“What is presented in this series of articles is a new paradigm known as Transfinancial Economics, or TFE. The word “Transfinancial” implies innovative funding which goes beyond (ie.trans) our present conventional understanding of money. TFE is not only an abbreviation for Transfinancial Economics, but also implies a genuine scientific dimension to the subject of economics. In science many key terms use abbreviations.
It should be added here that we will not discuss the Great Financial Crisis, or the pathetic state of mainstream Neo-Classical Economics. Both topics have been discussed ad nauseum in any number of media sources, especially the former.
TFE can be summed up as follows. Essentially, it believes that new largely monitored non-repayable money can be created electronically in a highly responsible way by future governments, and special banks to speed up, and reform the economy, society, and politics into something more ethical, and environmentally sustainable.With the right legal arrangement an initial limited form of it could be undertaken NOW such as famine relief without resorting to fundraising for earned capital from people. With the introduction of special electronic monitoring, and tracking (replacing interest, and taxation overtime), or ETM of the entire economy it would be possible to produce new money on an “industrial scale” without fear of serious inflation as special direct electronic controls would be in place. Ultimately, an advanced understanding of the productive capacities of relevant companies plays a vital role in determining the amount of new non-repayable money.. otherwise “sudden” unexpected demands for more production could lead to unacceptable inflationary pressures.
Part One: The Core Concepts of Transfinancial Economics.
TFE recognizes the basic reality that virtually all money exists as electronic information. It also recognizes the seeming reality that large sums of non-repayable money does not lead to serious inflation. Taxation could be seen as an example of this. It takes earned money from the people, and re-distributes it for various social, economic, and political “needs”. However, if the government overspends it can create bonds which are sold to mainly wealthy people, and institutions. This borrowed capital is returned to the lenders after a period of time with interest. Generally speaking, bonds are regarded as safe bets by investors because they know that in normal circumstances (excluding Greece at the time of writing) governments can raise taxes to pay off debts. Ofcourse, governments could as a last resort print money to deal with economic problems but this can lead to serious inflation, and even hyperinflation.
What people though do not realize is that huge sums of money are electronically created out of thin air by banks…but as something which is repayable. In other words, loans with interest ofcourse. This fact whether we like it, or not is supported by any number of statements made in economic textbooks, and other “respected” sources. It is generally referred to as Credit Creation. In it, the amount of new repayable money created electronically is “determined” by how much the bank holds as reserves. The so-called “reserves” are meant to act as security against any default by the borrower(s). However, the amount of money created electronically by the bank is often “many” times greater than the reserves.
Transfinancial Economics claims that it is possible for special Facilitation Banks, or FBs, and governments to create Facilitation Finance, or new non-repayable money, in a responsible fashion. However, both FBs, and governments if desired could also create interest free loans. If enough, new non-repayable money creation is carried out it will not lead to serious inflation. Evidence, and reason would seem to bear this out. It is notably indicated by the ordinary mainstream banks creation of it as repayable loans.
It should now be noted that there are four basic phases of TFE.
Phase I. The Emergence of FBs.
This is the essential first step towards the setting up of a new financial system. The remit of FBs is concerned with the responsible limited creation of new non-repayable money to fund in full, or in part mainly carefully vetted environmental, and social entrepreneurship projects. This would be a huge boom for the world because it would also imply that many social, and economic projects (especially climate change ones) which were formerly unviable could become viable concerns with Financial Facilitation from the FBs.
Phase II. The Phasing in of Electronic Transaction Monitoring (ETM) of National Economies.
Most products, and even services have special business codes of one sort, or another. This is mainly for the ease of accounting.
In shops, and supermakets barcodes exist, and are used extensively. At the checkout transactions are recorded. In TFE such electronic records are not only collected electronically by the shop, or supermarket but are also at the sametime transmitted to the Resource/Inflation Authority. Thus, such transactions at the point of sale could if they are largely identified (via a barcode, or by just a written code tapped into some form of accessible technology such as a mobile phone, or computer) build up a highly accurate picture of the entire economy. This is revolutionary. This would mean…
a) we would get a far more accurate understanding of the workings of the real economy
b) we would get a more accurate knowledge of how much resources are being used….
c) we would also be able to pinpoint serious inflationary pressures, which if necessary could be targetted, and controlled by direct electronic means. This could spell the end of the business cycle, or the famous boom, and bust scenario in economics.
What all the above means is that if we can have a highly advanced, and credible understanding of the real economy on more scientific lines (unlike the present dismal “science” of economics) we would also be able to know with great confidence how much new non-repayable money is enough thus avoiding serious inflation. This is explained more in Part II.
Moreover, in TFE taxation, and interest could overtime be phased out. In the latter case, interest could still be paid for in part, or in full by new capital rather than by earned money of the customer. Thus, the banks would not loose out. Ofcourse, none of this rules out uncertainty, or the irrationallity of the markets.
Phase III.Growing Automation, and Greater Financial Empowerment of Non-Government Organizations.
Phase II, and Phase III can be seen as being part of the transition process towards an advanced environmentally sustainable world. It would involve the total phasing out of taxation, and interest on repayable loans. This though would only happen if all, or most businesses have been seriously restructuring themselves into something truly sustainable, and environmentally friendly in every respect. To speed up such a process the FBs, and governments would have supplied the necessary capital to bring this about. This capital ofcourse would in the main be non-repayable (ie. Facilitation Finance). For businesses, such funding is extremely attractive because virtually no money is paid back during their restructuring. Moreover, when they are truly green they could well receive a Zero Tax, and Zero Interest Status.
During this transition there would be increasing automation, and greater unemployment. The present limited tax system would probably be unable to fully cope with the latter. Thus, Facillitation Finance becomes increasingly critical as time goes by.
Moreover, since we would have such an accurate understanding of the actual workings of the real economy it would be possible to get accurate data on the amounts of largely identified transactions as well as the supply, and demand from the Resource/Inflation Authority. This would act as the basis on which new money could be created for unemployment benefits. It could be accurately assessed without serious inflation along with any “top up”, and/or extra electronic capital for the creation of any social, economic, or political “employment” project, or NGO.
Of course, existing NGOs concerned with any number of social, economic, and political issues would be increasingly able to recruit more, and more people as access to funds from Facilitation Finance becomes increasingly available. This could represent a big step in the evolutionary process of humanity.
Certain NGOs may also work in possible partnerships with governments in connection with the education of the masses towards the changing of their social, economic, and political values in society. They would become increasingly influential. Their open agenda would include such ideas as happiness economics, altruism, internet campaigning, direct democracy, technology, decentralisation of power, political ideologies, challenging plutocratic power structures, energy efficiency, new green technologies, human-scale sustainable communities, et al.In other words, enlightened, and progressive thinking.
Phase IV. The Automated World.
The last phase of TFE involves the abolition of money. When the world has reached a “fully” automated stage wage slavery would completely disappear. Work as we would presently understand it would no longer exist, and human beings would be involved in “higher things.”
As far as is known TFE offers the first really practical transition plan for the world to become something far more advanced, and civilized as never before.
For more information about this “work in progress” project see http://www.p2pfoundation.net/Transfinancial_Economics