Circular Macroeconomics and the Economic BIG-BANG Theory (Part 17)
My theory of the Economic Big Bang holds that there are two fundamental magnitudes in economics: GDP and EMPLOYMENT, which feed back indefinitely producing economic development as long as their determinants remain stable.
Study carried out by Jorge Vendrell that will be part of his next book entitled: "#TOP SECRET CRIOGENIZACION ECONOMICA" Appointment obliged by copyright.
Since 2017 I have been focusing my research on the belief that there had to be a higher level than traditional macroeconomics, which I have called Circular Macroeconomics, consisting of only two fundamental macroeconomic magnitudes, which should be related bimonthly to each other, capable of generating a chain of action-reaction that would lead to an economic Big Bang.
"After a long investigation I concluded that the two fundamental magnitudes of the economy were: employment and GDP; something as simple and as unknown as it is surprising to politicians, economists and above all to the IMF who are bent on creating economic growth without taking employment into account. I am convinced that this discovery will rewrite the economy anchored in the twentieth century, and will signify an unprecedented advance towards the implementation of a new macroeconomic policy: The Circular Macroeconomics that I lead"
Gdp and employment are therefore the backbone of circular macroeconomics, whose name comes from the two-way relationship established between both magnitudes, which has nothing to do with the Circular Economy.
"Until now it has always been believed that to generate employment it was necessary to previously create economic growth, when in fact it is not so, since the creation of employment itself also generates economic growth, so the relationship is not only univoca pib-empleo but biunivoca employment-pib "
"But Circular Macroeconomics goes beyond the study of the two-way relationship between GDP and Employment. In order for both employment and GDP to remain stable, and to be able to create economic growth and jobs, it will be necessary to discover what their determinants are, since by knowing them we will be able to isolate the most harmful aspects that destabilise the economy and cause crises."
This was one of the great challenges that took me years of study, and that concluded when I finally managed to identify interest rates, and taxes on profits, as the determinants of Gdp; and economic paralysis, and inflation when it is higher than real income, in addition to severance pay, as the determinants of employment.
"My theory about the Economic Big Bang thus confirms the existence of two independent economic cycles, one of growth and the other of degrowth. Both cycles are formed in turn by two loops that will feed back while their determinants remain stable. The first cycle, that of growth, consists of a double loop employment-GDP, and Gdp-employment. The second cycle, that of degrowth, is composed of another double loop, but this time, of unemployment-fall Gdp and fall Gdp-unemployment."
The first loop, that of growth, has the ability to feed back infinitely as long as the economy remains stable; disappearing, and giving way to the second, of decrease-unemployment, as the economy becomes unstable. Thus, the end of one cycle will give way to the beginning of another, in the opposite direction to the previous one.
The length of growth and degrowth cycles will depend on the stability or inesthecity of the determinants of their two fundamental magnitudes: GDP and employment.
The length of each of the cycles will depend on the stability of your GDP's DNA. If stable, the first cycle could last forever; but when the cycle becomes unstable its duration will depend on the time that was used to restore its stability again. Of course, along the way could leave a good part of the progress that would have achieved until the moment in which the 1st finished. Cycle and started the 2nd.
DIRECT AND INDIRECT DETERMINANTS OF GDP AND UNEMPLOYMENT
GDP and employment have two types of determinants: the direct determinants, and the indirect determinants.
"The direct determinants are those that, worth the redundancy, directly affect employment, or GDP, being different for each of them. The indirect ones are the ones that affect each of these, as a result of the two-way relationship between GDP and employment."
"Thus, the indirect determinant of GDP will be employment; since a rise in GDP will imply an indirect increase in employment; and the indirect determinant of employment will be GDP, since an increase in employment will imply an indirect increase in GDP."
On the other hand, the direct determinants of growth act on GDP by raising it when they are positive, or reducing it when they are negative; in the same way that the determinants of unemployment act by increasing it when they are negative, and reducing it when they are positive.
According to my research, these are the determinants of the fundamentals of GDP and Employment:
Determinants of GDP. Themost important "Determinants of GDP" that directly affect its growth are, in this order: The Level of Economic Paralysis, Leadership, Interest Rates and Taxes on Profits and Consumption; so that with the exception of leadership, the lower the leadership, the greater the growth; triggering a chain reaction that will increase investment, employment, consumption and employment again, feeding back the growth loop.
Determinants of Unemployment. The determinants that directly affect unemployment are, in this order: the level of economic paralysis, inflation and severance pay, generating a chain reaction that will trigger the fall in employment, consumption, employment, investment and unemployment again, feeding bac the downward loop.
"In addition to an environment of economic growth and decline associated with the increase in GDP and employment in the first case, and the fall in GDP and employment, in the second; there may be a stable mixed environment for growth with declining interest rates and, or, taxes on reasonable profits; and unstable for employment with inflation above real income and, or, high layoff taxes, as happened in Spain from the beginning of democracy until the last years of Felipismo"
"The reason why there can be a stable environment for growth and unstable for employment, as happened in Spain from the beginning of democracy until the last years of Felipismo, is that the determinants of GDP and employment are different. Thus, declining interest rates and, or, taxes on reasonable profits should result in an increase in GDP. On the contrary, a level of inflation higher than real income and, or, high layoff taxes, will lead to an increase in unemployment."
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Jorge Vendrell - World Economy Development Center