Transfinancial Economics

Transfinancial Economics,or TFE is a concept for economic and financial reform developed by Robert Searle.

            An Introductory Note.

At the time of writing this entry (April 2008)the existing kheper essay, or "paper" on TFE has not been updated due to a problem with the webmaster. This may change soon. I (ie Robert Searle) include the old link, and also a new one which gives a more up-to-date presentation on TFE (still subject to research, and development especially the electronic inflation controls).

             Old Link.

URL = http://kheper.net/essays/Transfinancial_Economics.html

            New Up-to-Date Link on TFE.

The following link takes one to my email post (April 2008)found on the Global Justice Movement.net discussion group.

[1]

Also, the next link gives a clearer, and arguably a more credible means of how to deal with the "final" reversal of price rises, and how inflation can thus be controlled. It too comes from a post from the the Global Justice Movement.net...

[2]

The above is entitled Price Rises, and Subsidized Price Decrease in Transfinancial Economics. The Key to Inflation Control (May 2008).

Tax Free, and Interest Free Monetary Reform

This is a brief "non-technical" introduction to a "new" futuristic monetary reform. It is called Transfinancial Economics or TFE, sometimes called Non-Taxation Monetary Reform.

It revolves around the concept that apart from earned money new non-repayable (ie.unearned) capital can be responsibly created, and transmitted (ie money is electronic in the main, and is sent electronically from one account to another) without taxation for democratic governments,and indeed, to a large extent fundraising by NGOs in many cases. This is a "revolution" in our understanding of money and the world. In the right hands, this concept could be one of the greatest breakthroughs of the 21st century and beyond.

However,there is arguably more than enough earned money to change the world. Ofcourse, it would be highly ethical for it to be more fairly distributed, or rather redistributed as understood in a genuine socialist system. Yet, most of us realize this is unlikely to occur in the immediate future..if at all.

As such TFE recognizes this, and believes that the best way forward is the responsible creation, and tranmission to governments, and NGOs of new non-repayable money circulated along with its earned counterpart. It is realized that greater financial empowerment lies with LEGAL ACCESS to it when, and wherever there is a true need for it. The only other limits to success in such matters is effective planning, and relevant resources.

In normal circumstances, the creation, and transmission of new non-repayable money in a measured way could lead in time to hyperinflation. Yet, this is unlikely in the light of "new" understanding which will be explained in the next sction of the p2p foundation entry. All the same though advanced computer technology and programming could be developed, and then used to deal with this instantly, effectively, and directly (explained later on).

        VERY IMPORTANT TO UNDERSTAND.

Before procceeding further it is vital to comprehend the following. There is NO UNCONTROLLED CREATION OF MONEY unlike the cases of the Weimar Republic, the French Revolution, the Russion Revolution, the American War of Independence, et al. Rather it is usually targetted at social,economic, and political projects, and DOES NOT QUICKLY ENTER THE GENERAL CIRCULATION OF MONEY. This last point appears to be what happened in the past ultimately leading to devaluation of currency (ie. hyperinflation).

Thus, there would notably be a gradual rather than a rapid rise in consumer demand which would largely be met by businesses who would expand fairly quickly because they would have the extra money, and indeed, the help (ie. interest loans, subsidies, plus commercial grants created out of carefully targetted new non-repayable capital)to cater for it. As such natural shortages of products, and services would probably not feature.

It is important to grasp the point that in our present economy that on a daily basis new non-repayable is being created electronically out of thin air by banks as loans. However, the slow paying back of this unearned capital with its earned equavalent can be seen as a means of reducing inflation levels as it is new extra capital.

Moreover, governments give huge/small grants of non-repayable money to their various departments, and projects. Yet, in this case this is ofcourse earned money created via taxes.

In the light of all this it is wonder that hyperinflation has not occured especially so when we realize that fantastical amounts are created by various types of "unproductive" financial "betting" known as derivatives!!(notably currency speculation). Yet, these are largely CONTAINED in the electronic virtual economy rather than in the real economy.

A realization of the above claims was something which was realized by Social Credit developed by Clifford Douglas. But in TFE there are also powerful direct electronic controls in dealing with any possibilities of hyperinflation rather than interest rates, and taxes which would not exist any longer.

Basics Arguments for the Creation of New Non-Repayable Money.

There are a number of key points which make the concept of new non-repayable money acceptable along with its earned counterpart.

i) All money originates from an unearned source of creation. As such from an objective viewpoint it has equal value to its earned counterpart as it would be legal tender.

ii) So-called Free Money already exists to a limited extent (eg government grants, donations, wills leaving money).

iii) Critics would like to point out that if new non-repayable money could be created, and transmitted without uncontrolled inflation it would mean that earning it in the first place would no longer be necessary. This ofcourse would lead to the collapse of the economy, and social chaos.

TFE though sees itself as a transitional, or evolutionary process in which we should have the mental maturity to realize that earning money is still essential until the time comes when "full"automation exists, and society may become "jobless" in a traditional economic sense. It is then that new non-repayable money could play a vital role by helping to bring into existence "leisure-like employments" which would be possible either in a profit, or/and non-profit context. Ultimately, in some future time money itself would be abolished altogether. In other word,a hi-tech gifting economy similiar to proposals as the Venus Project developed by Jacque Fresco who notably draws his direct inspiration from Technocracy.

iv) Some critics would say that new non-repayable money is Funny Money. Yet, they fail to realize the fact that it already exists as most of the banks create it out of thin air as a loan which is repayable...

v) TFE should be seen as a kind of ethical economics because it sees money as having a High Human Value other than just a medium of exchange because its social, economic, and political implications are huge, and all-encompassing.

      Electronic Controls Over Inflation Levels.

As already indicated inflation levels could be controlled directly without uncontrolled inflation leading to possible degrees of hyperinflation. It is important to understand that Price Controls, and Price Ceilings are avoided altogther, and used only as a last resort. Yet, if used they would be flexible as never before imaginabe in stark contrast to the past. Furthermore, they would probably be only a temporary measure.

In TFE prices can self-adjust naturally as much as possible, and are hence elastic. This is vital within the present capitalist system. There are a number of electronic methods which could be used to control, and contain inflation levels which might lead on to some degree of hyperinflation. These could "indirectly" influence pricing.

PLEASE NOTE that what follows on electronic inflation controls is still subject to research, and development. This would require help from willing economists, and computer experts.

i) Automatic Inflation Adjustment.

This is when the inflated portion of a product, or service is subjected to an instant inflation check at the point of sale, or later on at the bank. If whatever has been bought happens to be inflated to say 10% this amount is instantly created electronically into a subsidy which goes straight into the account of the customer. Thus, income, and nominal prices rise at the same time. This avoids serious devaluation.

ii) Customer Current/Deposit Account Adjustment.

This is perhaps the easiest method than i). Here, all bank accounts could be indexed electronically to the changing value of money during inflation. Something like this already exists to a limited extent.

In TFE new non-repayable money could be created electronically for the bank accounts of customers. This would give rise to the "money illusion" that one has more to spend, and buy. Yet, the bank account has been adjusted to take into account inflation,and thus, ones purchasing power remains largely the same as before.

iii) Automatic Inflation Deduction.

This is when the inflated portion of a product, or service is subject to an instant inflation check in which it is reduced to its real value. In other words, the "inflated portion" is destroyed. This can be seen by some as a "tax" but it is not because money in real terms (ie.its real value as opposed to its inflated value) retains its purchasing power as if nothing had happened to it at all.

iv) Instant Electronic Price Subsidization.

If parts of the economy have persistent price rises (though arguably unlikely depending on the type, or types of computer programming)this may disturb public confidence in the monetary system. It is thus beholden by banks, and/or democratic governments to set up a programme of instant automatic price subsidization created electronically ofcourse out of new non-repayable money.

This could in part pay for the inflated portion of the market price of a product, or service,(upto a "flexible" Price Ceiling) and the rest is paid for by the customer with earned money. Such an approach may be used if the prices are not only persistent but rise too quickly.

v) Possible Price Rises, and Price Descrease Subsidization.

This is another form of subsidization.It can play an important role in preventing,and/or reducing price rises.

As the prices reach a "flexible" electronic Price Ceiling they are encouraged to decrease their retail value otherwise they are fined progressively to zero. However, as a positive incentive to start dropping their prices a subsidy acting as extra profit is instantly created. This could well mean double, or even triple profit a small part of which is given as earned money from the customer,and the rest of it is the instant creation of new non-repayable money as a subsidy.

However, this could lead to some degree of overall price distortions in the marketplace but this could be sorted out by using electronic techniques. All this ofcourse is a small price to pay for an economy which is:-

a)free of taxes

b)free of interest on loans.

b) The greater possibility of commercial grants.

c) There are no "boom" and "bust" cycles but rather a continous process of growing prosperity. Thus, businesses benefit enormously in a Transfinancial Economy.

vi) Controlled Hyperinflation.

This should be totally unnecessary as it is largely if not wholly unacceptable, and of course ridiculous. This is when businesses deal amongst themselves in "hyperinflated" pricing. However, as soon as the money enters the bank computers it is reinterpreted into its real values rather than its "astronomical" nominal/inflated equivalent. Businesses would have to understand that this is just "a change of digits" in which the purchasing power is preserved without serious currency devaluation.

        Possible Increases in Demand for Products, and Services.

There are certain key areas which directly, and indirectly deal with the possibility of rising demand in some, or most sectors of the economy. These are briefly listed:

a) "Accurate" assessments of possible high demand for products, and services along with advanced ecological audits concerning the supplies of certain raw materials.

b) Commercial Back-Up with the aid of business grants, and interest free loans along with advice from governments, NGOs, and certain types of businesses.

c) Gradual transition of the economy to a transfinancial one to ensure that changes in demand can be dealt with successfully.

d) Rigorous checks to ensure that transmissions of new non-repayable money is going to projects which are backed up with good planning, and relevant resources (rather than little, or nothing credible).

e) Possible limited rationing of certain raw materials,and/or certain "non-essential"products instigated by Commercial Back-Up which would also have powers to compensate loss of profits where,and when necessary.

f) Due to possible high demand certain "non-essential" products could disappear altogether or deliberately taken off the market altogether.

g) The public could be encouraged to save more if the right financial incentives are there.

The above gives one an idea of possible demand management in an interest,and tax-free economy.

             From Capitalism to More Advanced  Socio-Economic Alternatives?

It should be said that capitalists would make much profit in Transfinancial Economics especially in the first few decades of its introduction. But, later on it would become increasingly difficult to find new business opportunities as they would be very thin on the ground (ie. resource scarcity). Thus, take-over bids may become increasingly common for existing commercial enterprises. By then capitalism, and capitalists will at long last realize that money itself is, and cannot be the answer to everything if the relevant resources are not around for them to profit on.

Through education especially of the young possibly via certain NGOs concerned with altruism, fairer distribution of wealth and non-competative/co-operative forms of "capitalism" and it alternatives it would ultimately phase itself out altogether. In other words, a process of evolution.

            Interest-Free Monetary Reform.

Apart from what has been said above radical monetary reformers tend to concentrate on banks. As mentioned earlier these commercial enterprises create most of the money of the world out of thin air as a loan, or credit with interest of course. Cash produced by governments only make a near non-existant portion of the present financial system. The aim of the monetary reformers in question is to try to bring about interest-free loans which would be beneficial to society, and the economy. Obviously, this is unlikely to happen because of the power of the banks.

In TFE this situation can be solved. Banks could continue to lend at interest but this would not be paid for by the customer but rather by an independent public body. However, when other highly profitable forms of business emerge then these can replace the creation of interest free credit, and only non-repayable money could be created at an "operational" cost. Moreover, banks would receive payment for carrying out the electronic inflation controls on a daily basis. The same would be true for their transmission of grants.

            Some Important Implications in Transfinancial Economics.

These can be briefly listed:-

1. There would be a huge process of acceleration towards the research, and possible use of sustainable technologies backed up by interest free loans, and of course grants created out of new non-repayable money.

2. Transnational Corporations especially in the Third World could be transformed into truly ethical, and sustainable businesses with powerful financial incentives for change including profit subsidization on a massive scale.

3. Universal healthcare would be possible irrespective of whether private businesses are involved or not.

4. Generous pensions would be possible for an aged population.

5. NGOs concerned with poverty reduction in the Developed, and Developing World would be better financed as never before to bring about positive change.

6. NGOs concerned with fairer wealth distribution (or redistribution) such as Binary Economics and the like would be financed as never before to become a greater influence on society.

7. Corporations concerned with oil production, and indeed, the arms trade could be bought up in stages by new non-repayable money. At present democratic governments seem powerless to do much about them but with TFE we have a very powerful solution..................

Of course, there are other implications which we shall not go into here.

PS A paper on TFE with direct references was actually accepted by a peer review journal. However, due to a dispute with the editor/publisher I withdrew it from publication, and at the time of writing (April 2008) a new version has been sent elsewhere.

R.Searle email address dharao4@yahoo.co.uk