The Americonian Economic Problem

The Americonian Economic Problem

By Auden Watts

1. Introduction

The United Friends of America has had an economy since the 2023-2024 school year, when the Americonian token was first created. This economy was formalized with the ratification of the Constitution and the formal establishment of the country on April 22, 2024. Interestingly, however, there is nothing in the Constitution that tells us how we should run our economy. In this editorial, I will attempt to explain what I believe to be the major issues facing the UFA's economy and justify my positions with fact and logic. I will also provide steps that the Government of the UFA can take to fix these problems.

2. What Kind of Economy Does the UFA Have?

In the context of a small state operating on the micronational level, such as the UFA, it is not particularly useful to apply terms such as capitalism, socialism, or feudalism when discussing economics, as these terms primarily deal with the means of production, whereas the UFA's economy has very little production [1] in the first place, only exchange of existing goods. (The vast majority of Americonian products are imported from the USA, and products are almost never substantially modified through labor before being sent to the market, with some exceptions.) Therefore, the UFA's economy is largely defined by how goods and services are bought, sold, and exchanged.

The UFA has a commodity-based market economy under the guidance of a democratic state with limited welfare programs. By 'commodity-based' I mean that economic activity is centered around commodities, and by 'market economy' I mean that buyers and sellers use [2] physical and virtual spaces within the UFA to facilitate the exchange of goods and services.

A commodity can be broadly (and insufficiently) defined as any good or service that can be exchanged with an identical one for an equivalent value. A one-ounce bag of Cheez-Its is a commodity, because it has the same value as any other one-ounce bag of Cheez-Its. How is the value of a commodity determined? Depending on what economist one consults, it could be the amount of labor required to manufacture the commodity, the scarcity of the commodity, the law of supply and demand, or any number of other factors. In the UFA, due to the factors described above, the value of a commodity is primarily determined by two things. The first is the law of supply and demand. [3] The second is the price of importing the commodity (i.e. its cost in USD) [4]. While the latter is influenced by factors that are far beyond the scope of this paper, the former can be more easily understood in an Americonian context.

It is important to understand that, especially with a young, stagnant, micronational economy, the law of supply and demand is not universally applicable. For example, in a situation where there is only one bag of Cheez-Its but many people want to eat Cheez-Its, classical economics would indicate that the price of Cheez-Its should skyrocket. However, this is limited by several factors, including the ability for Americonians to acquire commodities on the foreign market, the desire for the seller to avoid being seen as a dishonest salesperson, and, perhaps most importantly, the upper limit of what most Americonians are even able to pay for Cheez-Its.

While trade in the UFA sometimes takes place through bartering, the primary mode of exchange is money, specifically the UFA's national currency known as the Americonian token. The token serves broadly the same function as any other form of money, namely, that it serves as a medium of exchange between the buyer and the seller.

The token can be classified as a fiat money [5], but in some ways, it both is and is not. In the early days of the Americonian economy, the token was informally pegged [6] to the US Dollar at $0.15 per token. In October 2024, President Aiden Jacob redefined the token as being worth 10 tokens per one-ounce bag of Cheez-Its. Since the value of Cheez-Its is at least partially defined by the value of the US Dollar, this has essentially formalized the relationship between Cheez-Its and the dollar. However, the law of supply and demand is still at play, and the US Dollar value of a bag of Cheez-Its is meaningless compared to the amount that buyers are actually willing to pay for them or for any other commodity that is sold on the market. The value of tokens is developing organically over time, and it remains unknown whether the so-called "Cheez-It Rule" will remain useful in the future.

Currently, the UFA's economy remains in stagnation and dormancy. Trade has become less common every year, and if we are interested in seeing a prosperous economy, something has to be done.

3. The Public Sector

No organization has employed more Americonians than the UFA Government. Around the time of the UFA's major expansion within Charter Arts, the UFA employed civil servants in the National Organization for Voting Assistance (NOVA), DEMOCRACY! News, and the Token Manufacturing industry. It was not difficult for the government to pay these workers then, albeit low salaries by today's standards. As the expansion at Charter Arts ended and economic stagnation increased, interest in civil participation dropped to a low level that the UFA has still not recovered from. In response, President Jacob announced salaries for elected government officials. While the extent to which this increased civil participation has yet to be fully analyzed, it resulted in something else: an obligation. Now that government officials have been given a salary, it almost certainly cannot be revoked or even reduced without major backlash. 

Then, in April of 2025, Congress implemented a Universal Basic Income program. This program requires the government to distribute 150 tokens per month, nine months of the year. [7] UBI has been discussed in various countries as a way to help citizens cover their basic expenses. With its implementation in the UFA, it has resulted in a significant expense for the government, relative to the size of the economy. As we will see in Section 4 of this paper, there is a significant mathematical challenge posed by the cost of UBI.

4. Taxation or Money-Printing?

Because of the UFA Government spends money, it follows that it must therefore have a source of income equal to or greater than the money it spends in order to continue its operations. Presently this is not the case. It follows, thus, that without a source of income the UFA Government cannot cover its expenses. This is, unfortunately, the case. UBI payments have not successfully been distributed since 2026 Q1, and there are at least five outstanding payments per UBI recipient that the UFA Government has yet to pay. The same logic applies to elected government officials, most of whom have never been paid despite being legally entitled to payment since October of 2025. Clearly, this is a problem, and people are starting to notice. The government's failure to pay its expenses has led not only to distrust and apathy, but to the ostensible recipients of such payments voicing their discontent and threatening to sue the government.

The UFA Government must develop a source of income in order to rectify this issue. There are two feasible solutions: taxation and money-printing, and the answer is probably a combination of both. (Selling resources to other countries is not a viable option, as there is little production in the UFA and no other countries trade in tokens as of now.) Let us examine the benefits and drawbacks of both.

First, money-printing — that is, minting tokens with the purpose of circulating them into the economy by fulfilling mandatory payments. Very few economists would advise "printing money", but the UFA needs it for reasons that I will explain in the next section. The reader may ask, "Will this not cause inflation?" But it has no real reason to under our current economic conditions. Most commodities in the UFA have never been sold, or have only been sold a small handful of times, and thus cannot be said to have a set price. If there is no set price in the first place, the price cannot increase (which is what inflation is). In addition, even if prices did increase, it would only be a problem if citizens could no longer afford commodities with their wages, and they are not being paid in the first place. However, it is unsustainable to adopt a long-term policy of minting new currency to cover government expenses, as when the UFA's economy becomes more active inflation will become more of a risk.

Second, taxation. Nobody likes paying taxes, but everybody likes receiving useful services from the government. (Well, most people do.) It is impossible to find the magic number that will satisfy everyone, but government is about compromise. Therefore, we must work to find a tax rate that will not greatly upset the majority of the population but will also allow the Government to cover its expenses. As we will see in the next section, this is easier said than done.

5. The Americonian Economic Problem

The AEP can be described in a single phrase: There is simply not enough money.

Suppose there were 10 active Americonian businesspeople (in reality there are fewer) and each of them makes 150 tokens per month (probably no one has achieved this). Additionally, suppose the UFA's only expense is UBI, which is 150 tokens per recipient, for 10 recipients. These conditions have been greatly exaggerated to be more favorable for the UFA Government. 

What rate of taxation should the UFA apply? Let us choose 20% each month for now, although I imagine this would be higher than most people would be readily willing to accept.

In this scenario, the businesspeople make 1,500 (10 * 150 = 1,500) tokens each month, and the government collects 300 (1,500 * 0.2 = 300). The government needs to pay 1,500 tokens in UBI (10 * 150), but has only collected 300. The government falls 1,200 tokens short (300 - 1,500 = -1200). As a matter of fact, in this scenario, the government would have to collect 100% in taxes (!) in order to successfully distribute the payments.

When the numbers are changed, the problem remains. Suppose each businessperson made 500 tokens per month (an absurd number). Even in this scenario, the government still falls short by 500 tokens [8].

Essentially the equation is the following: Taxes - Expenses < 0

But this equation is not a law of nature, only a description of our current economic conditions. If, for instance, the income of sellers were to drastically increase and the number of citizens participating in the market were to increase as well, then a much higher amount could be collected in taxes. However, we will likely not see this emerge for at least a few quarters, and then only due to extensive and well-crafted economic policy.

6. The Path to Prosperity

If it is unsustainable to continue to mint tokens forever, and taxation cannot raise enough money at the moment, then the short-term solution is to add more tokens to the economy, whereas the long-term solution is to implement a taxation policy that will gradually grow to cover the government's expenses.

I have received word that President Aiden Jacob is implementing an executive order to mint 10,000 tokens. This is the first step. The real challenge is distributing these tokens in a way that actually encourages further economic activity and a revitalization of Americonian markets. Over the next several months, the UFA must forge the path to prosperity, restore the active market economy, provide essential services to its people, and bring an economy from stagnation to expansion and thriving. It won't be easy, but our government, under the guidance of the Economic Planning Institutional Center, will develop new and improved solutions for each problem and overcome every obstacle.

Notes and References

[1] The Britannica Dictionary defines 'production' as "the process of making or growing something for sale or use"(https://www.britannica.com/dictionary/production). Some economists may use more precise definitions, but this definition essentially covers the general usage of the term.

[2] While this behavior may not be particularly common nowadays, the structure still remains and has only been made less relevant by a general lack of economy participation, and thus the UFA can definitely still be classified as a market economy.

[3] https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-demand-equilibrium

[4] This applies less to items made by Americonians, such as handmade crafts, but the cost of the raw materials will likely be a factor as well.

[5] Fiat money is money not backed by a physical commodity. It has been the predominant form of money globally since 1971.

[6] Pegging refers to fixing the value of a currency against that of another.

[7] UBI Payments are not distributed in the months of June, July, and August.

[8] (500 * 10 = 5,000) (5,000 * 0.2 = 1,000) (1,000 - 1,500 = -500)