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Transfinancial Economics
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search Transfinancial Economics,or TFE is a concept for economic and financial reform developed by Robert Searle.
An Introductory Note.
At the time of writing this entry (January 2009)the existing kheper essay, or "paper" on TFE has not been updated as yet. This may change soon. It should also be said that it gives a somewhat "crude" understanding of the electronic inflation controls in comparison to what is presented here. TFE is also nearing basic completion, and new ideas may be added to it.
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TFE should be treated as an invention rather than a political football. Updates concerning research progress can on occassion be found at the global justice movement.net discussion group.
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TFE in a Nutshell
Transfinancial Economics or TFE believes that taxes, and interest on loans are no longer necessary in the 21st century.It realizes too that money itself is essentially electronic information transmitted from one bank account to another. This means that with the right programming it could be directly controlled in special ways. In the future it would be possible to have these transactions largely identified by special ID Codes.
They would notably apply to most retail goods, and services in the entire economy. This would mean that prices could be instantly checked at transaction, and transmitted via modified barcodes to the banks computers which would undertake instant inflation checks. With a largely accurate, and more scientific comprehension of the "content," volume,and velocity of transactions of the entire economy it would be possible with special computer programming to know how much new non-repayable money (along with existing earned money)could be created, and transmitted at zero, low, or high inflation risk.
At present, the above could only be achieved to some extent with little, or no serious inflation via "indirect" Economic Indicators. In TFE though we can produce a far more accurate macroeconomic account(so to speak) of the electronic workings of the economy so that new non-repayable money can be created, and transmitted successfully. This would ofcourse replace taxation, and many kinds of grants, and some of it could be used as interest free loans.
However, just in case things were to go awry, there are a whole array of direct electronic inflation controls which are far more flexible, and advanced than price controls of the past.All this is revolutionary because it would mean essentially that:-
a)New non-repayable money (largely monitored or otherwise, and possibly paid in instalments electonically)would be able to successfully increase productivity, and prosperity more quickly for businesses in a continous fashion. As such economic growth within a sustainable context would be able in the main to deal with the possible increase of consumer demand.
b)Special financial incentives where necessary would ensure that businesses become genuinely sustainable, and environmentally friendly. Those projects which are commerciallly unviable but vital to the world would receive the necessary subsidies, grants, and interest free loans created ofcourse out of new non-repayable money.
c)Charities, or NGOs concerned notably with high ethical issues,(eg. transparency in government, and business, human rights abuses, direct democracy,fairer wealth distribution, etc) and humanitarianism (eg.food relief, AIDs research, heart disease, etc) would probably be fully funded without need for fundraising
What follows is a more detailed enlargement of what has been stated here along with other relevant information.
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Tax Free, and Interest Free Monetary Reform
This is a brief "non-technical" introduction to a "new" futuristic monetary reform. It is called Transfinancial Economics or TFE, sometimes called Non-Taxation Monetary Reform.
It revolves around the concept that apart from earned money new non-repayable (ie.unearned) capital can be responsibly created, and transmitted (ie money is electronic in the main, and is sent electronically from one account to another) without taxation for democratic governments,and indeed, to a large extent fundraising by charitable non-profit NGOs. 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.
However,there is arguably more than enough earned money to change the world. Ofcourse, it would be highly ethical for it to be more fairly distributed, or rather redistributed as understood in a genuine socialist system. Yet, most of us realize this is unlikely to occur in the immediate future..if at all.
As such TFE recognizes this, and believes that the best way forward is the responsible creation, and tranmission to governments, and NGOs of new non-repayable money circulated along with its earned counterpart. This could be undertaken by an independent authority, and/or banks irrespective of whether they are private, or part nationalized, or indeed, fully nationalized. It is realized that greater financial empowerment lies with legal access to it when, and wherever there is a true need for it. The only other limits to success in such matters is effective planning, and relevant resources.
In normal circumstances, the creation, and transmission of new non-repayable money could lead in time to hyperinflation. Yet, this is unlikely in the light of "new" understanding which will be explained later. All the same though advanced computer technology and programming could be developed, and then used to deal with this instantly, effectively, and directly.
Important to Grasp
Before procceeding further it is vital to comprehend the following. There is no uncontrolled creation of new money unlike the cases of the Weimar Republic, the French Revolution, the Russion Revolution, the American War of Independence, et al. Rather it is notably targetted at productive social,economic, and political projects, and does not enter quickly into general circulation. This last point appears to be what happened in the past ultimately leading to devaluation of currency (ie. hyperinflation).
Thus, there would notably be a gradual rather than a rapid rise in consumer demand which would largely be met by businesses who would expand fairly quickly because they would have the extra money, and indeed, the help if necessary(ie. interest loans, subsidies, plus commercial grants created out of carefully targetted new non-repayable capital)to cater for it. As such natural shortages of products, and services would probably not feature.
Indeed, in TFE we would have a more accurate, and more scientific understanding of the entire economy as money is mainly electronic data being transmitted from one bank account to another. As such it would be possible with the right programming(tracking, and identification of most transactions electronically on a banks computer) to get highly accurate data about how much of an inflation risk the creation of new, and non-repayable money could be.In other words, enough could be created, and transmitted with little, or no fear of genuine economic "damage." This more scientific approach would be much more advanced, and accurate than the usage of present day Economic Indicators, and would have direct electronic data on how quickly certain businesses could meet demand with increased capacity.
It is also important to understand that there is a huge amount of "non-repayable" money in the existing economy. For example....
A. Loans are created electronically out of thin air by banks. In other words, new money for the time being. Yet, loans are repayable via the slow paying back of the new unearned capital with its earned equavalent. This can be seen too as a means of reducing inflation levels as it is new extra capital into the economy.
B. Governments give huge/small grants of non-repayable money to their various departments, and projects. Yet, in this case this is ofcourse earned money created via taxes.
C. NGOs receive, and give a large number of grants which again are non-repayable monies. But like taxes it comes from an earned source.
In the light of all this it is wonder that hyperinflation has not occured especially so when we realize that fantastical amounts are created by various types of "unproductive" financial "betting" known as derivatives!!(notably currency speculation). Yet, these are largely contained in the electronic virtual economy rather than in the real economy.
It is thus becomes clear that a certain amount of non-repayable money as grants if targetted at existing assets do not lead to serious inflation. The huge bank bailouts are an example. This like the loans ofcourse mentioned earlier are created out of new money but through a process of time are paid back by the taxpayer. This is absurd because if they do not cause serious inflation in the first place then why pay this unearned money via earned money from the people?
The above claims was something which was realized to a certain extent Clifford Douglas whou founded Social Credit. But in TFE there are also powerful super-flexible direct electronic controls in dealing with any possibilities of serious inflation and even hyperinflation rather than interest rates, and taxes. Furthermore ofcourse it should be repeated that with specially programmed, and advanced computer technology it would probably be possible to create enough money without serious inflation.
Basic Ethical Arguments for the Creation of New Money.
There are a number of key points which make the concept of new non-repayable money acceptable along with its earned counterpart.
i) All money originates from an unearned source of creation. As such from an objective viewpoint it has equal value to its earned counterpart as it would be legal tender.
ii) So-called Free Money already exists to a limited extent (eg government grants, donations, wills leaving money).
iii) Critics would like to point out that if new non-repayable money could be created, and transmitted without uncontrolled inflation it would mean that earning it in the first place would no longer be necessary. This ofcourse would lead to the collapse of the economy, and social chaos.
TFE though sees itself as a transitional, or evolutionary process in which we should have the mental maturity to realize that earning money is still essential until the time comes when "full"automation exists, and society becomed "jobless" in a traditional economic sense. It is then that new non-repayable money could play a vital role by helping to bring into existence "leisure-like employments" which would be possible either in a profit, or/and non-profit context. Ultimately, in some future time money itself would be abolished altogether. In other word,a hi-tech gifting economy similiar to proposals as the Venus Project developed by Jacque Fresco who notably draws his direct inspiration from Technocracy.
iv) Some critics would say that new non-repayable money is Funny Money. Yet, they fail to realize the fact that it already exists as most of the banks create it out of thin air as a loan which is repayable...
v) TFE should be seen as a kind of ethical economics because it sees money as having a High Human Value other than just a medium of exchange because its social, economic, and political implications are huge, and all-encompassing.
Important Moral Arguments for Non-Taxation.
There are a number of key arguments for the abolition of direct, and indirect taxation. They are;-
i)Tax raising is absurd especially as it is very possible for new non-repayable money to be created, and transmitted safely into the economy using advanced computer programming.
ii)Everyone should be entitled to all their earned money as a human right.
iii)It is highly unethical to finance any misuse of government spending.
iv)People should be rewarded by a policy of Non-Taxation as they are the actual creators of real wealth.
v)Evidence suggests that many rich, and super-rich people are finding loopholes to escape the taxman notably off-shore accounts. This means that people on lower incomes have to "subsidize" the well off so to speak which ofcourse is unfair.
Moreover, it has become very easy to transmit bank accounts to other countries thus making the investigation by tax inspectors difficult in extremis.
vi)Quite a number of wars, and revolutions were caused directly, or indirectly by unfair taxes.
Electronic Registration, and Electronic Macroeconomic Accounting
In TFE prices can self-adjust naturally as much as possible, and hence supply, and demand are elastic. This is vital within the present capitalist system.
Anyway, prices would ofcourse be determined by business people. These by law would be registered electronically with the inflation department (replacing tax legislation, and possibly in part overseen by the inflation authority of a bank, or some similiar institution). Changes in prices would thus be electronically tracked whenever sales are made, and where necessary (if at all)temporary electronic price controls could be instantly created after the business customer is informed. As with todays world anonymous cash transactions would still be possible.
Most products,and/or services (including notably most wage, and income levels)would have an electronic ID by law. Thus they form part of the Registered Economy. The Unregistered Economy though makes up a small part of the entire economy. It consists of products, and/or services which are difficult to price though a price range "system" could be used.It may ofcourse suffer some serious inflation in time, and may be subjected to possible registration, and hence temporary electronic controls.
In TFE the banks under inflation legislation would have special programmes to track the registered (ie identified) transactions, and the unregistered (ie unidentified)ones plus the volume, and velocity of their exchange for goods, and services. In other words, the bank would have a largely accurate comprehension of the entire working economy. On this basis special programmes would be used to ensure that new non-repayable capital could be created, and transmitted successfully. Moreover, for economists this would be a huge boon as it would be possible to gain direct, and accurate information concerned about forcasting the sustainable growth of the entire economy. This is revolutionary.
One way in which products, and/or services could be tracked electronically is ofcourse via barcodes which already exist. Special, or modified Scanners would pick up the data, and this could be sent to a bank. Thus, we would have instant up-to-date info on retail prices. This ofcourse would be a more advanced, and accurate way than notably using the Retail Price Index.
Another approach which could be included would be for a businessman, or woman to "cash" or rather more accurately electronically monetize the orders (as is the case today but we do not usually use such language describing the actual reality of the process!)for some product, or service with a bank. A condition for this is that what has been sold has to be declosed, and identified by a special electronic code for the completion of such transactions.
It must be made abundantly clear that we are not discussing a Command Economy but rather the reverse in which a Free Price System exists. Moreover, credible legislation must ensure a high degree of data protection, and be independent to a certain extent from so-called "Big Brother" beloved of conspiracy theorists.
Some critics may argue that such a system of electronic accounting is largely unnecessary. A simpler approach would be simply to create enough necessary money for governments, and most, if not all businesses mainly as grants, and to some extent as interest free loans. If this is injected, or rather transmitted largely simultaneously it means that businesses notably would be able to expand to cater for possible increased supply, and also with increased demand over a period of time.
In spite of the possible logic of the above governments, and indeed banks (who would incidently have powers not only to lend, but also to electronically create non-repayable grants at cost ) would probably regard a largely "blind" electronic system as too risky, and thus, the Electronic Macroeconomic Accounting would be seen as being more acceptable. This gives the authorities, and the financial istitutions a "psychological fix" that allows for the creation of new money in a successful, and measured manner without fear of serious inflation. This is further reinforced by the powerful direct electronic controls over inflation..if necessary ofcourse. This is to discussed in the next section.
Possible Electronic Controls Over Inflation if Necessary.
The following gives us some insight as to how registered products, and/or services could be subjected to instant inflation controls if necessary ofcourse. These measures are like price controls of the past but are far more advanced because
a)they are super-flexible,
b) they do not require a huge bureaucracy
c) they can give instant compensation, and/or instant subsidization
d) they can correct anything instantly if necessary, and thus any money lost as a result can be re-created by electronic means as money itself is essentially electronic data
e) they could if necessary fine people, and companies directly, and electronically from their banks accounts to ensure compliance to some aspect of inflation legislation.
There are a number of inflation controls as described below:-
i) Automatic Inflation Adjustment.
This is when the inflated portion of a product, or service is subjected to an instant inflation check at the point of sale, or later on at the bank. If whatever has been bought happens to be inflated to say 10% this amount is instantly created electronically into a subsidy which goes straight into the account of the customer. Thus, income, and nominal prices rise at the same time. This avoids serious devaluation.
ii) Customer Current/Deposit Account Adjustment.
This is perhaps the easiest method than i). Here, all bank accounts could be indexed-linked electronically to the changing value of money during inflation. Something like this already exists to a limited extent(ie index-linked products, or services).
In TFE new non-repayable money could be created electronically for the bank accounts of customers. This would give rise to the "money illusion" that one has more to spend, and buy. Yet, the bank account has been adjusted to take into account inflation,and thus, ones purchasing power remains largely the same as before.
iii) Automatic Inflation Deduction.
This is when the inflated portion of a product, or service is subject to an instant inflation check in which it is reduced to its real value. In other words, the "inflated portion" is destroyed. This can be seen by some as a "tax" but it is not because money in real terms (ie.its real value as opposed to its inflated value) retains its purchasing power as if nothing had happened to it at all.
iv) Instant Electronic Price Subsidization.
If parts of the economy have persistent price rises (though arguably unlikely depending on the type, or types of computer programming)this may disturb public confidence in the monetary system. It is thus beholden by banks, and/or democratic governments to set up a programme of instant automatic price subsidization created electronically ofcourse out of new non-repayable money.
This could in part pay for the inflated portion of the market price of a product, or service,(upto a "flexible" Price Ceiling) and the rest is paid for by the customer with earned money. Such an approach may be used if the prices are not only persistent but rise too quickly.
v) Possible Price Rises, and Price Descrease Subsidization.
This is another form of subsidization.It can play an important role in preventing,and/or reducing price rises.
As the prices reach a "flexible" electronic Price Ceiling they are encouraged to decrease their retail value otherwise they are fined progressively to zero. However, as a positive incentive to start dropping their prices a subsidy acting as extra profit is instantly created. This could well mean double, or even triple profit a small part of which is given as earned money from the customer,and the rest of it is the instant creation of new non-repayable money as a subsidy.
However, this could lead to some degree of overall price distortions in the marketplace but this could be sorted out by using electronic techniques. All this ofcourse is a small price to pay for an economy which is:-
a)free of taxes
b)free of interest on loans.
b) The greater possibility of commercial grants.
c) There are no "boom" and "bust" cycles but rather a continous process of growing prosperity. Thus, businesses benefit enormously in a Transfinancial Economy.
vi) Controlled Hyperinflation.
This should be totally unnecessary as it is largely if not wholly unacceptable, and of course ridiculous. This is when businesses deal amongst themselves in "hyperinflated" pricing. However, as soon as the money enters the bank computers it is reinterpreted into its real values rather than its "astronomical" nominal/inflated equivalent. Businesses would have to understand that this is just "a change of digits" in which the purchasing power is preserved without serious currency devaluation.
Possible Demand Management.
There are certain key areas which directly, and indirectly deal with the possibility of rising demand in some, or most sectors of the economy. These are briefly presented:
a) Gradual transition of the economy to a transfinancial one to ensure that changes in demand, and supply can be dealt with successfully. Thus, tax over a few years would be phased out to zero.
b) Rigorous checks on governments, NGOs, and certain businesses(especially those concerned with sustainable technologies) to ensure that transmissions of new non-repayable money (where necessary)is going to projects which are backed up with good planning, and enough relevant resources.
c) It would be possible to know whether certain important resources are under threat by using data instantly collected from registered transmissions monitored by the bank computers of certain transactions (via mandatory ID Codes). It, and/or some other legal body (ie. the national inflation authority)may step in to suggest alternatives, and/or cease production as soon as possible of the company concerned, or else face unlimited fines directly from its business bank account.Compensation for loss of business would be possible.
The above gives one an idea of possible demand management in an interest,and tax-free economy in the modern world.
From Competative Capitalism to more Advanced Socio-Economic Alternatives.
It should be said that capitalists would make much profit in Transfinancial Economics especially in the first few decades of its introduction. But, later on it would become increasingly difficult to find new business opportunities as they would be very thin on the ground (ie. resource scarcity). Thus, take-over bids may become increasingly common for existing commercial enterprises (but special NGOs, and possibly willing governments could buy up such assets as they would now have the financial clout as never before). At long last capitalism, and capitalists will realize that money in itself cannot be the answer to everything if the relevant resources are not around for them to profit on. Infact, this will cause more problems than it would solve!
At the same time through extensive education especially of the young possibly via certain NGOs concerned with democracy,altruism, fairer distribution of wealth and non-competative/co-operative forms of "capitalism" and other economic alternatives. The present capitalist system would probably ultimately phase itself out altogether. In other words, a process of evolution.
Hence, capitalism, and its elite would not be overthrown by revolution (as envisaged by Marx), or indeed, ofcourse via a global financial meltdown but simply discarded as a stage of automation, and technology would be reached making money itself redundent as a means of exchange. Such a stage of evolution would initially be undertaken by an enchanced capitalist system because by then its production, and marketing stategies would be fully in line with sustainability, and various green technologies. This process would be aided with powerful financial incentives in the form of subsidies, interest free loans, and commericial grants notably in areas where there are little, or no obvious viable investments for profiting on. These would be created out of new capital.
Interest-Free Monetary Reform.
Apart from what has been said above radical monetary reformers tend to concentrate on banks.These commercial enterprises create most of the money of the world out of thin air as a loan, or credit with interest of course. Cash produced by governments only make a near non-existant portion of the present financial system. The aim of the monetary reformers in question is to try to bring about interest-free loans which would be beneficial to society, and the economy. Obviously, this is unlikely to happen due to the power of the banks but things may change ofcourse during the financial "meltdown".
Anyhow, banks (along with other "non-financial" companies)could continue to lend at interest but this would not be paid for by the customer but rather by an independent public body. However, when other highly profitable forms of business emerge then these can replace the creation of interest free credit, and only non-repayable money could be created at an "operational" cost. Moreover, banks would receive payment for carrying out the electronic inflation controls on a daily basis. The same would be true for their transmission of grants which could be made cheap, or expensive to produce electronically.
Some Major Implications of Transfinancial Economics.
These can be briefly listed:-
1. There would be a huge process of acceleration towards the research, and possible use of sustainable technologies backed up by profit subsidies,interest free loans, and of course grants created out of new non-repayable money. Geo-engineering notably in connection with global warming could also become serious possibilities.
2. Transnational Corporations especially in the Third World could be transformed into truly ethical, and sustainable businesses with powerful financial incentives for change including profit subsidization on a massive scale ofcourse.
3. Universal healthcare would be possible irrespective of whether private businesses are involved or not.
4. Generous pensions would be possible for an aged population without the need of income created by taxes, and/or by private long-term investments in the stock market, and other financial sources.
5. Grassroots NGOs concerned with poverty reduction in the Developed, and Developing World would be better financed as never before to bring about positive change.
6. NGOs concerned with fairer wealth distribution (or redistribution) such as Binary Economics, and Co-operatives and the like would be financed as never before to become a greater influence on society.
7. Corporations concerned with oil production, and indeed, the arms trade could be bought up in stages by new non-repayable money. At present democratic governments plus certain relevant NGOs seem powerless to do much about them but with TFE we have a very powerful solution..................
Of course, there are other implications which we shall not go into here. At the same time, Positive Human Politics could be developed as a global paradigm which brings together as one the best, and most advanced democratic thinking into how a better, and more civilized world could be brought into existence. This subject is not discussed here.
Campaign Activism for Transfinancial Economics
In order to bring about the serious possibility of change from our present debt based economy of taxation, and interest to one which is not debt based a campaign would be necessary. However, a grassroots organization for the masses is unlikely to work though we may be wrong. Instead it is suggested here that a professional website would be set up to spread the word. It would be sent to people, and organizations that have power, and influence such as government policy makers,academics,financial companies, et cetera. This is probably the way forward.
The TFE website itself would include the following features.
i) A news update about the campaign progress.
ii) Commissioned papers (initially) by willing economists using econometric models to show the efficacy of TFE in technical terms, including detailed studies on Electronic Registration, Electronic Macroeconomic Accounting, and the possible Inflation Controls.
iii) An online Journal of Transfinancial Economics.
iv) A powerpoint presentation of TFE for downloading.
v) Any endorsements for TFE by any willing experts.
vi) Possible field trials of the electronic technologies involved in TFE.
PS A paper on TFE with direct references was actually accepted by a peer review journal. However, due to a dispute with the editor/publisher I withdrew it from publication, and at the time of writing (April 2008) a new version has been sent elsewhere.
Robert Searle email address dharao4@yahoo.co.uk
Intelligent, and constructive dialogue is welcomed from anyone via email.
PLEASE NOTE. Apologies for any errors in the above text if they exist.
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esoteric
October 2009 
Bob
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