How to rebuild our Economy

Money should not grow on trees

Knowing a fact of life, there is nothing in this world that last for ever. The reason for that is, nothing is perfect. Our modern economic system is not perfect. The proof of that is the current failures that have the potential to recapture the growth of our children.

In our world today, we are captured by the chains of economic growth and monetary well being. Nothing seems worth it, if it's not worth the money. That's the methodology adapted by us to choose. And since we have the power to choose, then lets choose a system that rewards hard work and increases the growth of true value.

The truth about our economic system lies in the fact that it fails to adequately reward value created. Abstract occupations today are more profitable than others. This leads to the increase in price of the output generated and causes inflation.

There should be a system that can reward value created with respect to the need it fulfils. 

As generic economics goes to explain the price of a product to be directly proportional and positivity related to the demand for it in the market, it fails to take into account the amount of money circulated in the market and also fails to account for the uneven distribution of income, and these factors warp the prices and product demand forecasts. Hence the new system must ensure a correct distribution of currency in-line with the economic growth, and also the rightful distribution of revenue generated from value creation.

To implement such an economic system, there must be a simple and effective measure put through the nation or nations.

There mustn't be any artificial sources of income including

• Interest rates
• Future Trading
• Stock Trading
• Option Trading
• Forward Trading ect..

Any form of income that is accrued without creating value is to be eliminated.

Trading physical stocks and assistance in distribution and sales of goods and services produced is equally productive an activity as production itself. 

The moment artificial income is eliminated, we must ensure accurate valuation of the economy size and monitor/control the currency flow into the system. Some may argue that in today's times currency flow controls are implemented to ensure effective international trade, and i agree with them. This should be a strategic move that can succeed only if there revenue distribution is of a higher quality. 

Revenue distribution cannot be equal. This is simply because no man is equal. Revenue distribution should be based on value creation. The price of the value shall be accurate only if there is no man with black money, which is a tall statement. Nevertheless, this situation is commendably possible if there is no artificial income floating in the economy.

Such an economy shall be free from inflation, depression, and stagflation of the economy. Such an economy can only be tow things, it's either stable, or in a growth phase and I feel that both situations are much more desirable than our current inflationary, and in a few other economies - depression like states.          

    

Flaws of interest rates.

Illuminating the flaw in collecting interest on loans and capital had been the motto of this blog. If you have followed the past posts, you shall understand the concept of fake value in money, created via interest rates.
When an individual earns money, it's his share of the aggregate value of the economy in which he lives.

When interest comes into the picture, new currency printing complements it. Today the economy is controlled using interest rates. This is possible due to the floating nature of currency in the economy. The value of money is no longer fixed and fluctuates depending on the amount of dollar reserves present with the national bank. The crux in fixing value of money using gold or even so USDs seems flawed. Why should gold be a security when it cannot complete any of the human needs? Gold wont feed you, it wont protect you. The inflated value of gold has caused trauma and disaster in the economies of the world. Wars have destroyed civilizations in South America and outcome has never been sweet. The Spaniards today face the same fate as their ancestors did all those years ago.
Hence fixing a value using gold or USDs is not the correct methodology to ascertain currency value. And using interest as a bait to control the surges in economic development is also incorrect. Since money made via interest rates is not an exchange for value created, this money spent shall cause inflation of prices.

Understanding normal human nature shall help us gauge the realism of this argument. When a person has more money in his pocket, he will be ready to pay more for a service he desires. Observing an man that has earned his living, you will find that his evaluation of cost for a service or product is a lot more stringent than a man that has made money in stocks or earns interest without a lot of hard work.
The service in question here is being delivered by the utilization of time and effort and the provider expects to be paid for it. If this is bought by money earned with value created - it shall contribute to the growth of the economy. And if this service is bought by money earned via stocks trade or interest - it shall inflate the value of the service and cause inflation in the economy.
The volumes of interest earned in the economy today is huge. Europe is in grave problems because it felt that interest on their capital invested elsewhere shall result in satisfactory earnings and a secure future.

Today Inflation is controlled by increasing interest rates to reduce return on investment. During the period of boom, no cost of investment shall seem expensive. Inflation is caused due to artificial value created by income that is not a reward for value creation.

To protect the economy from the ills we are facing today, we must put a stop on interest rates and build the economy with stronger hands. Value must be rewarded and true value must never be ignored. Each man must perform his chosen duty well as no mans work is greater than the work of another.