Author: Siize Punabantu

April 7th 2019

A practical way of understanding how inefficiencies in the circular flow of income (CFI) of a neoclassical economy or contemporary economy (CE) affect productivity.

The systemic financial losses to the economy caused by operational inefficiencies in money supply are easily rationalized when how they affect output is analysed. The graph below shows a business’ performance over one month. Every business owner or manager knows that from day one of a new month when the business begins to record sales every dollar or kwacha earned must have a significant proportion set aside for “pay day”.

The business in the graph below pays its staff between the 26th and 30th of every month. But it must begin to prepare for this expense from day one. The business knows that it must set aside income from its earnings to pay workers and to provide income for the business owner and other shareholders. Therefore, for a full business cycle lasting a month a business experiences very significant losses in productivity.

Business owners and staff combined form human capital or “households”. Firms or businesses having to divert earnings from investment in productivity and output (non-human capital) “subtracts” or diverts income from productivity, a process referred to as economic “Implosion” in the GPWN. Consumption is the opposite of production and yet in the monthly business cycle, for close to “30 days”, on any one of those days (at any point in time) it retains or locks away financial resources from non-human capital that could have been contributing to growth in GDP by financing production. This retards industrialization by starving it of useful resources.

The Graph below shows the loss in output caused by an inefficient CFI

The graph below shows that businesses in the economy diverting earnings from non-human capital to ensure they have enough to cover the monthly pay-roll, the business owner and shareholders, under-perform. Over a twelve month period their capacity for productivity can be halved by this practice leading to a stunted annual GDP.

These simple graphs are a practical example and illustrate how subtraction in the circular flow of income (CFI) diminishes an economy’s capacity to grow, create jobs, end poverty and yield greater financial resources to government for its budget.

A Split Velocity system enables a central bank to correct this problem thereby accelerating growth and productivity in the national economy. Split Velocity (SVTech) solves this problem by advancing the cost equation from Profit = Total Revenue (TR) – Total Cost (TC) to the SVTech cost equation Profit = Total Revenue (TR) = Total Cost (TC).

……….

The Production Possibility Frontier

ncreases in money supply provided by the central bank to counter subtraction through the SV-Tech system do not cause inflation, instead they generate economic growth. Remember that technically this is not an increase in money because this money is actually missing from the CFI, causing a money supply deficit which causes the problem of pervasive scarcity (poverty) in an economy (see the empirical test to help you understand how and why this money supply deficit exists and must be corrected by the central bank).

Correcting flaws in the CFI generates microeconomic equilibrium, within each and every business that leads to general price and macroeconomic stability.

The SVTech cost equation shown earlier neutralizes subtraction. It ensures that finances available for expenditure on non-human capital can be equal to finances available for human capital creating an equilibrium within each and every firm or business that not only increases output, but also simultaneously increases demand. This means that from day 1 and for the rest of the month a business can expect to be able to spend close to 100% of its Total Revenue (TR) on non-human or capital expenses, without any fear of having to hold back revenue and without any fear of loss of this income to human capital. This is regardless of the size of a businesses enterprise. With efficiency restored to the CFI, and all of industry in an economy using SV-Tech, being able to spend close to 100% of Total Revenue on capital related expenditure, this not only leads to increased output, but goods and services of much higher quality. Businesses are in a much better financial position to manage operations, which include paying taxes to government, servicing old loans, taking on new loans, purchasing electricity, raw materials and equipment, including other capital-related variable and fixed costs businesses in general face. Not only is output and quality rising, so too is consumption, because income that the inefficient CFI was keeping from households is also being restored by the SV-Tech system. Businesses are not only able to pay workers and shareholders better, they are able to dramatically improve working conditions and conditions of service while taking on more employees. The economy naturally has abundant resources with which to care for every man, woman and child and with which to fend off unwanted scarcity and poverty that characterized the CFI in the past. With both output and consumption rising rapidly, not only does an economy experience accelerated economic growth [a consistent economic boom], the constant balance between output and money supply keeps the value of currency stable and free from inflationary pressures. This is because increases in money supply correspond with increases in output, while both capital growth and consumption move at an equal pace (see Keynesian/Monetarist equal increases in aggregate demand and supply). This is how a national economy should be managed. To achieve this growth and stability the SV-Tech cost equation has to be implemented and managed in an economy through a financial service distributed by commercial banks and non-banks. From being subjected to a defective economy where the default position was consistent loss, scarcity, poverty and austerity, government now presides over an economy where the default position is consistent gain, growth, abundance and prosperity.

It should not be forgotten that non-human capital subtracting finances from human capital reduces demand in the economy and causes a fall in consumption equally as significant. When these two losses are combined, it reveals tremendous inefficiencies in how the CFI operates in modern economies.

Human suffering and general economic malaise is caused by scarcity. This scarcity is ever-present at any point in time in an economy as a result of subtraction in the CFI. No matter what approach in economics, development and management is applied poverty persists, unless this flaw in the CFI is corrected. Humanity has tried everything in its power intellectually, financially and systemically to either counter or end poverty and bring about prosperous economies, such as structural adjustment programmes, development aid/donor aid, identifying the poverty line in every country, poverty reduction strategy papers – year after year since 2002, social cash transfer, unemployment benefits, welfare, pro-poor policies, farmer input support programmes, winter maize, rural resilience Initiative, multi-facility economic zones, enhancing international trade, common markets, guiding the exploitation of mineral resources, foreign direct investment, using eurobonds to finance projects, employment creation strategies, raising the minimum wage, Jubilee cancellation of debt (HIPC) and so on, however, no permanent solution has thus far ever been found, but the clock keeps ticking. The reason for this lack of success in ending poverty is that the magnitude of the problem that generates scarcity in the CFI is actually far much greater than anyone could ever have imagined. Poverty cannot be eradicated because the losses it generates are simply too great and too aggressive (the equivalent of GDP per annum) and they are grafted into the very structure of the economy in the CFI. These financial losses being equivalent to GDP per annum, means that technically no domestic or international effort leveled at ending poverty can realistically counter losses of this magnitude identified in the CFI. Despite being of truly monstrous proportions, this scarcity has remained hidden in plain sight and therefore made poverty seem indefatigable and inescapable. This is why subtraction is referred to in the GPWN as the first scientific explanation for poverty. This explanation has little or nothing to do with ideology, management style or approach applied in development. Technically, this means scarcity and therefore poverty can be countered in the CFI. However, doing so requires institutions and policy makers to begin to comprehend the sheer magnitude of the ongoing problem in the CFI. It does not matter how small or large an economy is, whether it is that of a developed country or developing country the magnitude of scarcity and therefore poverty being generated by the dysfunctional and dystopian CFI is equivalent to GDP. A dose of realism is required. Unless this is understood current strategies and finances applied to end poverty and create prosperity, even by reputable international organisations engaged in the fight against poverty will fail, because they are insufficient and inadequate in comparison to the problem. And for how long can you keep revising and basically doing the same thing over and over, yet keep expecting different results? How much longer can the youth wait for one initiative after another to add nothing substantive to their future? The most effective way to counter these dissipating resources, that are equivalent to GDP per annum, and recover them is to use the system itself to recoup and mobilize these resources using the CFI, taking direct control of the problem, reversing it and putting it work for the economy. This can be done. It means that human beings are not meant to suffer, poverty is not an indelible aspect of human socio-economic existence, in fact, the opposite of this is true: humanity is meant to prosper and has tremendous resources at its disposal to do so.

However, this wealth, these resources, abundance and tremendous prosperity is locked away from humanity and kept out of its reach by losses to subtraction in the CFI that neo-classical economics has not identified and cannot see. An analysis of the modern CFI shows that these combined financial losses are equivalent to a nation’s GDP. (Most people, even intelligent, highly educated neo-classically trained economists are unable to process or comprehend an annual loss of this magnitude (finances equivalent to GDP per annum); which means they also fail to process how recovering it can raise financing equivalent to GDP in one year at constant price, with which to accelerate economic growth.

For any government, private or public institution to sit back and allow useful economic resources to be lost on this scale while so many people are suffering, while people cannot get high quality treatment in hospitals because there are no resources for medicines and equipment, while children who should be in school and live in happy homes walk the streets at traffic lights begging for alms from motorists, while so many individuals and family’s fail to rent or buy homes, while development projects are standing still or workers are going unpaid for months due to inadequate funds and while businesses struggle to stay afloat is simply criminal. In any other industry or profession this failure would be classified as culpable professional malpractice. No court or justice system anywhere in the world would allow this to continue.

Split Velocity Solutions, Outreach 14th March 2019

We would like to thank the Ministry of Finance, Economic Management and Planning department for being forward looking, responding to our letter and inviting us to give a presentation on accelerated growth. The meeting was very successful. After the presentation pertinent questions were asked about how the system would work, including modalities of changes in financial architecture that would allow the introduction of a new more efficient and business friendly cost equation. All the questions were answered and an animated discussion ensued. We are impressed by the staff and bright minds at the Ministry and look forward to further collaboration as we continue to embark on our outreach to gain further buy in for our new tools and approach that can be applied to managing a national economy.

Highlights

During the discussions a need for a pilot to test and provide proof of concept for the new financial model was brought up. The team from SVS Ltd was impressed when the Assistant Director sitting in for the Permanent Secretary suggested that a pilot need not be too wide in scope to begin with, but should ideally focus on one pertinent area of the economy. The area suggested was the fuel sector.

[Note: Applying the new model to the fuel sector would allow pump prices of fuel to fall by as much as 35%. This would drop the fuel price in Zambia from K15.20  to K9.88. The effect would be immediate. This improvement in the fuel price would be gained purely from the increase in the efficiency of money provided by the new Split Velocity model. Although the price of fuel would fall overnight the earnings per litre at the pump for filling stations would climb to K19.76 per litre. All the businesses in the petroleum industry in the supply chain would similarly benefit from this improved profitability. It is common sense that filling stations would rather earn K19.76 per litre of fuel than the current K15.20, meanwhile the end users, that is consumers buying fuel would benefit from buying it for K9.88 rather than K15.20. This reduced fuel price would have significant positive impact on the economy in that the general price level (inflation) should fall and the Kwacha strengthen in value, since transport affects the majority of goods and services on the market. Setting up this pilot to achieve this and gain proof of concept would be relatively easy.] Note that this simple analysis does not include comprehensive supply chain efficiency of a split velocity system therefore it may be possible to obtain even better results for both consumers (even lower pump price) and petroleum industry (even higher profitability) in the Zambian economy than illustrated by this simple example.

It was pointed out that the Split Velocity system was new and it would require buy in from technocrats for it to be implemented. The Bank of Zambia is one of the key institutions and stakeholders that would need to be convinced about the new system for a pilot to succeed.  The potential benefits of the new system to the Zambian economy are also quite significant. More would need to be done to bring knowledge about how the new system works to stakeholders.

Return to Quick Links 2

Split-Velocity Solutions, Outreach 7^th March 2019

By far one of the most exciting aspects of our Split Velocity system when it is applied to managing a national economy is the advances it brings to the banking industry. Credit like any commodity can be accelerated.

If you recall earlier it was mentioned that the United States economy with its current population was 125 times smaller than it should be. Let’s illustrate why this may be the case using the banking sector. Commercial banks in the United States issue loans at an interest rate that is sometimes as low as 2%. When interest rates are too low, they make borrowing more attractive, but the reverse effect is that low interest rates compromise the earnings of lenders, making it difficult for them to cover the costs of managing and issuing credit.

Should we use a Split Velocity system to accelerate credit in the United States, as an example, the debtor is no longer burdened with interest when borrowing. Loans in a Split Velocity model are issued interest free, at 0% interest, which to the end user or loan applicant is a Wealth Creation financial product. A Split Velocity model achieves this by increasing the efficiency of money. Though commercial banks no longer charge interest, the new financial model now allows them to earn a Return on Credit (ROCr). In a Split Velocity model the standard rate for the ROCr is 100%. In the current inefficient system if a commercial bank issued loans with a 100% rate of interest the demand for loans would fall dramatically due to the interest rate burden being too heavy for borrowers. However, using Split Velocity this burden is shifted to the increase in the efficiency of money and is not felt by borrowers. Commercial banks can now issue loans with no interest, yet operate with a Return on Credit of 100%. Were our Split Velocity system introduced by the US Federal Reserve Bank today this improvement would make some aspects of the banking industry in the United States 50 times more profitable than they were in the old more inefficient and ineffectual system. This jump in efficiency and profitability helps explain why the current inefficient financial architecture has stunted growth over the years in the US. When credit is cheap it encourages borrowing. However, if this borrowing is taking place in the current inefficient economy it is not balanced with output. The result will be a disproportionate rise in domestic or national debt with no equal or balancing growth in output. A Split Velocity model does not allow this debt quagmire to emerge due to the fact that it would constantly balance expenditure on consumption with expenditure on output and productivity ensuring that the capacity to repay loans grows consistently alongside a nation like the United State’s economic growth.

If the Bank of Zambia (BoZ) introduced our Split Velocity system in Zambia where interest rates can average as high as 25% banks would be able to issue loans with no interest with the ROCr set at 100%. A ROCr of 100% has the same profitability profile as commercial banks issuing loans at an interest rate of 100% the difference being that the end user experiences no (0%)  interest rate burden. This highly innovative approach complies with Islamic banking. Banks in Zambia would become 4 times more profitable and yet charge no interest on loans.

Firstly, commercial banks would be able to issue more loans thus driving growth in the economy, Secondly in this new financial architecture commercial banks would be able to invest significantly greater amounts in the work they do and the distribution of credit, for example they would now be able to:

1. Spend more on improving and refining customer service
2. Improve accessibility by opening more branches, extend branch networks to rural and other areas that are difficult to reach
3. Invest in research and development (R&D) that advances technologies which improve the management and distribution of credit
4. Invest in buildings, infrastructure, vehicles, ATMs and other capital equipment required to enhance banking
5. Significantly increase the number of people they are able to employ in the countries where they operate
6. Greatly improve on salaries and offer better conditions of service than have ever been able to before for those employed in commercial banks

A commercial bank’s baseline profit from issuing loans should ideally not be less than 100% of the loan amount issued. In a Split Velocity model this is the break-even margin for credit creation. Under the current financial architecture this means commercial banks are unable to reach their full earning potential mainly due to the fact that interest rates are operationally incapable of functioning in the current inefficient financial architecture as the burden on borrowers would be too high. At present commercial banks, the world over, are therefore operating well below their earning potential and this is weakening their capacity to provide credit to a broader spectrum of clients and they are at present less able to grow fast enough to fund high value investments.

Increasing the efficiency of money, forces it to do more work at constant price, placing the burden of growth on money rather than on people. When the burden of economic growth is placed on people rather than technology this creates what is referred to as an “austerity measure”.

The advances made in the use of finance such as Split Velocity cannot be understood without an improvement in financial literacy. Highly educated and well qualified professionals in economics, business and finance would still require training to fully grasp the new architecture and the benefits it can bring to the financial sector. This has little to do with skill. A change in architecture often entails a reconfiguration of norms, left becomes right and up becomes down and it becomes necessary for anyone to have to adjust to these new developments in order to navigate concepts successfully. Once these professionals have understood these reconfigured norms they should become the elite in economics, business and finance as they can provide operational solutions to financial problems and how to end poverty no one else today has concise answers to. They become the new elite also because they have freed themselves and shaken off the many shackles that restrain many professionals in these fields whose mind set is still trapped in the limitations of the current ineffectual and inefficient economy and financial system that prolongs and sustains poverty, shuts businesses down unnecessarily and is responsible for much of the suffering we see in the world today. While old school thinkers are perturbed by how to gain a 4% growth in GDP the new elite professionals should be able to demonstrate how to extract financing equivalent to GDP with which to enhance growth, while the old school thinkers are perplexed by how to counter poverty they should be able to detail systemic changes to the economy that will free resources that end scarcity, because their knowledge and understanding of economics, business and finance has eclipsed that of the old school. They will be able to achieve, in economics, business and finance, what old school thinkers thought was impossible and easily bring about financially liberating changes to economies old school thinkers once believed could never be done. Where old school thinkers have failed, they should succeed, where old school knowledge and theory has exhausted its purpose and can rise no further, they should take the mantle with renewed strength and implement the changes in economics, business and finance that liberate economies from scarcity and the strife it brings with it. They should be able to hold their ground in any intellectual setting, in any part of the world where state of the art or cutting edge theory and practice in economics, business and finance is contested or debated. This enhancement in financial literacy when achieved will lead to a dramatic increase in the profitability of banks and have a positive impact on output enhancing a country’s growth in GDP.

When a Split Velocity model is applied to businesses, it is unlikely that credit creation in its current inefficient and ineffectual design could cope with the demand for loans from businesses whose growth is being accelerated. Businesses operating in an economy where Wealth Creation is present are better positioned to repay loans, their capacity to grow is significantly enhanced therefore their appetite for loans will increase dramatically to the extent that for banks to keep up with the demand for loans credit itself would need to be accelerated, otherwise banks would be unable to keep up with the economy’s demand for loans.

This improvement in the banking industry is one that we look forward to unveiling through a pilot of a Split Velocity model to provide the necessary proof of concept for the system before it can become mainstream.

We refer to our Split Velocity System as “the most advanced economic and financial operating system for central banks and businesses in the world.” And hope you now understand why.

The advances in finance Split Velocity promises to bring attest to this.

This approach has never been tried before anywhere in the world. When it is applied, it will be a first in the banking industry. For a more visual and simple to understand explanation on how our Split Velocity system is designed to enable central banks like the Bank of Zambia (BoZ) to accelerate credit in a national economy watch Episode 4 in the video section.

Return to Quick Links 2

Split-Velocity Solutions, Outreach 25^th February 2019

Recourse through the Justice System and Legal Framework in your country

Losses of finance caused by flaws in the CFI cause billions of dollars worth of lost income in a national economy leading to extensive damages that affect every area of human development for which there is both responsibility and culpability.

In order to have financial losses in the CFI addressed, recovered and applied to improve living standards, counter poverty and sustain the national economy, it is best to explore and exhaust all options and advocate for changes in national economic management and the financial system be made. It is best to write to officials and office bearers of relevant institutions who are professionals directly engaged with managing the national economy and ensuring the financial system is stable, in an effort to have these losses addressed and recovered, seek their engagement and explore all the amicable avenues available.  Do your best to exhaust all the available avenues. Most professionals who are genuine, career driven and pro-active will be open minded, willing to meet, listen and see how to act to address the problem.

Where this fails or proves fruitless recourse through the justice system has several channels that can be pursued.

Culpable professional malpractice

This is where the dereliction of professional duty or a failure to exercise an ordinary degree of professional skill or learning by one rendering professional services which results in injury, loss, or damage.

[The injury, loss and damage created by failing to address financial losses caused by subtraction in the CFI are readily demonstrable. Failure by a trained, professional to act to counter and recover losses in the CFI caused by subtraction is culpable professional malpractice.]

Criminal Negligence

In criminal law, criminal negligence is a surrogate mens rea required to constitute a conventional as opposed to strict liability offense. It is not, strictly speaking, a mens rea because it refers to an objective standard of behaviour expected of the defendant and does not refer to their mental state.

Criminal negligence is conduct where a person ignores an obvious risk or disregards the life and safety of those around him or her. Both federal and state courts describe this behavior as a form of recklessness. The negligent person acts significantly different than most people would under similar circumstances.

[The financial losses in the CFI can be demonstrated and admitted into evidence in a court of law. They are critical to the national economy and once recovered would go to saving lives, purchasing life-saving medicines and medical equipment, rescuing people from poverty, improving services, health and safety, education, policing and crime prevention, paying off a country’s debt that have a great impact on livelihoods and the well-being of a given population. Failing to act to recover these losses is classified as both civil and criminal negligence]

How Criminal Negligence can become a Financial Crime

This brief article evaluates what constitutes the inability of an institution to act on financial loss caused by an inefficient design of an economy, that has been pointed out and reported to relevant offices, and how it will measure up to criminal negligence in a court of law.  

Communities cannot stand by idly while so many people in both developed and developing countries, both rich and poor, suffer the negative effects of poverty and scarcity in their lives brought about by problems in economics for which there is an answer today. Economic justice and the right to live in an economy that uplifts businesses can only come about through a transformation. If there are obstacles to required change that stand in the way of economic emancipation that liberates humanity from inordinate levels of scarcity, then, as it is with most forms of justice, the recourse to bringing about this change shall be the courts of law.

Legal recourse

Criminal negligence when it comes to finance and financial crimes appears to be in the same vein as gross corruption, abuse of authority, money laundering, pyramid schemes and other financial crimes, except, when it comes to comparison with the financial loss being caused by subtraction or an inefficiently designed national economy, it will be considered a more serious abrogation of the law than the latter due to the magnitude of the loss; which will overshadow any loss due to negligence in human history. Having been reported or been informed of this financial loss, an office bearer’s inability to act to prevent it and the tremendous negative consequences this has on human life and livelihood will add to the gravity of this offense, described as a form of gross negligence well beyond the charge of simple misdemeanour.

When there is evidence in any country that a central bank or other relevant authorities are made aware of the real financial loss being incurred by the economy be it through the ministry of finance, governor or deputy governor of the central bank or other relevant offices; the central bank must act to stop this loss of public or national finance to the economy. A failure to do so by office bearers will inadvertently constitute a financial crime that is prosecutable by law as criminal negligence. The inability to act on a matter of this magnitude that has been reported and requires action would need to be investigated.

Criminal negligence is an abrogation of law recognised in both national and international law. For instance, in the Federal Laws of Canada Penal Code Section 219 states that:

“Everyone is criminally negligent who in doing anything, or in omitting to do anything that it is his [or her] duty to do, shows wanton or reckless disregard for the lives or safety of other persons.”

The daily financial loss caused by failing to address an inefficient economic design can attract value from the date the loss or benefit of correcting the loss is reported. The Zambian economy in 2018 grew by 4% (source: African Development Bank – AfDB). This means that the inefficient design of the national economy caused a loss equivalent to 96% of Zambia’s GDP. In 2018 Zambia’s GDP was pegged at US$25.81 billion. The daily loss for Zambia in 2018 due to subtraction was therefore US$68.8 million per day. If this loss was reported on the 17^th of December to the central bank for action, for the sake of example, the damages caused due to inaction or negligence to date in a court of law could be valued at 68 days, that is, 68*US$68.8 million or US$ 4.6 billion.

As financial literacy concerning subtraction grows business managers and owners will come to the realization that they suffer and pay the price for the daily hemorrhage of these useful financial resources. Recovering these resources, estimated at US$68.8 million per day for Zambia in 2018 would make profound improvements to all the sectors of the Zambian economy both public and private. The same simple procedure for assessing daily loss can be applied to most countries. This colossal loss of income to the national economy is purely a waste of financial resources caused by nothing more than a technical inefficiency in how money works or moves in the circular flow of income.

Correcting this flaw and recapturing these useful resources is achieved through advancing our understanding of economics and finance, then applying innovation that introduces changes to financial architecture that enhances the performance of businesses in an economy. The innovation and technology with which to do this is available today, straight forward to implement and only require the foresight and will to begin to be applied.

These losses can of course be set aside or wavered where institutions step up to address the problem. However, this extraordinary loss of recoverable useful financial resources should help to illustrate why institutions to whom this loss is made known should act expediently. When the financial loss as a result of the inefficiency of money supply, created by subtraction taking place beneath the circular flow of income are reported to office bearers who oversee the economy at a central bank or other relevant offices, be it anywhere in the world, by law, it is advisable that the office bearers act diligently, expediently and within the law by taking the actions required to prevent this financial loss from taking place within the economy they oversee otherwise they may show a reckless disregard for the lives and safety of other persons the daily value of which can be assessed before a court of law through a process of evaluation described above. Having been made aware of this financial loss, failing to act to prevent it can constitute criminal negligence.

Why is failing to act on this potentially a serious crime?

Citizens of a country rely on the income prevalent in an economy not simply for sustenance and for their livelihoods, but for their very existence.  This includes the infirm who rely on the availability of this income to provide medicines and access to medical care who will die without it. It includes those who require food, shelter and clothing who are unable to acquire it due to poverty who may fall ill or die; those who seek employment and steady jobs but cannot find them. The death, pain, anguish and suffering caused by the lack of resources in an economy is not only felt by both rich and poor, it is also experienced by businesses and business owners that fail to operate, experience low demand, watch as fast moving consumer goods (FMCGs) remain endlessly on shelves, are forced to lay off workers and close down, which is the equivalent of corporate death. This death and anguish amongst human beings constitute a heinous crime, when the cause is reported and made evident to office bearers, it is their professional duty to act to prevent it in the interest of lives and safety of the people. Since this negligence affects diverse categories of people or groups in the economy, they may in their diverse groups engage separate class action law suits against the central bank or institutions involved in a bid to recover needlessly lost income caused by criminal negligence.

Subtraction taking place beneath the circular of income creates a 100% loss of value in an economy. This public financial loss is equivalent to GDP. Basically, the economy is flawed in that its financial architecture is inherently designed to subvert the operability of businesses. The financial architecture of the economy has to change, advancing the cost equation from:

Current cost equation: Profit = Total Revenue (TR) – Total Cost (TC)

to a position where this loss caused by subtraction is recovered namely;

Corrected cost equation: Profit = Total Revenue (TR) = Total Cost (TC)

The economy in every country today currently pushes business constantly towards the shut-down point. Businesses fight back against this loss-making position that exists in the financial architecture of the economy by charging more for products they sell than their real value, creating what is referred to as profit or a “profit margin”. Though the profit margin created by businesses (banks included through interest rates) rallies against the tremendous financial loss being caused by the inefficiency of money due to poor design of the economy, in aggregate, on average they rarely recover more than 3% or 4% of this loss. This recovery becomes what is known in contemporary economics (CE) as the annual GDP growth rate.

This financial loss once identified and made known to the offices that oversee workings of a nation’s economy must be stopped and recovered as a functioning part of due diligence. To fail to do so when it has been identified amounts to criminal negligence, which is not only an abrogation of justice, by law, it is prosecutable.

Although financial loss caused by subtraction or an economy operating inefficiently are a recently identified phenomenon, the magnitude of this loss makes it a serious matter that demands immediate action by authorities it is reported to that have a professional duty to respond to it.

If this loss is reported to your office or institution, it is therefore advisable that it receives a prioritised response and is acted upon diligently.

Return to Quick Links 2