'generate' and 'permutate' are more semantically general words. To convey what you mean you have to add "on feedback with no additional input". 'imagine' or 'dream' fully includes this specific meaning: it is more accurate. The only difficulty is that we are not used to applying these verbs to non-animal subjects. It is just like going out of your way to say "the submarine propelled itself through the water" or "the plane propelled itself through the air" because you don't want to use the verbs swim or fly with inanimate subjects. Why the distinction in those two particular cases; I have no idea. Maybe we're used to seeing birds glide without moving while you don't really see fish swimming without that distinctive wriggling-flapping motion.
