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GOOD NEWS. It has been noted that the Bank of England and the International Monetary Fund, among others, are studying variants of the idea of Wealth bonds because of the stability that they can bring to government finances and the economy as a whole.
My Fin24 essay review team has offered to help them to think this through and the offer to look at a paper has been accepted.
Last week I promised to move on from the series of essays that has been published in my column on Fin24 so far. Readers wanting to review any or all of those can find a list and a guide to them by clicking here.
Those essays describe what is effectively a new model for the economy, what I have called the Ingram Economic Model, Mark One.
It is Mark One because there is more to come.
Mark One designs out the instabilities that build up as a result of the structures of our savings and debts. Savings and debts either respond to nominal rates of interest or, for fixed interest, they don’t respond at all. The need to keep pace with rising incomes - which economic forces demand that they should over time - is completely overlooked.
Explaining macro-economic design
Macro-economic design has two parts: the framework and the speed control.
The framework
It is a team effort like a team trying to build the best-ever motor car. The team is finding all the sources of instability built into the framework. The road may be bumpy or slippery, but the car and the driver have to cope. If all the potential instabilities have not been engineered out, the driver will need a great deal of skill to keep the car on the road.
For the framework, Adam Smith’s pricing principle is key. If the pricing is right, the resources of the nation will be found where they are needed. If the pricing is wrong, that will not happen.
This is not to ignore the role of governments, the need for regulations, law, and political priorities, all of which have a part to play in taming man’s greed, and in spreading the benefits of the economy in a socially acceptable fashion.
Otherwise, it is generally thought that the pricing mechanism automatically directs the resources of financial and human capital to those activities the people as a whole want, and as indicated by their spending choices.
If any price is distorted (misdirected) it means that some resources will be wasted, temporary jobs will replace what should have been permanent ones, or jobs may get wrongly exported if, for example, a currency is temporarily mispriced.
There are at least three more issues
1. The speed control system
The money supply is the creation, management and distribution system. It is a loose control system, so the economic car cannot maintain a steady course no matter how skilled the driver may be. This is a favourite gripe of the Austrian School of economics, but so far they have not proposed a solution that has been accepted.
2. The pricing of currencies
A single price can only balance one pair. And that pair should be the supply and demand for imports, otherwise called the balance of trade.
One currency value cannot also deal with international capital flows. This leads to the kind of currency volatility that South Africa in particular has been experiencing.
3. Single currency issues
When there is only a single currency in a nation or a federation of states, such as the European Union for example, there are social as well as economic costs to consider as some regions or cities get left behind.
In the worst cases, this can lead to extreme political movements. Normally the currency would weaken to address the problem, but when there is only one currency that is not possible.
The process of addressing all of these problems needs feedback from many talented helpers and followers, and maybe Fin24 users can also help.
In the next few weeks I will be adding at least a Mark Two and a Mark Three Model to the Mark One model for readers to discuss.
- Fin24
* Edward Ingram has a strong and growing support base. One American has started a petition asking President Barack Obama and/or his senate committees to look into these ideas. Ingram says: “Why not here in South Africa? The ideas are universal.”
My Fin24 essay review team has offered to help them to think this through and the offer to look at a paper has been accepted.
Last week I promised to move on from the series of essays that has been published in my column on Fin24 so far. Readers wanting to review any or all of those can find a list and a guide to them by clicking here.
Those essays describe what is effectively a new model for the economy, what I have called the Ingram Economic Model, Mark One.
It is Mark One because there is more to come.
Mark One designs out the instabilities that build up as a result of the structures of our savings and debts. Savings and debts either respond to nominal rates of interest or, for fixed interest, they don’t respond at all. The need to keep pace with rising incomes - which economic forces demand that they should over time - is completely overlooked.
Explaining macro-economic design
Macro-economic design has two parts: the framework and the speed control.
The framework
It is a team effort like a team trying to build the best-ever motor car. The team is finding all the sources of instability built into the framework. The road may be bumpy or slippery, but the car and the driver have to cope. If all the potential instabilities have not been engineered out, the driver will need a great deal of skill to keep the car on the road.
For the framework, Adam Smith’s pricing principle is key. If the pricing is right, the resources of the nation will be found where they are needed. If the pricing is wrong, that will not happen.
This is not to ignore the role of governments, the need for regulations, law, and political priorities, all of which have a part to play in taming man’s greed, and in spreading the benefits of the economy in a socially acceptable fashion.
Otherwise, it is generally thought that the pricing mechanism automatically directs the resources of financial and human capital to those activities the people as a whole want, and as indicated by their spending choices.
If any price is distorted (misdirected) it means that some resources will be wasted, temporary jobs will replace what should have been permanent ones, or jobs may get wrongly exported if, for example, a currency is temporarily mispriced.
There are at least three more issues
1. The speed control system
The money supply is the creation, management and distribution system. It is a loose control system, so the economic car cannot maintain a steady course no matter how skilled the driver may be. This is a favourite gripe of the Austrian School of economics, but so far they have not proposed a solution that has been accepted.
2. The pricing of currencies
A single price can only balance one pair. And that pair should be the supply and demand for imports, otherwise called the balance of trade.
One currency value cannot also deal with international capital flows. This leads to the kind of currency volatility that South Africa in particular has been experiencing.
3. Single currency issues
When there is only a single currency in a nation or a federation of states, such as the European Union for example, there are social as well as economic costs to consider as some regions or cities get left behind.
In the worst cases, this can lead to extreme political movements. Normally the currency would weaken to address the problem, but when there is only one currency that is not possible.
The process of addressing all of these problems needs feedback from many talented helpers and followers, and maybe Fin24 users can also help.
In the next few weeks I will be adding at least a Mark Two and a Mark Three Model to the Mark One model for readers to discuss.
- Fin24
* Edward Ingram has a strong and growing support base. One American has started a petition asking President Barack Obama and/or his senate committees to look into these ideas. Ingram says: “Why not here in South Africa? The ideas are universal.”
