In modern economy we have the following players:
1) Government of the State
2) National Bank + Other banks
3) People
4) Business
5) External markets
Of course there are other participants – different churches and confessions, public organizations and founds and many others… But their goals are outside of the Economy, or they could be included into one of the 5 groups.
The current state of WorldEconomy can be shown like a simplified set of pyramids of state Money Turnover:
Legend:
Loans – different types of loans with interest, nominated in national currency
Taxes – different types of taxes, nominated in national currency.
External loans – loans with interest guaranteed by the State, nominated in foreign or local currencies (current popular mechanism of getting money into economy and to satisfy demand of foreign currencies in the State).
Foreign trade and investments – different types of external financial operations that form external trade balance of the state.
Problems we face in the modern economy:
- Misbalances and economical “bubbles”
- “Grows and Crisis” cycles that became “crisis-Crisis” cycles
- Uncontrolled growth of State Debs and high level of interest payments.
- Vital demand,together with the low level of income–causing non economical and non-effective supply. People growing foods for personal consuming, using home medical practices, barter, not getting education and not involving in the economy.
- Low level of Social security in some countries and cruel\unfair goods distribution.
- High level of personal debts and high cost of interest payments.
- “Trade wars” and “Currency wars” between States.
- Inflation.
- Uncontrolled external markets and unbalanced external trade balance.
- Unemployment.
These problems and conflicts can be resolved (and they will be) relatively easy, by changing the rules of interactions between the 5 players.
The future state of World Economy can be shown like this:
Legend:
Loans–different types of loans nominated in national currencies
Social financing – The form of regularly providing money to the people, to create economically effective vital demand as the basis inside the economy (to purchase minimal food, drinking water, clothes, to pay for social home, vital medical services, etc.).
Non interest loans – noncommercial loans for people (for education, house purchase, etc.), to create economically effective demand in the areas strategically important for the state.
Taxes– different types of taxes, nominated in national currency. These taxes could be greater than in previous model and should contain the share of the money turnover, to control the inflation.
Inflation balancing – the share of the Taxes that will be returned to the National bank and will not be included into the state budget, to control the inflation. Changing the level of taxes and the share returned back to the National bank will be effective instruments of inflation control and economy stimulation.
Currency swaps–operations of exchange currencies between the National banks. Good and simple way to balance and to control the sizes of external trade operations.
Solutions:
1) State debts in any form should be prohibited. Statescannot be players on the debts markets and cannot pay interest because this is economically senseless and bad. State should care about growth of economy and wealth of the population and not about risks of making and paying debts.
Existing debts should be paid, freeze, restructured or forgiven. Main goal is to remove pressure of existing debts and no making new ones. Money to economy gives National bank,foreigncurrencies will beobtained by swaps or external trade and investments.
2) Social financing and Inflation balancingtogether should be the major instruments to stimulate the internal demand, economic activity and to control the inflation. Because the National Bank interest rate is not effective in long term. Social financing gives money directly to the people creating economically effective demand. Taxes and Inflation balancing share, returned to the National bank, will take the extra money from the turnover and control the inflation.
3) Non interest Loans to the people can remove risk of personal bankruptcy and remain a form of stimulation of economical activity.
These simple actions will providesolid basis for economic growthto all countries. And will change economic relationship into the civilized form.
I consider these changes as good and actual.
Iplan to lobby this economic model in the Ukrainian parliament and propose it to all countries to resolve existing problems and came out of crisis dead end.
Feel free to contact me if you are interested and have any questions.
Bitukov Eugene Alekseevich
System Analyst/System Architect
Cell: +380963335258
eMail: bitukoffe@mail.ru
Skype: eugenea.bitukov