Robert Searle:

In Part Two of Transfinancial Economics, or TFE we will examine in more detail about the role of Facilitation Banks, or FBs, and also Electronic Transaction Monitoring, or ETM.

Facilitation Banks.

These would be quite different to the ordinary mainstream banks..even though they would probably be part of the existing banking system. They would have special legal powers to electronically create sufficient new non-repayable money as commercial grants to deal with large, or small-scale environmental, and/or social enterprise projects. There are a number of key features for FBs.

i) Application for funding must go through a highly rigorous, and credible decision-making process which must be publicly transparent, and involve any number of experts.

ii) If feasible, checks on the productive capacity of relevant companies to fulfill orders for a certain project should be carried out as far possible ideally. However, funding would always be available if there is a need to increase capacity. This is a subject which we will return to later as it is somewhat important.

iii) The actions of FBs are electronically monitored, and tracked by an independent body, or the Central Bank.

iv) Commercial grants awards could also be subject to close electronic tracking, and monitoring to avoid fraud. Special binding contracts could be involved.

v) Unlike normal mainstream banks, the FBs do not need reserves on which to base the amount of money they can create electronically. This is instead determined by the cost. In TFE this is known as the Resource Capacity Requirements, or RCRs.

vi) Unlike the International Monetary Fund, and its so-called “structural adjustments” FBs adopt a more microeconomic”bottoms-up” approach in which parts of the economy are dealt with rather than the whole! This can prove more effective than a macroeconomic approach.

Electronic Transaction Monitoring, or ETM.

As mentioned before, in Part I most products, and services have identified codes for accounting. For example, barcodes notably at many shops, and supermarkets play an important part in the retail industry in finding out which products sell well. Such data though at the point of sale could also be transmitted to the Resource/Inflation Authority. If a process like this came into being (and this does not always have to require barcodes, or written codes as indicated in Part One) for most if not “all” products, and indeed, services, a highly accurate profile could be created of the productivity of the entire economy. In other words, an accounting process existing largely in real-time.

The Restructuring of Businesses.

The aim of the ETM is essential to allow the massive increase in the electronic creation of closely monitored new non-repayable money as commercial grants without the risk of serious inflation. These could “nudge” businesses into incentivizing them into restructuring them into something environmentally friendly. This would most notably include the mass phasing in of low carbon, or indeed, non carbon technologies for their line of business. These should be largely automated. Interventionism by FBs, and governments via Facilitation Finance as indicated could prove vital.

It is important to understand that most businesses during the mass restructuring process would be largely on an equal footing as far as competition is concerned….as the opportunity to apply would be open to everyone.

The Relevance, and Importance of Resource Capacity Requirements in ETM.

To understand the need for Resource Capacity Requirements, or RCRs, becomes somewhat important when ETM exists. The fomer are the means by which we can access to a large extent the inflation risk of creating new monitored non-repayable money, or commercial grants for a business which wants to restructure itself.It cannot though fully discount the factor of uncertainty.

To understand the importance of productive capacity we need to take an example. As economies grow in terms of wealth they start to “overheat”. The key reason is because there would appear to be an increasing amount of money buying products, and services. However, if too much money is around the companies creating goods find it increasingly difficult to match demand. The reason in part for this is that their capacity to produce gets stretched. Hence, they start putting up their free market prices, and a situation may even be reached when shortages start happening.

In order to reduce the flow of money into the economy, taxes, and interest on borrowing can be raised. This may help reduce the “flows” of money in the real economy. A recession though may follow. Thus, the so-called business cycles ends, and later begins again when a low level of inflation is reached, and a new cycle of boom, and “bust” begins. To spur on this new economic growth, taxes, and interest may be lowered to encourge businesses to grow again, or be created.

Quite often economists argue about what are the exact causal sources of these business cycles are. With ETM we maybe able to find out exactly why based directly on the electronic transaction data transmitted to the Resource/Inflation Authority. Moreover, in TFE, taxes, and interest are gradually phased out altogether to be replaced by a whole series of direct electronic methods to reduce any kind of inflation. This could mean the end of boom, and bust.

In TFE, it would be possible to get an accurate picture of the productive capacity of companies relevant to a business wishing to seriously restructure itself via the powerful incentives of Facilitation Finance. it would have to disclose its new, and old suppliers. If their electronic wholesale, and retail transaction data are on record on the computers, or rather the supercomputers, then these can be examined. The actual supply and demand of their raw materials, and resulting products would with the aid of mathematical modelling be able to determine how much productive capacity may, or may not be necessary. This would infact involve a computer simulation in which new grants, or Facilitation Finance were created to see how likely the free market prices would rise (based ofcourse on the electronic price record of the company, or companies involved) . If there is little spare productive capacity the FB can step in with funding be it an interest free loan, or indeed, a commercial grant ofcourse depending on the importance of the restructuring process. Yet, in spite of this there is always the problem of uncertainty, but TFE is robust enough to deal with any economic problems.

The Use of Electronic Controls.

As transactions of products, and services are continually tracked, and monitored they can be electronically targetted by supercomputers by Resource/Inflation Authority. These supercomputers would be programmed to check all kinds of price changes. They would also instantly compare, and contrast prices of any set of like goods,and services to see if there are any inflationary risks. This programming is dependant on the quality of data given by barcodes, or commercial codes of products, and services. The following are the key controls.

i) National Inflation Adjustment.

This is when most if not the entire economy can have its money electronically adjusted instantaneously thus maintaining its purchasing power.

ii) Automatic Inflation Rebate.

When a price of a product being bought at a checkout is found to be above the inflation rate new money could be used to instantly adjust it to the “right” Free Market Price. This could be like a tax but the money taken at the point of sale is recreated electronically in the account of the retail company. In other words, it is temporarily taken out of general circulation where the inflationary pressures are being “felt.”

iii) Automatic Inflation Deduction.

This is when a temporary “tax” is created at the point of sale in which the inflated portion is instantly taken off at the point of sale. It is the opposite of the Automatic Inflation Rebate which for obvious reasons would be more popular.

iv) Instant Electronic Price Subsidization.

This is when a price of a product maybe below the inflation rate, and an instant subsidy, or adjustment is created, and transmitted back by the Inflation Authority to the relevant checkout after a computer check.

v) Electronic Price Capping.

Here, a maximun price maybe set by a government, or even by an FB in certain circumstances. If the price of production starts to exceed the maximun price, the producers would recieve instant financial help, or compensation where necessary. Ofcourse, electronic price capping should be avoided if possible.

What has been said so far should give us some idea as to the basic mechanics of TFE. There will always ofcourse be critics who will say that it is impossible, or that it would lead to continous “price controls”. Some would say that the ETM is like a command/control economy. But this is incorrect as captalism still plays its part, and would would still exist until everything were “fully” automated. It would then be that money itself as we as presently understand it would become unnecessary along with wage slavery . This would be the natural, and ultimate result of automation.

For more information about this “work in progress” project see http://www.p2pfoundation.net/Transfinancial_Economics