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If It Costs 0, It Is Worth ...

By   Follow Me on Twitter     Message Shalom Patrick Hamou       (Page 1 of 1 pages)     Permalink    (# of views)   2 comments

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Now we have been for more than 18 month under the regime of the 0% target discount rate. We have injected trillions of money that never were translated in long-term investments (unless, of course, you consider gold a long-term investment, which I would dispute vigurously). We must draw the conclusions now and those are straightforward.

If the risk free rate is 0% it means that there is no individual or social value of incremental investments. It means simply that we have too much of them. Too much relatively to what? Relatively to the consumption capacity of the economy.

What we need now is to make the existing businesses profitable and then, on a longer run, create investments. If the existing businesses, that is mainly small businesses (but soon any business) are unprofitable how are you going to generate more investments? Certainly not by distributing money at a negative interest rate once discounted for interest rate risk (Quantitative Easing).

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What you need is to create demand for goods and services that means put money in the pocket of those more susceptible to spend it and less susceptible to save it.

It is unbelievable that interest groups and vested interest should ask for tax breaks for the rich when it is in their own best interest that we create demand for the goods they produce.

The argument by which taxing them would diminish investments is ludicrous: if it cost 0% it is worth 0%: right now we don't need any marginal investments: they have no social or individual value!

It is true that in the short run they will be richer if they don't pay taxes but definitively they will die on the long-run.

The good new is that they would pay less tax on the short-run but the bad new is that they will not pay any tax on the long-run: no loss ridden business or individual pay taxes!

In today's economy while investments have no marginal value consumption has a high marginal value. Contrary to the common prevalent ideology the banks are not systemic the consumers are!

We know that vested interests and interest groups will make it practically impossible to increase the taxes for the rich and institute an negative income tax for the poor and hence balance the budget and rescue the prevalent economy.

The Invisible Hand, as it is engineered now much prefer to look for individual short-term gain rather than medium term social gains even if it means your own death on the long-term (not that long, by the way)

We have hence decided that we had to implement a system that would provide for those who so wanted incremental jobs, consumption and later investments.

Participation in our system is on a voluntary basis and does not preclude participation in the prevalent credit based economy.

We will launch our system when we reach the figure of 240.000.000 registered participants. When launched registration will be closed and no one else will be allowed to take part.

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Registration gives the right and not the obligation to participate in the System when it will be launched.

The aim of our System is in no way to replace the prevalent Ideology or to replace any economic system existing in any country. Likewise its aim is not to establish a government but to provide much needed increment in jobs, consumption and, later, investments.

Of course this text is very controversial as the prevalent system is so pervasive that no one is presently discussing its validity although it does not pass the test of reality. What is Politically Correct is Mathematically Wrong.

We don't support either explicitly or implicitly any other Ideology: Economic, Political, Religious or Else. Others might support our System but being exclusively at the service of society at large and not at the service of specific individuals, special interest groups or vested interest we support no one.

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Not only we don't intend to destroy the prevalent system but we will in the process provide existing businesses with demand without which they would have to be liquidated.

Although the only goal of our system is to maximize the efficiency of the economy whose only goal should be the maximization of transaction and minimization of the risk that is beyond the reach of economic agents: the Systemic Risk it so happens. and will be a surprise to us that it also maximize the fairness of the system and minimize confrontational and violent behaviour. Although the main focus is to provide individuals with a system that maximise the social interest it can not be confounded with the prevalent view of Socialism as in no way do we preach for a centralism of investment decisions. Our purpose is not to replace the Invisible Hand by a Visible Hand but to make sure that the Invisble Hand favors the behavior that is coherant with our common good.

Economic discrimination of any sort result necessarily in diminishing the amount of transaction. In our pursuit of that optimization our system has been made anonymous and hence protects privacy and individual freedom more than any system that has been experimented or imagined.

Although the individual and social cost of implementing this System is ridiculously low, the social and individual cost of not implementing that system would be enormous: beyond the obvious economic consequences the world would get in a Formidable Chaos: we would experience social and political turmoils, heinous and violent discriminations, and military adventures as the history of the Great Depression has already taught us.

Our only risk is that we wouldn't succeed but we can't afford not to try.

Innovative Credit Free, Free Market, Economic Ideology

A Tract on Monetary Reform

Disclosure: No Positions


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I have an engineer diploma from Ecole Centrale de Lyon (France) and a MBA from Boston University. Since 1986 till 1994 I have worked as a broker dealer on the French Domestic Fixed interest market. Since the spring of 1994 I have worked on the (more...)

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