Model Economy WIKI

John Gelles suggested a wikispace for designing our model economy.  The vision is suggested by Reece:  ”Transparency is the key to a new money model – a thousand minds working on the system just like the Linux computer model so that as glitches arise they can be solved through time. The money structure would be an evolving process moving beneath the watchful gaze of the ‘thousand eyes.’”  A start at a Model Economy Wiki is here –

http://model-economy.wikispaces.com/

11 Responses

  1. Robert Searle, on January 4th, 2009 at 12:59 pm Said:

    This might be a good idea.

    As far as I am concerned when the basic mechanics of my project of Transfinancial Economics are undertaken I will get them checked out by certain willing economists.

    I am also a preparing a highly informed book on the subject with the possible working title of The Non-Taxation Revolution; Financial, and Economic Reform, the Basis of Global Justice. Here, the word revolution in this context implies revolution in thinking. This book should take upto two years to write, and God-willing it may be published ideally by a mainstream publisher!

    Ultimately, a proper professional /campaign website would be created. This would probably have some commissioned papers (to begin with as well as an on-line Journal for Transfinancial Economics would be producted) on the efficacy of the electronic programming structure of TFE, and other relevant matters.

    Anyway, I do not intend to enlarge on this subject as I have other concerns to attend to at present. However, a plan, or strategy is being developed in which the public, governments, the banks, corporations, et al would be willing to help to turn TFE into a reality. This requires much thought, and obviously research. I feel an anti-bank approach is unlikely to work though I may be wrong especially in connection with the so-called global “meltdown”.

    I will also be updating the p2pfoundation entry on TFE shortly……………

    Reply
    • Ellen Brown, on January 4th, 2009 at 1:18 pm Said:

      I just put your TF in the table of contents to my wikispace. I can create a link and page for you to elaborate on if you like. You just have to join it. I’m not sure what that allows you to edit. I’d be happy if everyone could edit everything, but I’m not sure that’s how it’s set up. I’d be interested to hear!

      Reply
  2. W O PAYNE, on January 4th, 2009 at 11:57 pm Said:

    WE ARE SIMPLY GOING TO HAVE TO SOMETHING ABOUT THE PIRATES THAT HAVE TAKEN OVER OUR COUNTRY BEFORE THEY DO SOMETHING ABOUT US.
    I DON’T FEEL LIKE I OWE THEM A DIME BUT I BET THEY WILL COME LOOKING FOR WEALTH IN SOME FORM FROM ME. “AFTER ALL WE OWE 100 TRILLION DOLLARS” TO THEM.
    STOCK UP ON STAPLE FOODS. HAVE A WAY TO MAKE POTABLE WATER. OH, AND BUY A GOOD GUN AND BULLETS FOR IT. IT’S GOING TO GET VERY VERY NASTY…
    WHAT HAPPENED TO LAW ENFORCEMENT? WHERE THE HECK ARE THE COPS WHEN YOU REALLY NEED THEM?
    FIRST THE LIVING HELL OF FINANCIAL COLLAPSE THEN THE LONG LONG WAY BACK TO SANITY. SORRY…

    Reply
  3. jeepndesert, on January 23rd, 2009 at 7:25 am Said:

    i believe we need to jail the federal reserve, bilderberg, and cfr. we should confiscate the wealth of these criminals to pay off the debt and convert to a new public fiat currency.

    after we do a thorough job of jailing criminals, busting trusts, shutting down the soft kill systems, and shutting down corruption, i believe we should pursue a blend of anarcho-capitalism, georgism, libertarian socialism, combined with some utilitarian programs, such as social security and national health insurance, which could be made to function better.

    http://newworldliberty.wordpress.com/2008/12/05/why-thomas-paine-henry-george-and-the-fair-tax-are-important-today/

    http://newworldliberty.wordpress.com/left-libertarianism/

    Reply
  4. renzo cantoni, on February 4th, 2009 at 9:11 pm Said:

    Possible solution?
    Fractional Reserve Lending Banking and central banking are the essence of the crisis today and… future crisis. The media carefully avoid to focus on the fact that the fractional reserve system promotes global growth through debt growth only. Money is debt and debt is money and….the banking system privately owned is… the main money creator. This leads to a world of excessive debt which simply… cannot be anymore be serviced by the overall disposable income. The last few years were very symptomatic since we had basically $5 of debt growth for $1 of GDP output!!!
    This crisis is interesting since we never have seen such a convergence of negative factors on such a broad scale. What should not have been happening… is happening.
    Could have been it avoided? I think so. Many advisors and analysts have been warning for years over the dangers of excess leverage. Since such crisis take a long time to occur it is hard to predict when they will indeed take place and therefore their warnings have been silently ignored. It is a little bit like knowing that a big earthquake will strike California but .. when and .. we keep building over it. All central bankers have a clear view about the overall disposable income available and the leverage accumulated. You do not need to be a rocket scientist to figure out that the more debt growth is accumulated… the more instable the system might become. Another fact is also simple. Some sources point out that early 2008, total financial assets value was around USD 160 Trillions and Global GDP… $50-60 Trillion. Hard to believe that such GDP size can…. provide decent returns on such broad asset market.

    What are the problems of such system:

    1. Globally, growth is achieved through debt growth which is inflationary. Debt growth tends te become more and more inefficient along with the leverage process. Just look at the evolution of M3 and you will see that the growth debt ratio to GDP output has been running to USD 5 to 1 the last few years. The process of asset price inflation feeds itself until growth and returns prospects falters. Then the created bubbles implode and result in such crisis as we have today.

    2. The tax return or dividend to society will diminish since a greater share of you tax money will be used just to serve the interest on the public debt (rarely paid back)

    3. Many argues that inflation is “under control”. Partially true since the income distribution is not even so…depending on the items, the inflation impact might be higher like… higher premium on your health insurance will be costlier if you earn 1’000 than if you earn 10’000. In addition, inflation calculation has several methods which.. usually presents quite large differences.

    4. What I call “taxflation” takes place. I mean you need to spend more of your disposable income to maintain your living standard. Ex: you could drive freely on the highway, now you need to pay a vignette or a toll; the quality of the public school diminish and you need to spend your kids to private school but… still pay your taxes; you could park your car free in the street and now you need to pay; your insurance deductible was lower and now is higher, your airline ticket was all inclusive and now has some additional fees for fuel, security etc.. billed separately; the police response to an incident was quick and now is slower etc…the list is endless!

    5. Let’s suppose that the interest rates is 5%. This means that for about every 14 years USD 1. becomes USD 2. This means that every 14 years the whole money stock has been siphoned by the banking system. If you look at M3 growth, you will see it clearly.

    6. The system has structural instability built in. It means that even though this crisis might be the only true financial crisis you will go through in your life you need to realize that there is almost 100% chance for any individual with a life expectancy > 70 years to face such a crisis during his lifetime. This bears tremendous implications over the whole retirement and pensions system of any society without mentioning the destruction of wealth he could pass to his heirs.

    7. The system over time promotes actively income inequality. Facts and data prove that. Wealth and capital will always follow a concentrating path over time due to the essence of the system. The middle class in rich countries has been under heavy pressure and savings capabilities have diminished a lot. The impoverishment of the middle class is a threat to true democracy and the tax share to the states paid form the riches becomes higher which becomes an incentive to tax evasion and/or “management”. At the end …. Government resources become under increasing stress due to growing social demand and programs.

    8. The dependence on the financial system has proven to be extremely damaging. This has lead to the acceptance of absurd standards like “to big to fail” (AIG , Citibank…) which have incentivated the financial players in leveraging their balance sheet to extreme levels. No private citizen neither corporation has a blank check backing up. Only the financial institutions. (we do not need more regulation, we already have to much of it, we need a clear message that bank must go under when they do bad and I can assure you that they will make sure to keep their risk well appropriate. Have you seen any private bank in need of capital recently?)

    9. The goals and interests of the “banking community” responsible of most of the money creation process collide with the interests of society . It is clear that greed is a powerful driver which lead individuals, corporations and ohers entities to take wrong investments decisions and this will not change. However, the “banking community” is forced by its controllers and shareholder seeking higher returns to constantly leverage their balance sheet and therefore take too much risks which… results in systematic crisis as we have today. You will understand that a financial system roughly doubling size every 14 years (5% int. Compounded) becomes harder to manage on the long run and “oversized” in comparison to other sectors (just compare total market capitalization).

    10. Since government debts is one of the main factor o monetary growth due to its appetite for deficits …. it means that government share/size to GDP will only grow overtime reaching proportions which are just unbearable to the productive side of the economy. We can end-up having an oversized government and financial sector which can turn into a monster due to the multiplier effect of interests. The world is full of countries which face this problem like Argentina, Brasil etc…and… now developed countries are following the same path due the huge bailout plans.

    Central bankers and other government entities take excuse now that they have been just fulfilling their mandate but… they had the tools to foresee such crisis. The leaders and individuals behind the public curtain have just ignored common sense. One very simple indicator easily available is the measure of debt and debt servicing over disposable income. The other one is savings rate. Constant decline in savings combined with accelerate debt growth is a sign of important changes to come. You do not need to be a genius to see that and this information is easy to obtain. I am sure that if you were a bank owner… your lending standards would be stricter since… your money and your wealth is at stake.
    The interests of large financial institutions whose shareholders base are broad have been largely abused by the reckless conducts of many CEOs whose short term objectives for revenues and profits have proven to be creator of excessive leverage. They might argue that their decisions are based on risk models but risk models have proven to be wrong (se the Black Swan). Give me some data and I will create any model which will suits your needs. Just imagine…. creating a risk model against the costs of global warming… We could sell an insurance policy to all the cow farmers of the planet since their cows produce a few litters of methane (or just plain fart) every single day. What a “brilliant” idea… isn’t it? And the consumers pay the bill at the end (another example of taxflation)

    What alternatives do we have?

    Money is to the economy what blood is to the human body. We need money to keep the system working and history has shown that the world has already been through various severe crisis.

    My proposal basically eliminates the central bank and fractional reserves system as we have today.
    We would just keep an “independent treasury or T” which would issue money as needed for the good functioning of trade and the broad economy. Banks or so called new banks would be able to accept deposits on behalf of T. and would make some “treasury loans” to their customers instead. This Treasuries loans could be done based on excess “unused” deposits or by fresh new money issued by T.

    No interest would be charged but… a tax rate. let’s say you borrow 100k for 20y and the tax rate would be higher due to the length. let’s say 120%. So as a borrower, you owe in fact 220k payable to the treasury in 20 years.

    The so called new banks would receive a fee of let’s say 20%-30% of the tax rate imposed (not the principal).This would be used to cover their administrative costs, part of it would be kept as insurance or mandatory reserves in case they ‘ve done a bad job assessing the payment capacities of the borrower and a loss would be incurred and part of this 20% would be paid as “Tax credits” on the money of the depositors. The remaining would stay with the banks

    Private debt issuance and private loans could be carried out as well without any problems. They would just obey the same rules as the treasury loans. The tax rates would apply the same way but the investors returns could be higher since they would be no need for reserves and administrative costs provisions. All private debt issuance and instruments would need to be registered at some clearing centrals or banks which would centralize the fund cash flow. It is basically already the case for most debt traded instruments today (euroclear).

    The overall tax rates would be decided by a board (treasury board) in function of time and other policies like … a “tax curve” instead of a yield curve. The advantage is that it would avoid the compounded effect.
    In case the government needs to embark on spending program or needs to stimulate the economy, it could ask the treasury to issue more currency to fund its programs, use unused deposits excesses in the system , lower the tax yield curve and or even tax the excess deposits balance in extreme case. Bad government spending could create inflation… as it is today which is anyway a hidden tax. On the opposite, if it needs to cool down the economy… the government could raise the tax yield curve etc..

    Today’s tax structure, taxes income anyway. So you receive interests on your investments and pay taxes back. You receive dividends and pay taxes on them. Taxes are just an internal transfer between the private and public sector which has become more and more complex.

    There would be no need for income and capital gain taxes in such a system. Government funding would come from private and public domestic and international treasury borrowing, currency issuance and eventually a kind of VAT or sales taxes if really required. In fact sound financial public policies will be judged on how carefully they balance tax loans revenues with currency issuance and eventual VAT revenues. If governments are managed by reckless public servants… we get what we can observe in Zimbawe today.

    People might criticise the present proposal arguing that governments need to have a counterweight to such easiness as printing money when needed. True, but anyway… government do what they want anyway as we can see today. I would say that such proposal might shift positively the public attitude towards government. It could create a much stronger sense of collective awareness and participation to public affair in our daily life.

    Basically almost all present financial transactions carried out today could be replicated including derivatives securitization etc… but there would always be the “tax curve” to price the length of the transaction. We could even imagine different “tax curve” in function of the importance of the amounts of this “treasury loans”. Consumer “tax rate curves” could be higher; tax curve on speculative or financial leveraged transaction leading to excessive asset price inflation could be different etc…tax curve on lower income families, on real estate investments etc…

    It might seem too simple to be true but the fractional reserves system is simple in its essence. Such exposed proposal is much less inflationary on the long run since the compounded effect is not built in and IS SIMPLE. The issuance of currency or money would be done by the Treasury through the banks and banks would simply fail if they had done a bad job assessing the payment capabilities of their Treasury Loans customers.

    In addition, the system offers the advantage of simplicity by diminishing tremendously all the fiscal red tape and administration. This represents a huge productivity gain for all economic agents.

    International exchange would not suffer since the currency would remain fully convertible as it is today. Foreign debtors would just add to the tax base and excess reserves kept by foreign countries would be kept as deposits at the treasury or other financial institutions following the same treatment as any other depositor.

    In such system the economy does not need to constantly borrow to grow. Excess deposits (savings) and currency issuance can be used in combination with tax curves policies to warm or cool down the economy

    The above analysis of the present system demonstrates that the fractional system is an un-necessary tax on the whole society.

    In my proposal, investors relying on income would shift their habits. Capital is automatically put at work for productive incentives the best way it should. I deeply trust that such a proposal would give incentive to the capitalist and entrepreneur spirit which has brought many great achievements. Individuals and corporation will try to make the best of their money.
    Imagine that the functioning costs of the present economic system would be lowered (no need for tax accountants etc..)Investors would be mainly rewarded by dividends and growth. Lower returns on bank deposit would be compensated by the lack of income and capital gain taxes.

    People and corporations would welcome such a system which simplify and rewards their life without having constantly the obligation to leverage exponentially the overall economy to grow. Lower income people could improve their living standard at much more affordable costs too and higher income people would feel comfortable knowing that their wealth building process is being protected. In fact all economic agents would feel comfortable about their wealth accumulation process.

    The present system could be quite easily adapted. . Existing central bankers would turn into monetary growth and “tax curve” administrators with the responsibility to hold the true purchase power of the currency over time.

    It’s kind of provocative….(would need a few details to be worked out due to the globalization of finance) but seems sound, simple and fair. Savers and investors would be rewarded anyway and bad GVT policies would be sanctioned anyway (as it is today… at the end)

    Reply
  5. William Jackson, on February 7th, 2009 at 5:52 am Said:

    Silvio Gesell covered most of the issues with regards sound financial systems over 100 years ago. It is not for lack of knowledge that our current financial system is mismanaged.

    Reply
  6. Andrei Spassky, on March 19th, 2009 at 10:40 pm Said:

    THE NATURE OF MONEY, INFLATION AND DEVELOPMENT AND UNDERDEVELOPMENT.
    Hi, fellas!
    I put a post (doubled) on the main forum. Once again, I’m a Russian living in Cuba and I repeat, it’s good to see so many people concerned with serious issues, although there are a couple of things I see in common in the posts of all of you, people, because of being mostly Americans. First: fear to KARL MARX, although many of you talk about Revolution, taking over the Government by the people, etc. Second: your main area of reference is precisely USA; Ellen writes about historical experiences of other places and times, other of you make negative references to Zimbabwe, but no one truly discusses how the rest, or the whole, of the world works and how the economy and politics of American establishment determine the fate of political and economic evolution of other countries. What follows is a super-brief summary aimed at expanding area of discussion and thinking with the purpose of conceiving model of the global system that would replace the existing one and would prolong the existence of our species.
    Marx sees cycle of accumulation in 3 phases: 1) a capital is invested into acquisition of machinery (constant capital C) and into hiring the workforce (variable capital V); my update: Resources must be added here, both Natural and Recycled ones (NR+RR or R(N+R)) and Information; 2) workers produce merchanidise that includes all of the above + a surplus value; 3) the owner of the means of production (C) – the capitalist – puts the merchandise into circulation from which obtains the income to reproduce his own status and the capital for the next first phase.
    Like I was saying in the other post seeing the market in 3 dimensions means adding social one as the third to be quantized in income strata. Each income stratum is a market place on its own with an accumulation cycle on its own, although never completely independent. All the strata don’t accumulate the same, but each superior one is pushing downwards the next inferior one by squeezing out of it the surplus value it produces. The nature of inflation can be understood better if we dig briefly into the issue of development/ underdevelopment.
    First of all, scratch the image of development as of something vertical to be scaled up. It’s BS. We’re talking about DIVERSIFICATION in a rather horizontal sense of direction. THE NATURE OF MONEY is determined by its ingredients in the formula above. In the very beginning of “The Capital” Marx describes how a producer considers TIME and RESOURCES he put into manufacturing a merchandise as criteria to exchange it for antother merchandise first, and for the money-merchandise later in history. Now another update of mine to Marx’s formula (obtained from reading Andre Gunder Frank (1929-2005) and Brazilian economist Theotonio dos Santos (born 1936)): Marx was talking about INTERNAL orbit of circulation in the 3rd phase while talking about Europe. Today’s Third World has been imposed by force an EXTERNAL orbit of circulation: first Latin American elites were employing slaves on plantations ripping them off the TOTAL amount of the surplus value they were producing. Internal market was not an issue. All plantation production was being sold in Europe and later in the USA, and on the world market for the INDUSTRIALIZED WORLD today; at the same time the elites were importing luxury for themselves and the means necessary to maintain the repressive colonial state from abroad. They didn’t need to industrialize their own countries. So underdevelopment is not the first path to development, but a DEAD END. Andre Gunder Frank wrote (in 1966): “Today’s industrialized countries have never gone through underdevelopment, although may have had LITTLE development”. THE SOUTH OF THE USA HAD DEVELOPED THE SAME ECONOMIC STRUCTURES THAT LATIN AMERICA AND THE CARRIBBEAN. The reason for it was found by AGF as well: it’s the demand of the “civilized” North for the products of other CLIMATE zones. The 19th century slavery, same as today’s (although not official one), is not a defect, but A PRODUCT of the system and its consumption needs.
    The abolition obeyed profit reasons rather than humanitarian ones. The colonial structures, however, REMAINED THE SAME, although changed the appearances. Some industrialization attempts have been made on the peripheries. Their SUBdiversification have been determined though by the fact that IMPORTS KEPT REPLACING HISTORICALLY THE CREATION OF NATIONAL ECONOMIC POTENTIAL. The high class markets kept preferring imports which was limiting the diversification of national production and making go bankrupt. The salaries and the jobs were being sacrificed in favor of the debts to be paid for imported machinery. The guarantee for the debts was the production of the plantations and the mines which were organized from the beggining as CAPITALIST ENTERPRISES (AGF found that the first sugar cane plantations in the today’s ultra-underdeveloped Notheast of Brazil were financed by the Dutch banks; the Northeast of Brazil became first supplier of sugar to Europe as fast as by 1550). The most important thing to understand here is that today’s Third World’s poverty is not a problem of lack of jobs for all of those who need them TODAY. We’re talking about GENERATIONS OF WORKERS THAT HAVE NOT BEEN HIRED IN CREATION OF THE NATIONAL ECONOMIC POTENTIAL THAT HAS BEEN REPLACED HISTORICALLY FOR IMPORTS favoring thus diversification of today’s industrialized centers at expenses of PREVENTING it elsewhere. Want a proof? History of Paraguay, a land-locked country in South America, which had gone through the industrialization to the point of manufacturing iron-built ships in 19th century. Its regime has been destroyed in the course of the Triple Alliance War (1865-1870) in which also 2/3 OF COUNTRY’S POPULATION HAVE BEEN MASSACRED. Sounds familiar?
    Now, it’s well known that inflation in today’s Third World countries is measured by depreciation of national currencies in face of the dollar. Salaries are paid in the NATIONAL currencies, but neither they’re enough to pay the imports (C) for basic living neither can people find enough jobs in the middle of structural and chronical subdiversification. There is a DEFICIT of money in the lower strata. At the same time there is an EXCESS of money in the upper ones. Structural changes are needed to invest it all inside the country, so the elites simply change the national currency for the dollars in the banks to afford a new spiral of imports. That deepens the inequalities by pushing the lower income strata further downwards, and after the social rebellions of the starved peoples are sunk in blood, the following monetary “adjustment” institutionalizes the disaster left by the previous inflation spiral turn.
    Joseph Stiglitz said the Bush left the USA with a social structure similar to the one of Brazil’s or Mexico’s. He’s damn right. The banks out of control, the stocks played the role of the dollar in economies like Brazil’s or Mexico’s.
    What’s the way out of this? Turning the ENTIRE HUMANITY INTO ONE SINGLE INCOME STRATUM making the notions of class and species coincide. The product in offer is the survival, the products in demand are the environment (what’s left of it), human hands, brains and effort. No one works harder than the poor, but their work and the very existence are turned into waste. The elites buy ONLY WHAT THEIR NEED, but neither they let people have resources to survive by themselves. Resuming, yes, we’re talking about World Revolution. These are the general ideas to be filled with A LOT of details. People’ve got to have the power, but they also must be responsible with it. The responsibility is determined by the need of every neighbor, a close and a distant one, to survive. But don’t get lost in details either. The best to all of you, Andrei.

    Reply
    • Brook, on May 14th, 2009 at 2:23 pm Said:

      Marx was bought and paid for by the Illuminati, who dont mind different forms of control — as long as they have the ultimate control.

      Reply
      • therooster, on November 4th, 2009 at 6:53 pm Said:

        correct …..and what allows control is hierarchical structure. All “ism’s” of modern history have been “housed” in hierarchy. There was no other method outside of the information age.

        The key to understanding does not fall into the conspiracy camp and even the camp of intention, but on the axiom of what’s capable versus what’s not capable.

        Store of value and instant liquidity could not be integrated until the development of computer networks. We are no longer bound by “Newtonian economics”.

        Reply
  7. Robert Searle, on March 21st, 2009 at 9:33 am Said:

    Andrei Spassky,

    You seem to be implying the possible existence of a Basic Universal Income, or National Dividend as explained in Social Credit.

    I think you will also find the Venus Project of huge interest along with the Zeitgeist Movement that is now promoting it.

    http://www.thevenusproject.com/

    RS

    Reply
  8. Brook, on May 14th, 2009 at 2:19 pm Said:

    No one should underestimate how technology will change the landscape either. If we have robot servants beginning to take up laborious tasks, that changes the equation tremendously. You could imagine factories of robots that require few humans to manage.

    In such a society emphasis on education would be revamped completely. You would spend your time learning and discovering rather than laboring, and there is always a new horizon. We would be able to achieve our full creative potential.

    Reply

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