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Hello yesterday i took over one of the states . It is a ressource power with import of 145+ bln and export of 247+ bln the inflation is 2.45 % and economic growth is 3.23 % . I notised that my GDP is 840+ bln but the problem is that my money supply was 737 bln . I knew that the economy was goint to inevitablt go down because of luck of money so I raised it to 800 million through budget (max of what i could do ) . That is not enough to cover my GDP and my economy already started going down -1.74% . Also I notised that my debth is massive 700+bln and is going up by 80 bln . I had no choise but to force my economy to fight recession by increasing spending.
What should i do next.
Your debt is roughly 80% of your output and rising I would urge you to cut public spending in order to ensure long term prosperity and growth.
Shift tax burden from direct to indirect taxes i would advocate a reduction from 28% to 22% with excise duties rising from 14% to 20%.
Cut administration, others, subsidies, family and increase welfare and pensions to living costs and increase them then inline with inflation this will reduce corruption.
This will eliminate your deficit over two parliaments and leave you with a national debt of around 50% of GDP due to growth in the economy and debt reduction.
MOVE TO IMPLEMENT NEGATIVE INCOME TAX
use my state as an example Tongue
If you have not notised my pensions are much higher than living costs and my economy is heavily relaing on subsidies . Also your proposal of increasing selling tax would nearly kill my economic growth and farther escalate my recession . If you have not notised my main consern was saving my economy and not repaying the debth .
1) No one invests in an economy with high debt which is NOT being managed in your case.
2) raising sales taxes would not harm your economy as much as you say, im talking of rebalancing your tax system away from direct acqusition taxes towards excise taxes, NO NET TAX RISE. you get more revenue from the tax rise anyway as your economy consumes quite a lot of goods.
3) your pensions are just above living costs, hardly an achievement. your welfare is actually quite a concern given your disastrous unemployment at 13%. no wonder your corruption and shadow economy are so high.

Cutting debt is a means of ensuring the future stability of an economy you have without it being consumed by debt.
I would urge you to cut your interest rates if you continue to indebt yourself overwise your debt repayments will consume you if you dont take my advice.
short term pain is equal to long term gain.
you only need to look at my economy to see that.
Ok fair enoough but why should i change the interest rates what is that going to do . Also should I make more money next winter . Making money should not hurt my currency too bad it is at 1.03 at the moment and doing that should raise my money supply above my gdp and stop it from going down .
Yeah listen to ConservativeUk's suggestions on cutting.... If you have a hardy enough military and covered protections from war then lower defense spending and re-direct that towards administration. Hmm, I wouldn't even mess with the welfare situation yet. Cut down the interest rate so your following increase in excise taxes get you more revenue. Low interest rates= more purchasing of goods= more purchasing of goods being taxed. Hmm, hey if you want to get risky with it then you can increase MS beyond your GDP to create the lost exports, and let me mention that you will be needing more production economically (more jobs created) to cover the new amounts of consumption.

Focus on creating a 0 balance deficit (basically putting down the national debt) you WANT more investment in your economy since technically lowering interest rates discourages gross investment. A low national debt and fiscal responsibility usually meets that goal. With a higher infrastructure index I have no doubt your economy is set to not only get away from recession but increase at 20% within a year after about 10-12 quarters if you implement the right budget policy's, pick the right task options, and use the right reforms. (Administration reform will be your holy grail after you lower the national debt and initiate high spending for infrastructure)

This is all based on what I would personally do in your shoes.
Hmmm.... Somebody sounds like a supply-sider to me Eyes

Yes, it’s true. Embrace the right policies and you can “grow your way out of deficits.”Motz
Your MS/GDP ratio is not that of a problem, you need to balance the budget. By lowering the nominal interest you reduce the interest at which you get new indebtedness. As for fiscal policy I suggest lowering capital tax, lowering customs and lowering subsidies. Most of your safety indexes are really bad, corruption and shadow economy hinders your economy.
But don't dispair, you've just gotten into your new state you still have opportunities to outgrow your debt.
The Dam task will also provide big economic growth, if you choose the first option in the Lobbyists task you will also lower corruption.
The negative income tax reform works really well for the russian template, it will increase your revenues, decrease gini and bureaucracy a bit and also stimulate consumption.

RichardAWilson Wrote:
Hmmm.... Somebody sounds like a supply-sider to me Eyes


For a part Wink Richard you can mix me in with Keynes too. Smile

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