Three-Entity Mutual Stablecoin Peg Model in a Tax-Free Economy
Summary
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Overview
This model proposes a system in which the government, central bank, and private sector each issue stablecoins and bonds while mutually accepting one another’s instruments. Through this three-entity mutual peg, economic circulation can be maintained without relying on tax revenue, making it theoretically possible to sustain economic activity.
Mechanism of Credit Circulation
• Each entity’s stablecoin is backed not only by its own credibility but also by the credibility of the other two entities, effectively reducing individual credit risk to near zero.
• Coin issuance is controlled based on bond holdings and the mutual peg structure, preventing excessive issuance and mitigating the risk of inflation.
Inflation and Interest Rate Control
• Stepwise inflation targets are set. When prices exceed the target, coin issuance and credit circulation speed are reduced; if below the target, they are increased, ensuring economic stability.
• Interest rate policy is applied in parallel to flexibly respond to fluctuations in aggregate demand.
Response to Increased Government Spending
• Even with substantial increases in government spending, such as universal basic income or infrastructure investment, coins circulate within the three-entity credit network, absorbing funding needs.
• Adjustments to issuance and interest rate policy maintain the balance of aggregate demand and prices, enabling the operation of a tax-free economy.
Theoretical Basis for Feasibility
- Three-entity mutual peg disperses credit risk and stabilizes coin value.
- Bonds and credit circulation control issuance volume.
- Inflation targets and interest rate policy adjust aggregate demand and prices.
- Credit circulation structure allows for increased government spending without destabilizing the system.
Because value circulates throughout the economy via this credit network, economic activity can theoretically be maintained without taxation.
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