Transfinancial Economics

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

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An Introductory Note.

At the time of writing this entry (January 2009)the existing kheper essay, or "paper" on TFE has not been updated due to a problem with the webmaster. This may change soon. It should also be said that it gives a somewhat "crude" understanding of the electronic inflation controls in comparison to what is presented here. TFE is also nearing basic completion, and new ideas may be added to it.

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

TFE should be treated as an invention rather than a political football. Updates concerning research progress can on occassion be found at the global justice movement.net discussion group.

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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).

Important to Grasp

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 enter quickly into general circulation. 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.

Indeed, in TFE we would have a more accurate, and more scientific understanding of the entire economy as money is mainly electronic data being transmitted from one bank account to another. As such it would be possible with the right programming(tracking, and identifying more transactions electronically on a banks computer) to get highly accurate data about how much of an inflation risk the creation of new, and non-repayable money could be.In other words, enough could be created, and transmitted with little, or no fear of genuine economic "damage." This more scientific approach would be much more advanced, and accurate than the usage of present day Economic Indicators.

It is also important to understand that there is a huge amount of "non-repayable" money in the existing economy;-

A. Loans are created electronically out of thin air by banks as loans. In other words, new money for the time being. Yet, loans are repayable via the slow paying back of the new unearned capital with its earned equavalent. This can be seen too as a means of reducing inflation levels as it is new extra capital into the economy.

B. 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.

C. NGOs receive, and give a large number of grants which again can be seen as non-repayable money. But like taxes it comes from an earned source.

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.

It is thus becomes clear that a certain amounts of money as grants if targetted at existing assets do not lead to serious inflation. The huge bank bailouts are an example. This like the loans ofcourse mentioned earlier are created out of new money but through a process of time are paid back by the taxpayer. This is absurd because if they do not cause serious inflation in the first place then why pay this unearned money via earned money from the people??

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 super-flexible direct electronic controls in dealing with any possibilities of serious inflation and even hyperinflation rather than interest rates, and taxes which would not exist.

Basic Ethical Arguments for the Creation of New Capital.

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.

Important Moral Arguments for Non-Taxation.

There are a number of key arguments for the abolition of direct, and indirect taxation. They are;-

i)Taxes raising is absurd especially as it is very possible for new non-repayable money to created, and transmitted safely into the economy using advanced computer programming.

ii)Everyone should be entitled to all their earned money as a human right.

iii)It is highly unethical to finance any misuse of government spending.

iv)People should be rewarded by a policy of Non-Taxation as they are the actual creators of real wealth.

v)Evidence suggests that many rich, and super-rich are finding loopholes to excape the taxman notably off-shore accounts. This means that people on lower incomes have to "subsidize" the well off so to speak which ofcourse is unfair.

Moreover, it has become very easy to transmit one account to other countries thus making the investigation by tax inspectors difficult in extremis.

vi)Quite a number of wars, and revolutions were caused directly, or indirectly by unfair taxes.

Possible Electronic Controls over Inflation if Necessary.

As already indicated inflation levels could be controlled directly without uncontrolled inflation leading to possible degrees of hyperinflation. Yet, this should be totally UNNECESSARY as indicated earlier because of how TFE is set up electronically to deal with money directly. Only enough would be created using scientific methods.

In TFE prices can self-adjust naturally as much as possible, and are hence supply, and demand are 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 (if at all necessary)which might lead on to some degree of serious inflation, or even hyperinflation. These could "indirectly" influence pricing depending on the situation.

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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. Like mainstream Neo-Classical Economics of free market enterprise TFE would require improvements now, and again where,and when necessary.

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Anyway, as with the present capitalist system prices would ofcourse be determined by business people. These by law would be registered electronically with the inflation department (replacing tax legislation)of a bank, or some similiar institution. Changes in prices would thus be electronically tracked whenever sales are made, and where necessary (if at all)temporary electronic price celings could be instantly created after the business customer is informed. As with todays world anonymous cash transactions would still be possible.

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 Demand Management.

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 (as indicated earlier)with the aid of business grants, and interest free loans along with advice from governments, NGOs, and certain types of businesses. With the possible degree of ACCELERATION OF CONSUMER DEMAND THERE IS ALSO A "CORRESPONDING" ACCELERATION OF SUPPLY.

c) Gradual transition of the economy to a transfinancial one to ensure that changes in demand, and supply can be dealt with successfully. Thus, tax over a few years would be phased out to zero.

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.

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. Yet, in former case this is unlikely to occur because uncontrolled inflation leading to hyperinflation is largely impossible.

g) The public could be encouraged to save more if the right financial incentives are there. This would help to "contain" money from general circultion BUT this should be unnecessary in this context.

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

From Competative 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.

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

Hence, capitalism would not be overthrown by revolution (as envisaged by Marx), or indeed, ofcourse via a global financial meltdown but simply discarded as a stage of automation, and technology would be reached making money itself redundent as a means of exchange. Such a stage of evolution would be undertaken by an enchanced capitalist system because by then its production, and marketing stategies would be fully in line with sustainability, and various green technology. This process would be aid with powerful financial incentives in the form of subsidies, interest free loans, and commericial grants notably in areas where there are little, or no obvious viable investments for profiting on.

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 though things may change ofcourse during the financial "meltdown".

Anyhow, banks (along with other "non-financial" companies)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 Major Implications of 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 priofit subsidies,interest free loans, and of course grants created out of new non-repayable money. Geo-engineering notably in connection with global warming could also become serious possibilities.

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 ofcourse.

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 without the need of income created by taxes, and/or by private long-term investments in the stock market, and other financial sources.

5. Grassroots 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 Co-operatives 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 plus certain relevant NGOs 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. At the same time, Positive Human Politics could be developed as a global paradigm which brings together as one the best, and most advanced democratic thinking into how a better, and more civilized world could be brought into existence. This subject is not discussed 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.

Robert Searle email address dharao4@yahoo.co.uk

Intelligent, and constructive dialogue is welcomed from anyone via email.

PLEASE NOTE. Apologies for any ind of errors in the above text if they exist.