Action Points

But we do not need to wait till all this can be done in one go. We can start by learning from the ‘Worgl’ and the ‘Chiemgauer’ experiments.

• Let the currency depreciate, say at about a quarter percent per month or three percent per year, and more importantly, also, take out or reduce the effects of the concept of ‘Interest’ from the System.
• Those who wish to save can do so. Banks would not pay interest on savings, but charge, say one percent, for providing service to keep it safe and secure and for other services. Money placed in long term savings accounts would not lose value either. Only money in checking accounts would depreciate. Banks in turn, would invest their funds for profit, just as they do now. But instead of putting them out at interest, they would have to invest in assets that undergo real economic growth. Denied interest, private investors would have to do the same. Economists see another benefit, today’s problematic distribution of funds based on the cost of getting money (interest), would be replaced with more efficient allocations, by the value of the goods or services themselves, just as in barter.
• Banks and the money handlers must have ‘skin in the game’. Thus, making it personally cost, not only the institution and hence, its depositors but also, the Banks management at all levels to share personally and proportionately in the losses of the Bank and thus take effective blame for any irresponsible lending or investment. Ofcourse, such losses should not be isolated cases but weighted appropriately against the gains in other cases dealt with by the same Managers. The old system of Private sector Banks operating at the district level with better Know Your Customer (KYC) norms should be encouraged.

“When you have got ‘skin in the game: you stay in the game. Oh! You get love for it. You get hate for it. You get nothing if you just wait for it, wait for it, wait!” – Alexander Hamilton

• All this would steer investments into productive assets and ventures and in the direction of a sounder economy. It might also, end the curious cycle in which the wealthy (who can lend) impoverish the poor (who borrow) through interest charges, only to have huge and inefficient Government bureaucracies then take money back from the wealthy through taxes and distribute it once again to the poor through their ‘sticky’ fingers.
• Let the State’s revenue come out of the depreciation of the value of currency through a tax on money. (Each month or year?) or, as a sales/ service tax on Consumption/ Expenditure (GST). It is well recognized that a tax on consumption is more equitable and easier to implement than a tax on income. Differentiate between ‘real’ wealth arising out of productive activities and ‘false’ wealth arising out of artificial property / nonproductive assets appreciation. Depreciate such ‘false assets’ at the same rate every time they are sold, through GST, thus adding to the State’s revenue. Nonproductive ‘rental’ income of any sort should also, be subject to such revenue collection, say at 5/6 percent.

Since such a consumption tax is collected as a value added tax (VAT) on every transaction that can be accounted for in the system (GST), it should ideally be as low as possible, say upto one percent for open food items and enablers, 5/6 percent for packaged foods and other essential items and 10/12 percent for all the other items. Such low tax rates will also, encourage better compliance. (See-”Equity in Taxation“& “Comments on I.T. and GST” & “Pricing & Taxation Policy – For Fuels & Other Enablers”). Let Central Banks, through marginal inflation and control of money supply, and properly regulated Financial Institutions be involved in all sectors, Agriculture, Business and Social for growth in the economy. (See – “Wealth, Market Economics and Entrepreneurship – the Case for,”).

Such a concept has the added benefit of being in compliance with the rules of the ‘Shariat Banking’ and should thus receive support from the major Financial Institutions in the Middle East and the rest of the Islamic World. The rule of Law should be a transparent and equitable means of being fair, both to the lender and the borrower. An economic system that does not recognize ‘fair play’ as a standard of human welfare risks collapse. The monetary financial system incorporating the features as recommended above would meet such a standard.

Conclusion

The present monetary system is biased towards those westerners who established it, and it also, suffers from many flaws that arise due to its variance from Nature’s Laws. We, in India, need to review the system and make it better suit our objectives and also, Nature’s Laws.

Nothing in Nature enjoys continuous exponential growth. The concept of compounding interest on money will thus continue to lead to ‘Boom and Bust’ cycles, each time reducing the actual value of money. Money has value only in circulation which will in turn encourage investment in productive assets and prevent depression and unemployment. Currency exchange valuation should be done on an equitable Green Standard. We should also strive to evolve Digital currency and proper valuation of the assets backing it, based on Blockchain technology to prevent any malfeasance. Purely digitally created assets are not properly assessable.

JAI BHARAT! – JAI HIND!

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