All posts tagged 'Financial Sovereignty'

How to make an economy efficient (cheap), cost of business and chess

One way to make an economy competitive is to make its main "ingredients" cheap.

Low Taxes
Low taxes reduce the cost of produced items and services.

Cheap Labour
Cheap labour reduces the cost of produced items and services, allow s more employment of labour intensive industries.

Cheap Energy
Cheap energy reduces cost of heavy industry, transport and logistics.

Cheap agricultural resources
Cheap agricultural resources reduce the cost of food for people, so ir creates demand for different goods and services.

Cheap mineral resources
Cheap mineral resources reduce the cost of industrial and chemical goods.

Cheap Plastics
Cheap plastics reduces the cost of goods in general, especially consumer goods.

In global competition large companies always look for the most favorable country to run business operations. Usually it's about cheap labour and low taxes. But a country could also be competitive if it reduced the cost of the main "ingredients". Too often base industries like utilities, mining, oil & gas are owned by private companies which try to maximize profits. But by maximizing their profit, they often make whole industries uncompetitive. In some cases, cap the cost of "ingredients" to cost price, could allow many other industries to flourish.
In many cases such a decision would make sense, strategically speaking: a bit like in chess, where it is encouraged to sacrifice low value pieces short term in order to win the game longterm.
Russia did this quite cleverly, where profits from sale of oil is capped at 42 USD/barrel, all excess is going to the sovereign National Wealth Fund which invests in more strategic projects for longterm economic growth.

How to finance a sovereign economy

A while ago I wrote about sovereign bonds

Lately I have been looking at various informal credit systems.

I believe that a mix of charity donations, crowd funding, P2P micro credit and angel venture funding could be interesting:

-Charity donations could be directed to public institutions like museums, libraries, schools or charitable organizations
-Crowd funding could be best for support of interesting inventions and ideas
-P2P micro credit is best for existing small businesses
-Angel funding is for more start-ups with high technical potential.

A system containing all of these options could broker both sides and direct money where it is best needed. Donors of any type could propose/bid for each venture and receivers could accept a mix of any type of offer.

Financing the sovereign economy with sovereign government bonds

I believe that one the best instruments for financing a sovereign economy are sovereign government bonds. They could help provide additional funding for infrastructure or some sectors of the sovereign economy.

Special buckets could be created for agriculture, e.g. storage, processing, seeds production, veterinary medicine and logistics
Or electronics, perhaps even for my proposed MCST Elbrus cloud system
Or Pharma to create additional factories and research centres

They should be of different time to maturity:

3,6,12 months for short-term bonds
This would be very good for people who have saved up a little money, for example, to buy a new car, a home, but want to wait a little time to make a decision. And also for the local currency itself, as people are afraid of fluctuations and buy bonds in local currencies only for a short time to get additional interest.

24,36,48,60 months for medium-term bonds
These bonds can be issued in more "safe" hard currencies, such as the euro, US dollar for medium-term investments.

Bonds should start at 1.000 USD/EUR (maybe even less), so that normal people can get a little extra interest on modest amounts.

I believe that bonds should have a low maximum limit of 100.000 USD/EUR to allow individuals to reap interest, rather than large financial institutions.
Accrued interest should also not be taxed.

It was also possible to issue perpetual bonds, but with reservations.
Mini-bonds with an ultra-low face value, as was proposed in Italy a few years ago, may also be interesting to evaluate.

I have too little information about this and perpetual bonds, so I would be happy to hear from a finance specialist.