Brother, Can You Spare a Trill?

Economists?Mark J. Kamstra and?Robert J. Shiller propose?a new tool for government financing: “trills” — i.e., shares in U.S. GDP. “We propose a small-denomination GDP share paying a coupon each year of one-trillionth of that year’s GDP, or about $14.60 at current levels,” they write. “Similar to shares issued by corporations paying a fraction of corporate earnings in dividends, the trill would pay a fraction of the ‘earnings’ of the U.S.” Kamstra and Shiller point out that the trills could be great for public confidence: “Public confidence may be boosted if the U.S. government does something fundamental to correct the faulty risk management implicit in pure-debt government financing that helped make the current crisis as bad as it is, and that inhibits a constructive response to the crisis.” [%comments]


Brooks

I don't think this makes sense. When a company pays dividends on shares, it is based on profits that the company has received and put in the bank. The US GDP doesn't go into a bank; it's the aggregate of all economic activity.

This becomes a hedge of sorts, with the government betting that it will receiver higher tax revenues when the GDP increases. But there's no mechanical linkage there, so this could seriously compound the debt problem if, say, the GOP succeeds in reducing government revenue without cutting expenditures.

Drill-Baby-Drill Drill Team

Imagine being able to buy futures in a country in a world wide market. It is hard to bet against China.
Buy the high risk penny stock of Uncle Sam if you want a long shot and can spare a lost investment.

Mike Van Horn

I agree with Brooks: Dividends are paid on "net" not "gross."

Your "trill" might make sense if the dividend were based on the "net return" on GDP. Trill holders would watch government performance like a hawk. Government would be forced to shift its focus to providing valuable, measurable results, as it is with business.

Such measurement would demonstrate that the only viable way to increase social expenditure is to boost profitable growth, so a top priority of government would be to nurture and sustain economic growth.

Trill holders, like equity partners, could be assessed additional contributions if government performance fell off and went in the hole.

Come to think of it, that's the system we have now. Because government spending is going so far in the hole, it's assessing all us trill holders. It's called "tax increases," and it's got the trill holders all riled up.

This is why we're about to fire a whole bunch of these government policy makers for fiduciary irresponsibility. We replaced a bunch in 2006, another big bunch in 2008, and now yet more will be canned in 2010.

This current bunch seems oblivious to this dynamic. Faced with a big shortfall, they want to kill the goose and eat the seed corn, rather than increasing the flock and growing a field of corn. They're already making excuses: "Because we have to kill the goose, you trill holders will just have to get used to living with lowered expectations. We've had a good run, but now others are likely to move past us."

Fortunately, a lot of us trill holders don't buy this way of thinking, and that's why we're going to clean house right after Halloween. But will the next bunch do any better?

We trill holders need to do a much better job of hiring these folks charged with keeping our economy humming, so that we can afford to do all the nice things we want to do for ourselves.

It takes strong (net) earnings to support comfortable lifestyles.

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Eric M. Jones

Can we short these?

Harrison B

Wouldn't this just further encourage politicians to have short-term economic growth through stimulus than longer-term growth through innovation?

jack gott

So you're giving the US Govt an INCENTIVE TO CRASH GDP ?
ah....no thanks....