Shared Prosperity-backed Monetary System (SPMS)??

\*\*\*

In an AI‑driven world of mass productivity, cheap goods, and potential job loss, the usual macro debates (“print vs austerity”, “inflation vs deflation”) don’t really touch the core problem: \*\*who owns the capital and who benefits from the productivity gains\*\*.

This post sketches a proposed framework I’ve been calling the \*\*Shared Prosperity Monetary System (SPMS)\*\* – a way to redesign money, public wealth, and finance to avoid a K‑shaped economy in an era of AI‑driven abundance, while still preserving strong incentives for innovation and upward mobility.

No claim this is perfect or complete – it’s meant as a starting point for discussion.

\*\*\*

\## 1. Core intuition: from wage‑based to capital‑linked prosperity

Industrial capitalism ran (more or less) on a simple story:

\- Most adults work for wages.

\- Productivity grows, wages \*roughly\* track it.

\- Monetary policy aims at price stability and full employment.

AI breaks this if a big chunk of people become:

\- structurally underemployed, or

\- stuck in low‑bargaining‑power jobs, while

\- capital + a small elite of highly complementary workers capture most gains.

Then “wage growth with productivity” stops being the main channel to spread prosperity. You need \*\*direct links between ordinary people and capital income\*\*, and a money system that doesn’t mainly amplify asset wealth at the top.

SPMS is about rewiring those foundations, not just tweaking interest rates.

\*\*\*

\## 2. The SPMS architecture in a nutshell

The system rests on five interlocking pieces:

1. \*\*AI & Productivity Wealth Fund\*\* – a large, diversified public wealth fund that accumulates claims on productive assets (especially AI‑related ones).

2. \*\*Productivity‑linked public money rail\*\* – a digital public money system used for transfers and stabilization, loosely backed by the wealth fund’s asset base.

3. \*\*Risk‑sharing finance as a default\*\* – more equity / profit‑sharing, less pure interest‑bearing debt as the main growth engine.

4. \*\*Automatic, rule‑based distribution of gains\*\* – broad citizen claims on part of the fund’s returns (dividends and/or universal services).

5. \*\*Macro policy that targets stability \*and\* distributional health\*\* – inflation/NGDP targets plus explicit attention to inequality and sectoral divergence.

Let’s unpack these.

\*\*\*

\## 3. Pillar 1: AI & Productivity Wealth Fund

\*\*Goal:\*\* make everyone a partial owner of the productive base, especially AI capital, instead of leaving it almost entirely in private hands.

Design sketch:

\- A national (or regional) \*\*AI & Productivity Wealth Fund\*\* (APWF).

\- Assets:

\- Broad domestic + global equity (including AI firms).

\- Infrastructure, energy, land, logistics, key digital infrastructure.

\- Stakes in firms benefiting heavily from public R&D, data access, or AI‑related concessions.

\- Funding sources:

\- A slice of AI windfall taxes.

\- Fees for rights to exploit large public datasets, spectrum, etc.

\- Portions of resource rents (oil, gas, minerals, land value, etc.) where applicable.

Mandate:

1. \*\*Stability:\*\* long‑term, diversified asset accumulation to support fiscal and monetary resilience.

2. \*\*Shared prosperity:\*\* funnel a portion of returns to all residents via:

   \- per‑capita dividends, and/or

   \- funding of universal services (health, education, connectivity, basic income‑ish floor).

This is similar in spirit to Norway’s sovereign wealth fund and the Alaska Permanent Fund dividend, but expanded and explicitly tied to AI‑era productivity.

\*\*\*

\## 4. Pillar 2: Productivity‑linked public money rail

\*\*Goal:\*\* give the public sector a clean, direct channel to households and firms, while anchoring money loosely to real productive capacity.

Key features:

\- A \*\*retail public digital currency\*\* (could be implemented as a CBDC with strong privacy and tiered design), used alongside regular bank deposits and cash.

\- It is \*\*not\*\* a rigid “gold standard” where each unit must always equal a fixed amount of some asset. Instead:

\- The APWF’s assets and returns strengthen confidence in the system and finance part of transfers and stabilizers.

\- But the central bank retains a flexible mandate (e.g., 2% inflation or a stable nominal‑GDP path).

Usage:

\- Government payments (benefits, tax refunds, basic dividends) use this rail as default.

\- Counter‑cyclical support (what QE tried to do via asset markets) can instead go:

\- \*\*directly\*\* to households (helicopter‑style)

\- and/or to productive investment vehicles, not only financial markets.

Outcome:

\- Less dependence on bank balance sheets and asset prices as the primary transmission channel.

\- Faster, more targeted stabilization while keeping price stability as the anchor.

\*\*\*

\## 5. Pillar 3: Risk‑sharing finance > pure leverage

A lot of today’s inequality and fragility comes from:

\- credit‑driven asset booms

\- where gains accrue to those who already own assets and/or can access cheap leverage

\- while everyone else is stuck in wage or cash positions.

SPMS leans heavily toward \*\*risk‑sharing\*\* forms of finance:

\- Equity, venture capital, and public risk‑sharing funds.

\- Profit‑sharing and revenue‑sharing structures for SMEs and AI projects.

\- Structured “citizen investment pools” where small savers can buy tiny shares in diversified portfolios of high‑risk, high‑productivity projects.

The idea:

\- Founders and early workers still get rich if they build something big.

\- But upside is shared more broadly via:

\- the APWF (which takes stakes in some projects), and

\- citizen pools with diversified exposure to AI‑driven growth.

Debt still exists (for working capital, mortgages, etc.), but over time:

\- the balance tilts away from “lever up and ride the asset wave”

\- toward “share risk, share reward in productive projects”.

\*\*\*

\## 6. Pillar 4: Rule‑based distribution and social floor

If AI can produce huge output with relatively fewer workers, then:

\- the central distribution problem is \*not\* “how do we create enough jobs”,

\- it’s “how do we share high productivity so people can live, learn, and create even if classical jobs are thinner or more chaotic”.

SPMS builds in structural distribution channels:

\- \*\*Universal dividends or service entitlements\*\* funded from APWF returns.

\- Robust safety nets: guaranteed basic healthcare, education, connectivity, and some income floor.

\- Active support for:

\- retraining and lifelong learning,

\- relocation, and

\- micro‑entrepreneurship.

The aim is not pure “passive UBI” as the whole story, but:

\- a blend of basic security + real options to move into new roles, start things, or do meaningful non‑market work.

\*\*\*

\## 7. Pillar 5: Macro policy and inflation/deflation in SPMS

\### Inflation vs deflation

In an AI‑abundant world, \*\*“let it deflate”\*\* sounds tempting:

\- More goods, cheaper AI services, lower production costs → why not allow general price levels to drift down?

Problems:

\- Debt overhang: falling prices make existing debts harder to service.

\- Nominal rigidities: wages and contracts are downward sticky, so deflation leads more easily to unemployment and bankruptcies.

\- Monetary policy constraint: deep deflation pushes interest rates to the lower bound and limits stabilization tools.

On the other hand, \*\*high inflation\*\*:

\- erodes cash and wage incomes,

\- can widen inequality if rich households hold real assets and the poor hold nominal claims.

\### SPMS stance:

\- Aim for \*\*low, stable positive inflation\*\* (or a stable nominal‑GDP path).

\- Let productivity gains show up as:

\- partly lower relative prices in AI‑heavy sectors,

\- partly higher real incomes and broader transfers.

Monetary/financial policy functions:

\- Central bank keeps inflation/NGDP on target, but:

\- uses the public digital rail and APWF as extra tools.

\- explicitly monitors distributional indicators (wage growth across percentiles, employment by skill level, asset ownership) as constraints/inputs.

\- Fiscal side:

\- uses automatic stabilizers (transfers, dividends, service guarantees) to maintain demand and social stability when AI shocks hit certain groups.

The point is to avoid \*\*both\*\*:

\- debt‑deflation spirals that slam households and small firms,

\- and asset‑inflation booms that mainly enrich those already at the top.

\*\*\*

\## 8. Wealth distribution dynamics under SPMS

Rough sketch of how SPMS changes long‑run distribution:

\*\*Under “business as usual” with strong AI:\*\*

\- Capital share of income rises.

\- Owners of AI, data, and platforms accumulate extreme wealth.

\- Middle and lower wage earners see slow or no real wage growth and precarious employment.

\- Asset‑price cycles (stocks, housing, etc.) dominate wealth accumulation.

\*\*Under SPMS (if implemented seriously):\*\*

\- A growing chunk of capital income is owned \*\*indirectly\*\* by the public via the APWF.

\- Everyone receives some share of its returns via dividends or services.

\- Households can also hold direct stakes in diversified risk‑sharing vehicles.

\- So even if the \*functional\* income distribution (labor vs capital share) shifts toward capital, the \*ownership\* of capital is much less concentrated.

You still have inequality – founders and top talent can still get very rich – but:

\- the bottom and middle are pulled up by:

\- regular capital income,

\- better social services, and

\- easier access to education and entrepreneurship.

This is how SPMS aims to “bend” a potential K‑shaped AI trajectory toward something closer to a rising, somewhat flatter curve.

\*\*\*

\## 9. How does SPMS compare to existing schools?

\### vs Austrian‑type views

Austrian‑leaning ideas emphasize:

\- sound money (often commodity‑backed or rules‑based),

\- skepticism about central bank discretion,

\- the distortive role of credit expansion and artificially low rates.

\*\*Where SPMS agrees:\*\*

\- Credit‑fuelled asset booms are dangerous and distortive.

\- Over‑reliance on central bank balance sheet expansion to prop up asset prices is unhealthy.

\- There should be a tighter link between money and real productive capacity.

\*\*Where SPMS diverges:\*\*

\- It does \*\*not\*\* advocate a rigid commodity standard; that tends to be deflationary and crisis‑prone, especially in a world with large shocks.

\- It accepts an active central bank with a clear mandate (inflation/NGDP stabilization) plus direct distribution tools.

\- It explicitly focuses on distributional outcomes and public ownership of capital, which many Austrian treatments consider outside the “core” of monetary theory.

You could see SPMS as \*\*post‑Austrian in diagnosis\*\* (credit/asset bubbles are bad), but \*\*post‑Keynesian in tools\*\* (active stabilization and public balance sheet), with a big twist: systematic, rule‑based public participation in capital ownership.

\### vs Keynesian / New‑Keynesian mainstream

Keynesian and New‑Keynesian frameworks emphasize:

\- demand management via fiscal and monetary policy,

\- sticky prices/wages,

\- counter‑cyclical stabilization,

\- inflation targeting / Taylor‑rule type frameworks.

\*\*Where SPMS agrees:\*\*

\- Demand needs active management; deflation is dangerous.

\- Sticky wages and nominal rigidities matter.

\- Central bank discretion (within a rule‑like framework) is necessary.

\*\*Where SPMS extends/criticizes:\*\*

\- Standard Keynesianism often treats distribution as “second order” – SPMS makes it \*\*first order\*\*.

\- The usual toolkit (rate cuts, QE, deficit spending) tends to favor asset owners and those close to financial markets.

\- SPMS re‑routes some of that firepower through:

\- direct transfers via the public digital rail,

\- structural public ownership of productive assets (APWF),

\- risk‑sharing finance that broadens exposure to upside.

You can think of SPMS as \*\*Keynesian macro with an integrated sovereign wealth fund and explicit distributional design\*\*, tuned for AI‑driven abundance.

\*\*\*

\## 10. Other angles: innovation and upward mobility

A big legitimate concern: does this kill innovation?

SPMS tries to avoid that by:

\- Protecting \*\*strong upside\*\* for founders and early employees (equity, stock options, profit shares).

\- Using public and citizen funds as \*\*co‑investors\*\*, not expropriators:

\- they take minority stakes or structured revenue shares in high‑impact projects,

\- they help absorb some early risk, and

\- they share in success.

\- Combining this with strong competition policy and open AI infrastructure so:

\- many players can build,

\- workers can move between firms,

\- smaller companies can use shared AI tools and data.

The ladder of upward mobility is:

\- skill and learning (investment in mass education, retraining),

\- entrepreneurship (easier, more inclusive access to risk capital),

\- and ownership (baseline stake via APWF + voluntary additional saving/investing).

\*\*\*

\*\*\*

\## 11. Money creation, asset‑backed CBDC, and liquidity in SPMS

A lot of the practical questions about SPMS boil down to: \*\*how is money actually created, and how does an asset‑backed CBDC change things\*\* compared with today’s system and with Austrian/Keynesian ideas?

\### 11.1 How money is created now (very briefly)

In the current fiat setup:

\- \*\*Public money\*\* = cash + central bank reserves.

\- \*\*Private money\*\* = bank deposits created when banks make loans (fractional‑reserve banking).\[1\]\[2\]\[3\]

When a bank lends, it simultaneously creates a deposit; that deposit is spendable money. Central banks influence the process by:

\- setting policy rates and liquidity conditions,

\- supplying or draining reserves,

\- doing QE or QT, etc.\[2\]\[3\]\[1\]

Most day‑to‑day money is private bank money; central bank money is the base and the settlement layer.

\### 11.2 How SPMS tweaks money creation

In SPMS, we add a \*\*retail, asset‑linked public money\*\* layer on top of this:

1. The central bank (or a tightly governed public entity) issues a \*\*retail CBDC‑style token\*\*.

2. This CBDC is a direct liability of the central bank, like cash/reserves, \*\*but\*\*:

   \- part of the central bank/public sector asset side is the AI & Productivity Wealth Fund (APWF), which holds diversified productive assets.

   \- the fund’s returns help finance dividends or universal services distributed via CBDC wallets.

Crucially:

\- The CBDC is \*\*not fully 1:1 “hard‑backed”\*\* by the APWF in a narrow sense (like a gold peg).

\- The central bank retains the ability to expand or contract CBDC supply in line with macro targets (inflation/NGDP).

\- The APWF provides:

\- a stronger real‑asset foundation for the public balance sheet,

\- and a continuous stream of income to support transfers and confidence.

So money creation happens through three main channels:

\- Central bank operations (as now): changing the size of its balance sheet, influencing reserves and interest rates.

\- CBDC issuance/redemption: new CBDC units created against public assets/claims, or retired as needed.

\- Bank lending: private credit creation, still important but less monopolistic as a channel to households.

\### 11.3 Liquidity supply in good times and bad

In a standard fiat system:

\- Liquidity mostly flows through banks and capital markets.

\- QE and lender‑of‑last‑resort operations support banks and asset markets first, then “trickle down”.

In SPMS:

\- The central bank still has the usual lender‑of‑last‑resort tools.

\- But it also has the \*\*CBDC rail\*\* and the APWF behind it, so it can:

\- inject liquidity directly into household wallets (helicopter‑style) during downturns,

\- fund targeted credit programs into productive sectors via risk‑sharing vehicles,

\- operate counter‑cyclical rules (larger dividends or temporary top‑ups when unemployment spikes, smaller when the economy overheats).

Banks still matter for credit intermediation, but:

\- their deposit base competes with CBDC as a safe store of value,

\- and their role shifts more toward screening, project finance, and risk management, less toward pure money creation.\[4\]\[5\]\[6\]\[7\]\[8\]\[1\]

CBDC research suggests this can pressure banks’ funding models but is manageable with design choices (caps, tiered interest, etc.).\[5\]\[6\]\[7\]\[8\]\[9\]\[2\]\[4\]

\### 11.4 Why “asset‑backed” but not a hard commodity standard?

A strict asset‑backed digital currency (1:1 with gold, Treasuries, etc.) can:

\- improve confidence and limit arbitrary expansion,

\- but also recreate gold‑standard‑like problems: deflation risk, inability to respond to shocks, and passing volatility in underlying asset markets straight into money.\[10\]\[11\]\[12\]

SPMS instead treats the APWF as:

\- an anchor for long‑run solvency and confidence,

\- a source of real returns that can be shared widely,

\- not a rigid convertibility rule that says “1 token = 1 fixed share of asset X at all times”.

That’s closer to:

\- a \*\*strengthened fiat system with a large public asset base\*\*,

\- than to a full‑blown 100% reserve or strict gold standard.\[11\]\[12\]\[13\]\[10\]

\### 11.5 Comparison with other schools of thought

\*\*Austrian / hard‑money view\*\*

\- Prefers commodity‑backed or very rule‑bound money; strong skepticism toward discretionary issuance and credit expansion.

\- Sees bank‑driven credit cycles and central bank activism as key sources of malinvestment and bubbles.

SPMS vs Austrian:

\- \*\*Similarities:\*\*

\- Concern about credit‑fuelled asset bubbles and misallocation.

\- Desire to link money more closely to real productive capacity (via APWF).

\- \*\*Differences:\*\*

\- SPMS avoids a rigid commodity peg; it allows flexible money supply aligned with macro targets.

\- It uses public digital money and direct transfers as tools, which Austrians typically distrust.

\- It explicitly centers distributional outcomes and shared ownership, where Austrians generally focus on rule‑based “neutral” money.

You could think of SPMS as: \*taking the Austrian critique of bubble‑prone credit seriously, but responding with democratic public asset backing + inclusive tools instead of a narrow gold or 100%‑reserve regime\*.

\*\*Keynesian / New‑Keynesian view\*\*

\- Focuses on stabilizing demand with interest‑rate policy, QE, and fiscal deficits.

\- Treats bank‑created money as central but often sees asset distribution as secondary.

SPMS vs Keynesian:

\- \*\*Similarities:\*\*

\- Accepts an active central bank with an inflation/NGDP target.

\- Recognizes nominal rigidities and the need to avoid deep deflation.

\- \*\*Extensions:\*\*

\- Adds a large public asset fund backing the public balance sheet.

\- Introduces a retail CBDC to move from “QE through markets” to “QE / stabilization through people and productive channels”.

\- Embeds distributional metrics and capital‑ownership structure in the policy design, not as an afterthought.

In other words: \*Keynesian stabilization, but with an integrated balance‑sheet and ownership redesign\*.

\### 11.6 Implications in an AI‑driven world

In an AI world with high productivity and potential job loss:

\- Traditional bank‑centered money creation risks more K‑shaped outcomes:

\- credit and liquidity primarily flow to asset markets and large firms,

\- asset owners gain, non‑owners and displaced workers lag.

SPMS tries to flip the default:

\- A bigger share of new public money and liquidity reaches:

\- ordinary households (through dividends and direct transfers),

\- broad‑based risk‑sharing investment vehicles,

\- and productive infrastructure, not just stock buybacks and real‑estate speculation.

The asset‑backed CBDC:

\- strengthens the perceived solidity of public money,

\- gives the central bank precise tools to stabilize an economy where traditional wage income is less central,

\- and anchors the system in shared claims on real productive assets, which become increasingly important as AI capital dominates.

You still need all the other SPMS parts (wealth fund governance, risk‑sharing finance, competition policy, safety nets, etc.), but designing money creation and liquidity around a \*\*public, asset‑anchored digital rail\*\* is what makes it operationally different from both classic Austrian “hard money” and classic Keynesian “manage rates and deficits and hope it trickles down”.

\## 12. What’s missing / open problems

Even with SPMS, big open questions remain:

\- \*\*Global dimension:\*\* How do you avoid one country’s SPMS becoming effectively a giant capital sink, leaving others as mere data/raw‑material suppliers?

\- \*\*Governance and capture:\*\* How do you keep the APWF and the digital currency rail from being captured by the same elites or political factions?

\- \*\*Transition costs:\*\* Moving from today’s model to SPMS will involve losers (some asset holders, some parts of finance) and complex political fights.

\- \*\*Measurement and rules:\*\* How exactly to encode distributional metrics (wage percentiles, ownership shares, job transitions) into monetary/fiscal reaction functions?

These are non‑trivial; this post is not pretending to solve them, just to articulate a direction.

\*\*\*

\## 13. TL;DR for discussion

\- AI raises productivity and capital income massively, but may hollow out labor demand and wage bargaining.

\- Standard “inflation vs deflation” and rate tweaking won’t stop a K‑shaped outcome by themselves.

\- \*\*SPMS\*\* proposes:

\- a large AI & Productivity Wealth Fund,

\- a productivity‑linked public digital money rail,

\- risk‑sharing finance as a norm,

\- rule‑based broad sharing of capital income,

\- and macro policy that targets both stability and distributional health.

\- It borrows elements that echo Austrian critiques (anti‑bubble, real‑capacity anchoring) and Keynesian tools (active stabilization), but reorients the system around \*\*shared capital ownership in an AI world\*\*.

Would be interested in critiques along three lines:

1. What are the biggest macro inconsistencies in this design?

2. How badly would this disrupt existing financial institutions, and is that manageable?

3. Are there better ways to embed shared capital ownership and distribution into a high‑AI economy without killing innovation?