Split-Velocity Solutions, Outreach 1st February 2019
To begin with anyone familiar with central banking history will know that there was a time that central banks kept gold in their vaults to back the value of currency in circulation. However, the gold standard was inevitably discarded for the simple fact that the value of gold may itself fluctuate over time, furthermore a system like this restricts a central bank’s capacity to issue new notes and coins to the availability of gold and can be quite costly to manage especially when a government needs to apply monetary policy to manage growth in an economy.
The gold standard was abandoned for good reason. Instead of measuring the value of a local currency against gold, central banks today instead monitor natural fluctuations in economic growth and increase or reduce money supply. This controls inflation levels and maintains the stability of a local currency. But as can be observed in Zambia where in the past few years the value of the Kwacha has fallen from US$1 – ZMK8 to US$1-ZMK12. This system is not perfect. In fact, it doesn’t really work, simply due to the fact that the Zambian Kwacha, in this system, is indexed against the natural propensity for the economy to grow over a period of time. Consequently, any shocks to the economy, such as drought, electricity deficits, a drop in copper prices, fall in forex reserves will hammer the value of the Kwacha and BOZ will be forced to ride these trends. It will only be able to mitigate against them using monetary policy, which is why the Kwacha must inevitably lose value as a buffer against declining economic performance. Put simply this places BOZ at the mercy of trends in the economy since the value of the Kwacha in the current system is indexed against economic performance, in the same way that a fall in the international gold price would affect local currency were it on the gold standard. Furthermore, increases in money supply using monetary policy must be supported by economic growth. In other words before BOZ can increase money supply it must first observe an increase in productivity or output in the economy.
Why Split Velocity technology is more valuable than the Gold Standard and more efficient than conventional Monetary Policy
The Gold Standard limits the capacity to back a national currency to the volume of gold held in the vaults of a reserve bank, the price of gold and other economic factors. Monetary policy limits a government’s capacity to back its national currency to the economic performance which can be quite poor when growth in GDP is minimal as is common in today’s economies. A Split-Velocity model backs a government’s national currency with economic value equivalent to 100% of GDP. Neither the Gold Standard nor current Monetary Policy come anywhere near this kind of strength and stability. Consequently governments are better able to and have the resources at hand to withstand shocks to the economy and easily counter shocks that would push an economy into recession. Whether these shocks are caused by natural disasters such as floods, earthquakes or are technical such as shortages of electricity, unemployment and poverty that governments may have trouble resolving today a Split-Velocity model on the other hand will be able to thenceforth counter these kinds of economic shocks with relative ease giving central banks the tools they need to support government.
A Split-Velocity Model is the first system or technology that allows central banks to control economic outcomes. For instance, whereas the Gold Standard is limited by the value of gold and amounts of it held in reserve; and Monetary Policy is dictated to by natural trends in economic growth over time, a Split Velocity model is not as weak or redundant as any of these approaches. It does not wait for a “price level” to be set by economic trends such as a natural growth of 3% experienced by the economy in one year. A Split Velocity model can allow a central bank to stimulate growth at constant price anywhere between 0 to 100% of GDP in one year. In other words, the central bank does not wait to see how the economy will perform, it now dictates how fast it wants that economy to grow over a given time frame.
This is unique in that no other technology/system offers central banks this kind of power over an economy. Mediocre natural growth rates such as 3% or 6% are now thrown out the window as the central bank can now harness as much as 100% of an economy’s capacity to grow over time [due to ending inefficiencies causing losses as a result of subtraction or implosion in the circular flow of income]. Since the central bank now controls the growth rate, it is no longer at the mercy of economic indicators, it now dictates them and can raise or slow down economic growth at will. Consequently, it now has near perfect control of the value of the national currency. For the Bank of Zambia, this means that the Zambian government, for the first time in Zambia’s history, would have at its disposal enough financial resources to end poverty in Zambia in just a few years. This is why we have made a submission to the Bank of Zambia for the introduction of a Split-Velocity system in Zambia.
This makes a Split Velocity Model more valuable than a Gold Standard when it comes to managing a national economy. It also means a Split Velocity Model or system is far more powerful, efficient, effective and advanced than any aspect of Monetary Policy currently being used by the Bank of Zambia [or any central bank in the world today for that matter] to manage a national economy.
This is why we want to run the pilot and eventually fully implement and deploy our Split Velocity system and showcase what it can do.
A Precautionary Note: Beware of uniformed nay sayers.
We have enough confidence that our innovation works that we would be brazen enough to suggest that even if you have a Master’s degree or PhD in Economics and/or Finance etc. it is unlikely that you are qualified to understand how split velocity works without allowing yourself to quantify it above and beyond your academic credentials and professional experience. If you were poverty would not exist today and this model would already be commonly in use to manage national economies. This is consequently outside the scope of what you have been taught or exposed to professionally over the years. To understand a split-velocity model and how it works to generate growth at constant price and be able to explain this to someone else you will have to apply yourself, otherwise you would probably do it a disservice by dismissing it or laughing it off. We are not saying this to seem superior, to be rude or to denigrate anyone’s qualifications. To understand it off the bat requires real intelligence not just a higher education. You may be well educated, but in regard to this era and area of knowledge it is likely you are not informed enough to understand it without some intellectual effort [above and beyond your qualifications] to do so.
To understand this model, you cannot rely solely on your tertiary education. There is no component of this that you were taught. Instead you must rely more on your intelligence, puzzle solving capacity, problem solving ability, capacity for analysis and abstract thought, basically your IQ. As has been mentioned, in the 250 or so years since the debut of economics the most brilliant minds in the world have failed to identify subtraction in the circular flow of income and formulate a commensurate solution to it that ends poverty. Credit creation doesn’t solve this problem. It is a problem for which the solution is counter-intuitive, making it difficult to rationalize. Therefore, this is not as easy a problem to solve as anyone might presume, if it was, it would have been solved before this. Therefore you may underestimate it at the peril of your own future professional competency, when it runs and proves beyond all reasonable doubt that it works.
If you don’t understand how a split velocity model works, it quite literally may mean you are uninformed and that you have to try a little harder [we recommend you watch the videos, go through the math and read the book again]. In our view a split-velocity model is more reliable than a gold standard used in central banking and more efficient than monetary policy currently in use. The model does not need to be backed by gold, technically the technology or system is more stable than a system based on a gold standard when properly applied. This is due to the fact that a split velocity model can take money which is of little or no value and apply it in the economy in a distribution pattern or in such a way that it creates productivity, which in turn generates raw materials, goods and services of a measurable value at constant price making the need to hold gold to back a currency redundant and an unnecessary expense. Wealth creation solves the puzzle of how to increase money supply and stimulate growth at constant price and presents the solution in an economic model.
If you do not have a background in economics, business or finance etc. and someone who does cannot explain how a split velocity model works to you, or they tell you it doesn’t work, in all likelihood what they are revealing to you is they have not really understood how the model works, are too incompetent to explain it and are using your trust in their ability or qualifications to hide the fact that they have no genuine competence in this area. This is the plain truth. We have to be blunt about this. It is why we want to run the pilot, because quite frankly, why waste time on debate when the system can demonstrate what it does beyond the egoistic tendency of people blinded by their academic qualifications and professional experience to disregard new innovations. As Frank Herbert once wrote, “Education is no substitute for intelligence.” The adage certainly applies here.
Split Velocity Solutions Ltd 