00:01
So, senior age is this idea that the people who operate and create currency make profit, at a very basic level, imagine that you're the central bank and you create a $20 bill.
00:12
It costs you a lot less than $20 to make that bill, but now you can buy $20 worth of stuff, right? so you get the difference here between value of money created, it minus the cost of creating money, right? this difference translates into real resources, right? every $20 bill you create can buy you $20 worth of stuff, but it cost you less than $20 to create.
00:49
So you come up with that, like you actually get some real purchasing power out of running the money system, right? nobody else can create money.
01:00
So it is the, i mean, amount you get from running the monetary system from printing and creating and expanding the money supply.
01:09
So we have a real inflation problem here, 100 % a month, which is well into hyperinflation, and we are interested in maximizing our senior watch, which is the profit we're making from the system.
01:21
So the question asks us to draw a laffer curve, and so a laffer curve historically applied to taxes, right? the idea being that...
01:32
That as you vary the tax rate, the tax revenue changes in a systematic way.
01:39
If you assign a tax rate of zero, you'll get no tax revenue.
01:43
If you sign a tax rate of 100, you'll also get no tax revenue because nobody is going to bother to work if you charge them 100 % in taxes.
01:53
So the first time you get 10 or no taxes because the tax rate is zero, the second time you get no taxes because a tax rate of 100 completely squashes the activity.
02:02
But at a tax rate of, say, 20%, you do get some revenue, right? some people choose to work and they pay their taxes.
02:09
So you get this sort of hump -shaped relationship between taxes and tax revenue.
02:17
Sometimes people call this squeezing the lemon, right? if you don't squeeze the lemon at all, you won't get any lemon juice...