[GJM] A New Summary of Transfinancial Economics

[robert searle]

Dear All.
 
          The first part of this reformed paper consists of a brief but vital introduction to Transfinancial Economics.
 
 
Robert Searle

Subject: TRANSFINANCIAL ECONOMICS..


A Brief Summary.

The following should give one a very brief overview of Transfinancail Economics, or TFE which then leads on to a more detailed article, or "paper". It is should just take a few minutes to read for those pressed for time. Also, please note that TFE at the time of writing this is a research, and development project.

TFE is also known as Non-Taxation Monetary Reform. It believes that new unearned money could be created for democratic governments both local, and national without raising taxes. Many NGOs, or independent non-governmental organizations could also be funded in a similiar manner either in full, or in part. Thus, in most cases, fund-raising, and donations should be largely superflous.

This can also lead to greater DECENTRALISATION of power from central government. Responsible direct participatory democracy at a local, and national level should be recommended as the way forward as politics, and politicians have clearly lost much credibility.

The creation of new unearned money without taxes, or fundraising would not lead to uncontrolled inflation, and devaluation of currency as this would be directly controlled by advanced computer technology. However, anonymous cash transactions would still be possible.

There is more than enough money to change the world. The problem notably for NGOs is LEGAL ACCESS to it. 

In TFE there is no redistribution of financial wealth, but NGOs concerned with fairer wealth distribution such as Binary Economics would be financially empowered as never before. Thus, their influence on public opinion would be far greater.

TFE is a TRANSITIONAL SYSTEM that would hopefully lead from the greed of competative capitalism to economic systems both large, and small which would cooperate with one another. Ultimately, as human nature evolves to a higher level of development, and understanding money as electronic transmissions, and as cash would no longer exist.Everything would be free on demand.

However, TFE realizes that the present competative capitalist system is too well entrenched in the society. As such it does not waste time opposing it but uses its new understanding of money in such a way as to allow it to flourish.  At the same  time, there is also the new financial empowerment of NGOs concerned with social, economic, and political reform. As such, they would be able as never before to speed up the pace of positive change.

Apart from the creation of new unearned money interest free loans could also be created. In TFE we are also dealing with a high, or higher growth economy. With the introduction of a tax, and interest free world research, and deployment of various simple, and complex sustainable technologies would be speeded up as never before to ensure that total resource scarcity cannot happen..

The possible social, economic, and political implications of TFE are massive. The creation of new unearned money can solve many problems including:-

i)The financing of pensions.

ii) Better social security.

iii) Powerful financial empowerment of NGOs concerned with corporate responsibility in connection notably with the environmental destruction, and the rights of workers. These   would be challenged as never before on an equal playing field.

iv) Huge high risk projects which may have great social,economic, and political value (eg. an environmental programme perhaps vital for the planet) would be possible with the creation of new unearned money.

v) The creation of more business grants, plus interest free loans allowing for continous material prosperity.

vi) If desired, more public services could be provided, and would be better financed.

vi) With the advance of automation the future will become increasingly jobless. Yet, with TFE it would be possible to have special businesses, and/or NGOs which could be created out of new unearned money. They would supply more advanced types of paid work which may be more akin to "leisure-type" pursuits than what  we have now.

The above are key examples of what TFE could, and would achieve. Success would also ofcourse crucially depend on excellent creative planning, and ofcourse, relevant resources.







Introduction to Transfinancial Economics. 

                 The Main Article, and Presentation.




This is a brief "non-technical" introduction to a "new" futuristic monetary reform. It is called Transfinancial Economics (TFE), or Non-Taxation Monetary Reform. It revolves around the concept that new non-repayable unearned money can be responsibly created without raising taxes, or even  fundraising 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.

It must be made abundantly clear from the start that TFE has nothing to do with the so-called New World Order, or conspiracy theories. What we are dealing with here is the positive progressive development of genuine open democracy which favours the voting public rather than the plutocrats.
 
Moreover, TFE is neither right wing, or left wing. Yet, it ultimately aims towards a fairer world.




Legal Access to Financial Power,and Decentralisation.


There are four main organisations that could responsibly order the creation of new money. They are as follows:-

i) National Government: This organisation instead of raising direct taxes on income, and indirect taxation on goods, and services could order the production of new funds in a measured way via special Treasury Banks which are genuine independent public authorities. Thus, programmes like the health service, the military, the police, social security, the law courts, and other expenditures would be properly financed. Reform of such concerns would also be stepped up as never before. Cost-effectiveness, and cost-cutting which can cause various social, economic, and political problems would become a thing of the past.

However, all this does not mean more government waste, or abuse of money. On the contrary, more powerful legislation would be introduced to curb this. Moreover, it must be remembered, and understood that such future democratic governments would not have a massive lump sum of tax money to draw upon. This would only encourage overspending but with TFE it simply created in a measured way, and only after scrutiny from the Treasury Bank which would have genuine legal powers.
 
Also,import duties,and taxes on tobacco, alcohol, et al would still exist but would  be re-defined as special charges, or civil fines. 

ii) Local Government: This organisation could under license responsibly order the creation of new money from a Treasury Bank without the need to raise  county taxes. Hence, various community progammes would be properly funded, and reformed where necessary.

iii) Banks: Believe it, or not these private commercial enterprises create virtually the entire money supply of the world..This will be discussed later.

iv) Charitable Foundations, or Trusts: Those which often supply grants to various non-governmental organisations, or NGOs would be revolutionised. Under license, they would would no longer have to rely upon the public, or wealthy donors, but instead could responsibly order the creation of new funds from Grant Generating Banks which would be independent of governments, and transnational companies, or TNCs. In turn, the resulting money would be given in full, or in part to various NGOs. Charities concerned with the Third World, heart disease, cancer, AIDs, and other humanitarian causes would more than likely be fully funded. Yet, other NGOs would only be in part funded by new money. The implications of all this for democracy, and humanity are stupendous.

With the greater financial empowerment of NGOs DECENTRALISATION of power from central government can be achieved. This point is especially relevant at the present time as politics, and politicians have clearly lost all credibility, and credible alternatives are desparately needed. The way ahead it would probably be the quick, or slow introduction of direct, or participatory democracy in which people could in a responsible, and civilized  manner create new laws, and amend existing ones via electronic voting. Ofcourse, this would be a revolutionary step forwards, and would with proper planning ensure that "mob rule" cannot take over, and ruin everything. Such a system would have to open, and transparent. However, present day democratic representative governments should still be reformable in spite of their bad reputations. 


The above represents the Human Financial System of Transfinancial Economics, or TFE. On the other hand, the Economic Financial System is where money is actually earned by people working as employees, or employers of a business. Both Systems interact with one another. It is important to understand that from an objective viewpoint unearned new money is just as valuable as that which has been earned many times over. In TFE we are trying to create a more advanced financial system which tries to put humanity first, rather than just money when it comes to important social, economic, and political problems. 

Ofcourse, finance itself is useless without effective planning, and relevant resources. This is true of goverments, NGOs, and indeed, everything else in life. But, at the end of the day no matter how advanced our social, economic, and political ideas, and reforms may be ultimately it has to be financed from somebody. This is the simple, and inescapable truth.

It is also important to understand that there is such a thing as a free lunch. Government departments receive "free" money as grants which they have not earned. Similiarly, a Will in which a beneficiary gets a large amount of money (though originally earned ofcourse) has been given it as something unearned. Thus, it is an example of a free lunch.



Inflation, and Advanced Computer Technology




Inflation can be defined as the persistent rise in prices. As money outstrips the production of goods, and services their retail cost to customers starts to go up. At the same time, this can lead to the devaluation of the currency. Thus, someone on a fixed wage may find that their cash buys less than before. In mainstream economics this basic concept of how prices rises occurs is referred to as Monetarism, and there are a number of theories on how excess money actually enters into the financial system.

In the past, there have been attempts to control inflation directly via policies on prices, and wages. These had mixed results, and were only temporary measures. At present, indirect methods to control inflation are used by raising, and lowering interest rates discussed later on.

Anyway, in TFE super-computers are used to keep an eye on serious persistent prices rises. It is a direct attempt at controlling inflation itself, and far more advanced, and effective than the old direct approach just mentioned.Essentially, the market continues to determine price, and wage changes. Such financial interactions are recorded on super-computers. However, if there is a serious persistent rise in inflation of  prices, and/or wages they are automatically fined. This appears on a bank statement. Moreover, the retail price 

The above has nothing to do with a centrally planned economy as understood in the old communist world. We are dealing here with a competative capitalist system in which Super-Price Flexibility is allowable, and possible. This is where one is given a higher range of retail prices for a product, or service which has to be registered under law (compulsory like Income Tax).Admitedly, a certain amount of price distortion may occur but with Super-Flexible Pricing this would be minimised.  

At first the introduction of direct electronic controls to tackle inflation effectively would be unpopular. It would require strong democratic governments to implement it. Yet, businesses will learn to accept it, and would find it by far more beneficial than taxation on their profits. Indeed, they would experience rapid commercial expansion. To further enhance the situation, business loans would be interest free too..

,Anonymous cash transactions would still be possible. As in our modern economy this makes up a near non-existent portion of the entire money supply, and thus, it would have little, or no effect on inflation. Products, and services (including certain wages)which have no obvious monetary value would be exempt from price registration. These too would have little, or no effect on inflation as they would only make up a small portion of the entire productive economy. However, most products, and services have to be registered by law.


Super-computers when properly programmed can ensure the value of peoples money when certain products, and services are purchased. To understand how this works a simple example should be enough. Lets say Mr. T buys product X which happens to be 10% above inflation then this very same percentage is created as new money, and is actually added to his bank account automatically. In TFE this is referred to as Inflation Interest.

Some people have wondered what would happen if there was an excess money supply that would outsrip the production of goods, and services. The answer is simple. Such "wealth" would easily be saved for the time being in deposit accounts indexed-linked to inflation. With rapid economic growth more, and more products, and services become available, and the "dormant" funds due to excess money supply would now be able to buy them. In effect, they would become part of the productive capacity of the country. 

Some people have suggested that the weakness of TFE is its reliance on advanced computer technology. Yet, we forget that our present banking system relies on it all the time. Out of necessity security is continually improved, and no hacker has yet (if ever) brought down the entire network permanently. If that had been the case we would have all known about it!

Other critics have pointed out the problem of privacy. Yet, is it really such a problem.....especially when we realize that in our present world it  hardly exists at all. In this respect, TFE is not necessarily going to make things any worse, or better as far as legal, and "illegal" access to personal information, or  privacy is concerned.

Anyway, there are many other aspects to this subject which cannot be discussed here, and at the end of they day would have to be ultimately hammered out by experts in economics, and information technology.
 

The Problem of Redistribution.


In TFE there is no redistribution of financial wealth. Rather there is a greater distribution of new money. The problem of re-distribution at the present time is that the money involved is earned, and based on the productive capacity of the country. TFE goes beyond this to make sure that most social, economic,and political programmes,and projects carried out by democratic governments, and NGOs are properly funded as never before.

Let us take an example of what we are actually saying. The Tobin Tax on currency speculation is intended to raise funds for the Third World, and if it were implemented the resulting monies would probably not be enough. On the other hand, TFE would be able to maximise funding initially created by the Grant Generating Banks.To do this by taxation, or by fundraising is unnecessary, and backward. The best, and most effective means of achieving these aims is to have new money created responsibly.

Ofcourse, people make the valid point that there is more than enough money to change the world many times over. The problem lies with LEGAL ACCESS to when there is a genuine need for it. This is the key point to grasp. 


THE MAJOR ANTI-TAX ARGUMENTS.


There are a number of excellent reasons for the abolition of direct, and indirect taxation. They are as follows.

1. It is now a gross absurdity to raise money through taxation when it can be easily created in a measured way by the relevant authorities without fear of hyper-inflation.

2. Everyone is entitled to all the money they earn, and as such it is morally wrong to have some of it deducted for tax purposes when it is no longer necessary.

3. It is highly unethical to fund any waste, and abuse of government spending.

4. Increasingly, the super-wealthy are finding legal loopholes to avoid tax, and as such they are not paying their fair share into the system. As a result all this means that the less well off are having to make up for the shortfall which is wrong. The situation is further made worse when  bank accounts can be easily switched from one country to another  thus making the life for the tax inspectors hell. 

5. It is we, the people which create the real wealth of the country in  the form of products, and services. Why then should we continue to be ripped off by a tax system when we can now at long last be rewarded by a democratic government with a policy of Non-Taxation? Why should we continually have to pay for everything?

6. Many wars,and revolutions have been directly, or indirectly caused by taxation. Its abolition would be popular, and a potential vote winner....



Interest Free Monetary Reform.


At the present time radical monetary reform is concerned with the power of banks. These private commercial companies create virtually all of the money of  the world as loans, or credit.  Governments issue the rest as coins, and paper (even though they can pay the banks to it!) The banks though produce it "out of thin air" by simply adding figures of a higher monetary value onto paper, and computers. Strictly speaking, there is meant to be a limit on how much they can create, and this is based on "money"  kept in reserve. This whole set-up is called fractional reserve banking. The banks ofcourse make huge super-normal profits on their loans for commercial, governmental, and private use (eg. mortgages).

Some critics of fractional reserve banking have stated that it is a fraud in that it counterfeits the national currency. More seriously, it produces non-existent "funny money" which is unwittingly accepted by all, and sundry. As with TFE they are able to create new unearned money on daily basis but as something which is repayable.

Since virtually all of the money in the world is produced  by banks it is believed that changes in the interest rates of their loans may well be the real cause of inflation. When the economy is not doing well the interest rate on borrowing notably for businesses is reduced to encourage a high take up. This in turn means expansion of commercial enterprises, and increased employment leading to a general material prosperity. As more, and more money is allowed to circulate it has to be somehow reduced to avoid serious degrees of inflation. This is done by raising interest rates on loans so that they discourage commercial take up. This results in less business expansion, decreased employment, and a certain amount of economic depresson. The whole cycle is then repeated. 

Anyhow, the aim of monetary reform itself here is to have loans created without interest. This could put a complete end to the business cycle of "boom", or "bust" just described. Interest free loans would be highly beneficial for the economy, society, and politics.It would also mean that the banking system itself would no longer be a massive commercial enterprise. Instead, an independent public authority would issue interest-free credit.

The big problem here ofcourse is that the banks are very powerful indeed. They would take immediate legal action against any country if they felt that their huge global monopoly was being seriously threatened. One way then to successfully undermine their great  power is to use Simultaneous Policy. This is the modernization, and popularisation of an old concept. In it people can at election time vote for those candidates who are willing to accept their policy proposal. The aim here ideally is to get most countries to try, and implement it simultaneously. Such an approach could be used against banks who would have little, or no choice but to comply to their own demise as private commercial companies. This could make way for independent public authorities which would lead to an interest free, and indeed, a tax free economy.

More controversially, there is another approach suggested by TFE. Banks could still make super-normal
profits but without charging their customers. How? The answer lies with the concept of auto-profit companies. These receive new unearned money as profit. Their calculation is directly based on the business records of their clients. Yet, interest free monetary reformers would be horrified by such a proposition, but at least it could make the transition from a interest based economy to an interest free one alot easier.

This brings us to another point. Non-Taxation Monetary Reform (ie. TFE)is far more important that Interest-Free Monetary Reform as its social, economic, and political benefits are totally outstanding. The latter should be united with the former if it is to be truly successful, or have any real impact on the public. As such Interest-Free Monetary Reform is seen as being of secondary importance compared with Non-Taxation Monetary Reform. Thus, both proposals make up Transfinancial Economics, or TFE. 


Sustainable Economics, and Resource Scarcity.


In the present era we live in a high growth economy. Sustainable Economics believes that this has lead to over-production, and over-consumption. It suggests that people should simplify their lives, and reduce their wants so that little, or no more natural resources are used up. In other words, it sees the zero, or stationary growth economy as "the way forward." In such a world people would live in small self-organising, and self-sufficient communities consisting of family businesses, cooperatives, and a LETS alternative to money (discussed later). Food would largely be grown locally. Here, ofcourse, we are not discussing socialism, and redistribution of wealth but rather a fairer distribution of it.

All this sounds fine in principle but it would take many decades before it became a national, and indeed, an international reality. By then most, or perhaps even all resources would have been used up. The ideas presented in the last paragrah are understandable reaction to governments, and big business. It is an attempt to be free of them, and instead take on the laudable mantle of self-sufficiency, and a more simple, and easier form of life. Unfortunately, it does NOT change the big problems of the world. TFE is in the main concerned with this, and nothing else. Big changes require big ideas that must challenge the status quo no matter how difficult it may be.  

The reality is that in  the present high growth economy much of the earths wealth is being massively depleted at an unprecedented rate. Non-renewable oil, and coal are classic examples of this. But, all is not lost. New ideas, and green technologies are emerging which could help our planets plight. 
 
In TFE it is believed that sustainability is indeed possible in a high, or rather higher growth economy. With the huge influx of new unearned money, and interest free loans, NGOs, and businesses will be able to SPEED UP AS NEVER BEFORE  the research, and deployment of various "safe" complex (eg. nanotechnology), and alternative technologies (ie. wind power, solar energy, biomass, and wave power) to "save the planet." Moreover, such funding can come independently of governments, and transnational corporations, or TNCs.  In a like manner, future democratic governments, and even certain NGOs along with businesses would be able to undertake any gargantuan environmental (or non-environmental) project that might  be vital for the survival of the human race.

Space research itself could be stepped up to find any alternative resources on other planets that may be invaluable for our world, and environment. This would involve massive injections of capital to be worthwhile, and successful. Ultimately, other planets would be colonized.


The Third World, and theTransnational Corporations..

Year in, and year out millions of people mainly children die in Africa. This is a wholly unacceptable situation. To help relieve poverty a number of NGOs notably exist, but if they had legal access to continous funds they  would be able to do so much more. At the same time many lives would be saved from useless, and pointless death. With TFE this would be possible without public donations, or indeed, government aid. The ultimate aim of such Third World NGOs is to help the poor help help themselves. Also, there would be the funds to ensure that 


A key factor to the terrible poverty in Africa, and elsewhere in the Third World are the unfair trading laws, and the gargantuan power of the Transnational Corporations, or TNCs. The former does not fully allow the poor to export its goods to rich countries due to restrictions. Thus, they are unable to earn their way out of poverty. The TNCs themselves on the other hand benefit from this situation as it gives them  a virtual monopoly over the production of goods, and services in the Third World. This earns them billions as they can get everything on the cheap (notably labour and easily sell it to the rich nations). At the same time, they have caused a huge amount of environmental destruction which is is totally unacceptable.

What is needed are genuine enforceable international trading laws which favour the poor as well as the rich. This could happen via Simultaneous Policy already mentioned.


Another problem with the Third World notably in Africa is getting aid to the right people. Much of it has gone instead into the pockets of corrupt officials, and dictators.

It could be argued that a genuine Marshall Plan for Africa, and possibly certain other Third World countries may well be necessary. With Transfinancial Economics, the transition from  poverty to wealth would be alot  easier, and quicker. This help would come from the rich countries who would be able to fund the creation of new businesses with  non-repayable grants, and interest free loans. 

Moreover, the arms-trade which has sold many weapons to the Third World could be curtailed by future democratic governments. The massive profits, and the economic power resulting from this dispicable activity would no longer be necessary. The reason being is that future  democratic, accountable, and progressive thinking governments would no longer be slaves to the banks, and TNCs. They would have powers to responsibly create new unearned money via s Treasury Bank.  If necessary  they could fund new businesses with subsidies, or non-repayable grants, and interest free loans. Incidently, they would no longer have to borrow from private commercial banks but would simply create the necessary finance where, and when necessary. Thus, the National Debt would no longer exist.


Greater Equitable Income.

Though not as appalling as the Third World a certain amount  of poverty exists in the rich nations of the globe. With TFE there is always the finance available to governments, and NGOs to alleviate it. At the same time, there are a number of ideas which exist on paper, and in reality to deal with this. These include the basic re-occuring theme of people owning a fair share of the profits of a company as well as receiving a working wage. The Co-operative Society, and Binary Economics could be seen as instances of this. 

A more radical approach is the Universal Basic Income, or UBI. This is intended for everyone as a human right irrespective of their means. With TFE such a policy would be easily implemented. Another similiar idea which exists in the developed world to varying degrees is income support for those who are under-employed. Here, TFE could top up the amount of money people were getting in this manner. 

It is interesting to point out that the social stigma of being a "parasite" living off the state when receiving such benefits would disappear. In TFE there is no "robbing" of anybody via taxation. Significantly, any new money sent to the Third World  would loose its shame as it would no longer come from an earned source (ie taxation, donations,and fundraising)but from an unearned one (ie. the Grant Generating Banks).

Furthermore, pensions in the future could be funded properly with new money. Thus, those who have worked all their life for the economic betterment of the community would  benefit.

A more astonishing aspect of TFE is that special businesses, and and/or NGOs would have to be created in the future. With increasingly automation jobs would become very difficult to find until a stage is reached where most of the population is jobless. Instead, a new form of work would appear which may be more akin to "leisure-type" activity. This would all be paid for by new unearned money rather like the Auto-Profit concept described earlier on with banks. This ofcourse would be a revolutionary step forward, as it would mean that in the future people would still have money to buy produc


Non-Taxation Past, and Present..

Transfinancial Economics, or TFE is a a new paradigm in so far it is a modernization of an old concept. Self-supporting communities have always existed with little, or no taxation.

Social Credit which was founded back in the early 20th Century by Clifford Douglas believed in new money, or rather what it termed debt-free money. It claims that if sufficient amounts of it were created there would be no serious inflation. The key point to understand about Social Credit is that its debt-free money does not appear to replace taxation and is thus limited. .

A book with the misleading title of Public Finance Without Taxation by Ronald Burgess exists. It deals with Henry Georges economic  reform. This involves the notion that a rent, or rather more accurately, a property tax on land could be levied to fund governmental programmes. In other words, it does involve a form of taxation which contradicts the title of the aforementioned book!

Interestingly, an advanced socialist system has been suggested in which everything is run by co-operatives. Since all the wealth would be fairly redistributed there would be no need for any taxation. However, in genuine utopian socialism there is no money. Instead all necessary activities are done out of  service to the community. 

Abba Lerner the founder of Functional Finance appears to have believed that savings could lead to a situation of lower taxes, or indeed, zero taxation. John DeSantis, in Baltimore USA had a vision of economic reform in which taxes would not exist. His ideas appear on a website, but as he himself admits they require radical improvement by other people.Shauna Mckay has similiar ideas with her ideal of the Perfect System. Also, an engineer called Theodore Thoren used mathematics to claim that zero taxation was possible.

Ofcourse, in times of emergency, and revolution governments have been forced to partly, or even fully finance their expenses via the printing of new unearned money. Examples include the American War of Indepedance, the French Revolution, the American Civil War, and the Russian Revolution.

Finally, to end our section on TFE there is a claim circulating that  Benjamin Franklin  spoke  of  Colonial Scrip which was a successful monetary currency that was actually  free from taxation, and acted as the national medium of exchange. It could also be borrowed without interest. This financial arrangement occured just before the American War of Independence but research has yet to admitedly  confirm these claims.

Transfinancial Economics (ie.TFE), or Non-Taxation Monetary Reform does not pretend to be the ultimate panacea of all the ills of the world. But, it does claim to be a major force for change, and as such must be taken seriously.


SOME KEY REFERENCES.

Adams, Charles, For Good, and Evil; The Impact of Taxes on the Course of Civilization. Madison Books, 1999.

Bunzl, John. The Simultaneous Policy; An Insiders Guide  to Save Humanity, and the Planet. New European Publications, 2OO1.

Hertz, Norena, The Silent Takeover; Global Capitalism, and the Death of Democracy. Heinemann, 2001.

Rowbotham, Michael, The Grip of Death; A Study of Modern Money, Debt Slavery, and Destructive Economics. Jon Carpenter,1998.

Sabine, B.E., A Short History of Taxation. Lexis Publishing n.d.

Stanlake & Grant, Introductory Economics, Longman, 1995


Zarlenga, The Lost Science of Money; The Mythology of Money..the Story of Power. American Monetary Institute, 2002.