Estimations of the Cycle of Money Without Escape Savings

Estimations of the Cycle of Money Without Escape Savings

March, 2024 | Constantinos Challoumis
This paper explores the theory of the money cycle without escaping savings, emphasizing the importance of appropriate tax policy in maintaining economic stability. The theory suggests that when there are no non-return savings, the economy operates at its maximum level of consumption and investment. Tax policy plays a crucial role in this scenario, with higher taxes applied to companies that substitute smaller businesses, as these companies disrupt the economy by reducing money circulation. The paper advocates for a tax policy that favors uncontrolled transactions with lower taxes and controlled transactions with higher taxes, aligning with the fixed length principle. The analysis uses the Q.E. method and its econometric approach to examine the relationship between savings, tax policies, and economic dynamics. The study highlights the complementary relationship between escape savings and enforcement savings, where savings can be either within or outside the economic system. The paper also discusses the importance of periodic inspections of controlled transactions to ensure compliance with the arm's length principle. The methodology involves equations that separate savings into non-return and return categories, analyzing variables such as financial liquidity, consumption, and the velocity of savings. The results show that in the absence of escape savings, the economy achieves maximum money circulation, leading to increased liquidity and reduced state obligations. The study concludes that appropriate tax policies should target companies that replace smaller businesses, promoting economic stability and maximizing utility for the economy. The research underscores the need for effective tax policies that align with public policy to ensure a robust and sustainable economic system.This paper explores the theory of the money cycle without escaping savings, emphasizing the importance of appropriate tax policy in maintaining economic stability. The theory suggests that when there are no non-return savings, the economy operates at its maximum level of consumption and investment. Tax policy plays a crucial role in this scenario, with higher taxes applied to companies that substitute smaller businesses, as these companies disrupt the economy by reducing money circulation. The paper advocates for a tax policy that favors uncontrolled transactions with lower taxes and controlled transactions with higher taxes, aligning with the fixed length principle. The analysis uses the Q.E. method and its econometric approach to examine the relationship between savings, tax policies, and economic dynamics. The study highlights the complementary relationship between escape savings and enforcement savings, where savings can be either within or outside the economic system. The paper also discusses the importance of periodic inspections of controlled transactions to ensure compliance with the arm's length principle. The methodology involves equations that separate savings into non-return and return categories, analyzing variables such as financial liquidity, consumption, and the velocity of savings. The results show that in the absence of escape savings, the economy achieves maximum money circulation, leading to increased liquidity and reduced state obligations. The study concludes that appropriate tax policies should target companies that replace smaller businesses, promoting economic stability and maximizing utility for the economy. The research underscores the need for effective tax policies that align with public policy to ensure a robust and sustainable economic system.
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