year schedule...

Mutatis mutandis.