A new Economic System
“Economic ideas are always and intimately a product of their own time and place, they cannot be seen apart from the world they interpret. And that world changes – is, indeed, in a constant process of transformation – so economic ideas, if they are to retain their relevance, must also change”. A History of Economics: The Past as the Present, P.1. John Kenneth Galbraith.
A New Role for Central Banks and The New Economics of Global Monetary Velocity
The new economics of Perfect Market Equilibrium, as ‘intimately a product of’ its ‘own time and place’, (A History of Economics: The Past as the Present, P.1. John Kenneth Galbraith), is consequently better able to ‘interpret’ the new globalised world around it, over pre-internet theories of the insular economics of yesteryear, be they Keynesian or conventional Monetarist. Evidencing the extent of globalisation and the need for a new economics better able to interpret the new globalised landscape, the growth of the daily Forex Market turnover from US$ 1.7 trillion in 1978 to its current vastness of circa US$ 7.5 trillion in 2022, with a 60% increase in the last decade alone.
A New Role For Central Banks: Central Banks have previously entertained the role for themselves as all consolidating ‘Super-correspondents’, p.29, Bank of England ‘Cross Border Inter-Bank Payments and Settlement’, but unviable and impractical under their antiquated methodological wholesale approach, where the ever present issue of settlement risk is relayed in a magnified capacity.
Perfect Market Equilibrium and the new Perfect Netting of cross border payments changes everything to now allow global monetary flows to be indeed routed though Central Banks on an all consolidated and streamlined basis, not as ‘Correspondents’, but simply as ‘perfectly netted sovereign currency clearing account ‘Gateways’, which absolves them of all conventional risk and where the client side payments minutia associated with SWIFT no longer features.
The New Economics of Global Monetary Velocity: The radical new implications of this new vastly more efficient, simplified and settlement free construct, is that it invests Central Banks with new economic policy levers. With global monetary flows now transiting through this new inter-Central Bank architecture, the requisite monetary link is created between Central Banks for them to now control and regulate, as a collective, the velocity at which money circulates within the global economy.
The new economic lever of Global Monetary Velocity, is thus a new form of monetarism facilitated by the new Central Bank cross-border payments architecture and which is applied by Central Banks.
That the new electronic P2P Netting system, built into the new Fintech P2P Exchange mechanism, consequently instantly and perfectly nets cross border payments between domestic payment systems at real-time exchange rate factored values and on a new consolidated sovereign currency basis, allows the value of a remitting payment of one party to be redirected and re-allocated as a beneficiary payment to another party, within its own domestic payment system.
This firstly means global cross border payments can now effectively move as fast as domestic payment systems allow, effectively instant and secondly, as with conventional domestic banking payment system technologies, where payment value timeframes and dates can be pre-determined, so the new system allows re-allocated beneficiary payment timeframes to be pre-determined and adjusted at will.
This consequently provides for a new ability to regulate the velocity at which money circulates within the global economy, to increase or decrease the amount of money within it at any one time. As a new globalised monetarism of its ‘own time and place’, it is better able to ‘interpret’ and consequently accommodate the modern 21st Century globalised landscape.
Under this new monetarism, the velocity at which money circulates between economies can be further fine tuned and calibrated on a bilateral currency pairing or multi-lateral currency basis, and further by specific currency segment; personal or business, traded or cross-border payments, from which a new inter-Central Bank macro-economic policy can be co-ordinated on a global, regional, bilateral country and currency segment basis.
With global cross-border payment timeframes able to be adjusted and calibrated on a new instant, delayed minute, hourly or in extremis daily basis, all according to the newly facilitated inter-Central Bank monetarist policy relationship at a macroeconomic level, these new economic levers can be applied, whilst comfortably operating within the existing cross border timeframe performance capabilities of the disparate risk based and inefficient international inter-bank correspondent model.
It is impossible for the pre-internet and antiquated methodological evolutionary path of the centuries old interbank 'vostro nostro' wholesale construct to evolutionary structurally aspire to this new Central Bank monetary velocity lever. And this, not least also as a result of its post payment restriction of interbank settlement, which systemically imposes delays in the ultimate debiting and crediting of cross border payment accounts. The new construct has no such Forex and cross border payments settlement issues, in that both Forex trade and cross border payments, are a consolidated settlement free process!
The new global economics of this new monetarism, are thus not based on interest rates or the domestic control of money supply, and neither directed towards financial institutions, the efficiency of which some economists, notably JK Galbraith questions, but on the new mechanics of a new electronic global monetary system, which can be, by virtue of being digitally dis-intermediated P2P, electronically accelerated or decelerated on a new finely calibrated basis.
A new source of public Monies
Taxation and the Bond market, as the existing means by which society raises public monies for its upkeep, respectively dating back to antiquity and 1694, are fully pre-globalisation, pre-Forex market expansion and pre-Perfect Market Equilibrium methodologies and systems.
Economic systems, as a product of their times, have forever evolved, yet it might be advanced, failure of the existing economic system to evolve in line with globalisation, has placed society at odds with a dated one unable to meet its current needs. And this notably reflected in the fault lines of increasing systemic risk, ever more difficult to contain, extreme domestic and global wealth disparities and severe pressures on existing means by which public monies are raised, with debt to GDP ratios and taxation policies pushed to the limit and precariously balanced.
In this regard, the first structural economic effect the new global cross border P2P Perfect Netting system induces, through its elimination of interbank ‘vostro nostro account settlement and SWIFT, is to release trapped ‘Vostro Nostro’ account balance liquidities into the global economy. According to a 2015 McKinsey report, this would equate to a value of US $27 trillion, as a first release of concentrated wealth held by financial institutions into the real economy.
The second and vastly more significant structural effect, with respect to the re-routing of global cross border payments through Central Banks on a new risk free basis, is to place within their hands, the estimated global value of which, per the Bank of England, is $150 trillion in 2017, and rising to over $250 trillion by 2027. And this aside from monies from the new more efficient P2P Forex traded capability, which by virtue of having no positional risk, breaks up the existing risk based percentage commission trading model.
Under this new risk free P2P Forex trading model, a new fixed fee or subscription based revenue model can be implemented to undercut the risk based trade percentage performance revenue model of 'brokered' institutional Forex trading. And from these more permanently Forex traded monies lodged within Central Bank accounts, would the ability to extract new public monies in the manner of fractional reserve banking, be further significantly bolstered.
That the velocity at which primarily global cross border payments, aside from the more permanently lodged Forex traded monies, can now be electronically controlled and adjusted on a finely calibrated basis, to increase or decrease monies within the global economy at any given time, also provides for the extraction of a calibrated proportion of this money, as new public monies as it sits and transits through Central Bank accounts on a new Central Bank fractional reserve basis.
Depending upon the Global Monetary Velocity opted for, novelly determines the amount of money within the global economy and also the amount able to be 'fractionally reserve' extracted by Central Banks as new monies.
A faster velocity, to place more money into the real economy, but less money held in Central Bank clearing accounts, and conversely, a slower velocity lessening real economy money, but increasing the transiting account value held by Central Banks.
This provides Central Bank policymakers with a new mix of levers and options they can apply, with respect to prevailing global economic conditions. Radically however, it provides them with access to new monies from a segment of the global monetary system, which is now vastly larger than the Bond market.
The accepted conventions of Taxation and the Bond market are that there is always an offset or compromise. The greater the taxes levied, the greater the burden to society, and the greater amount of sovereign bonds issued, the greater society’s repayment cost.
The limitations of these conventions, it might be argued are the result of dated system capabilities of a bygone age. However, under this new technologically enhanced 21st Century Central Bank fractional reserve methodology, there is no offset or imposed burden to society, in that it simply taps into a new vast and ever expanding pool of money, Central Banks now have control of.
As a new economic system which meets with and is in concert with the new landscape of an integrated globalised economy, to address the shortcomings of pre-internet, pre-globalisation theories and systems, it is also a virtuous circle, in that the more the global economy expands, the greater the amount of new monies availed to society for its upkeep.
In its entirety, this is the new economic system's ability to meet with and release the promise of globalisation, under the dis-intermediated P2P market construct and Perfect Market Equilibrium, where once concentrated wealth and expanding economic risk fault lines no longer exist.
And this to spearhead a new ethical age of globalised prosperity and equality, where a fast tracked transition to renewables can also be funded by public monies in the interests of staving off the existing economic system's inexorable drive towards a climate change armageddon, through existing systemic public purse constraints.
This is the manner by which the new higher state of Perfect Market Equilibrium facilitates the transition to a new more efficient and equitable market structure and also a new sustainable global economic system, which preserves humankind and ecologic life on earth.
Changing the Ethos and Moral Compass of Markets
The ability to operate at Perfect Market Equilibrium, transitions core market valuation from a traded risk / reward construct to a new ‘neutral’ globally harnessed data driven one.
Dis-intermediation of the financial institution and elimination of risk in global market valuation, fundamentally changes the imperatives and driving forces at the heart of the free market system. Since the market’s core of valuation and operational efficiency are no longer governed or bound by the naked pursuit of profit, nor the liberalisation of markets, the ethos and moral compass of markets can be set on a new more tempered self interested, yet efficient course, which works in concert with society’s aspirations of a fairer and more egalitarian distribution of wealth.