Gordon Grant Curtis | Money Manager, Financial Strategist
 
Homepage
Education
Speaking Engagements
Calendar
White Papers
Contact

World Government Finance Solutions

This white paper focuses on a two-part solution for the current world economic crisis.  It is a departure from the existing collective thought by politicians and economists, but it is a sound approach that will expedite resolution with certainty.

The plan requires the US to recruit the G-20 Nations to participate, starting with the G-7 Countries.  When properly presented, it will essentially reset global economic finances on a basis that will make all nations healthy and not penalize Nations that do not have internal deficits or capital market complications.  The primary reasons for the US to be the leader relative to presenting and selling this plan is its economic size and world posture.

Within the current configuration of capital/debt availability within the US, there is no sane solution that can resolve the crisis without a complete melt down of the system as it is known today.  This includes the ability to fund the healthcare plan and other major ongoing expenditures.

Although this is the abbreviated version of the rescue plan, it gives the appropriate outline of how it would work and how to implement it.

Part 1

When the US Constitution and its Amendments were authored, no one could have anticipated what might happen in the future.  The primary flaw has been the lack of consideration of trade partners and world integration.  This is also true for the majority of the G-20 Nations as many of their policies and laws are based upon US law and its political protocols that have short comings.

First and foremost is to understand that Part 1 of this plan will not create hyperinflation nor will it destabilize any existing Government or the confidence in the currency.  It is believed that confidence in the currency will actually improve as a result of a flood of new jobs and expenditures.

It is common knowledge that the velocity of money equates to a healthy economy because it is an indication of commerce.  In order to increase the velocity of money, consumer confidence needs to be high.  To increase a low consumer confidence there needs to be demonstration of free spending and high employment along with access to credit for business purposes and home acquisitions.  The rest follows suit.  Nothing new here, just restating the basic premises of what defines a healthy economy.

Printing money only creates real inflation when there is a derailment of one currency value against another.  Artificial inflation is when there is a rise of all prices across all currencies in unison.  This portion of the plan includes elimination of real inflation and a central regulator for artificial inflation.

By example, the US has about $15 Trillion in contingent and non-contingent debt secured by good faith in the Country and its holdings, which are vast.  There is another $15 or more trillion in State obligations and deferred costs (infrastructure repair) that are likely to become debt.  The only means of paying all of this debt that currently exists is through taxation.  But who to tax and how much do they have to pay in tax and would they be willing or will it create major conflict.

With 47% of the US population not filing tax returns means either ineligibility or negligence or both.  In either event, statistically half of the population would need to work to support the other half and this does not include supporting taxation to pay for Government employees.  In essence the system cannot work going forward under this formula.

This simple US demonstration is not much different than the majority of G-20 Nations with few exceptions.  Therefore, the initial solution is to print money from all currencies using a formula that respects the existing currency variables as they are now with the US, EU or UK being baseline at parity (the lowest one would be defined as such).  Printing money on a unilateral but pro-rata basis will respect balances of trade and make the healthier nations even more healthy stimulating more investment by them.

An additional budget beyond parity would be needed to pay for failing infrastructure (roads, bridges, electrical grids, non-polluting power generation and more) as well as be available for Government assisted loan programs using banks as the distribution points.

Elimination of debt would mean immediate reduction in taxation and elimination of debt would reduce interest rates to almost nothing, sparking more investment.  With a large surplus of capital funds, the Government would have the ability to expand and or contract using: taxation changes (local and federal), mark ups on loaned capital via banks to businesses and home owners and the ability to take money out of the system via VAT as needed or not.

Confidence in the currencies of the world would not be disrupted as they all would follow suit as the vast majority are in the same dilemma as the US and Western Europe leading economies are.

Part 2

Support of capital markets through the World Bank.  Each country that participates Part 1 will also participate in Part 2.  This will use the hierarchy of the World Bank to purchase and sell shares and bonds on regulated exchanges creating liquidity and stability over a broad spectrum of issues including junior capital markets.

This is yet another mechanism to put the breaks on the economy or spark it quickly as needed from a large budget available.  It also allows the ability to take money out of the market by selling World Bank holdings.  Encouraging investment in this manner will give a large growth potential on both productivity as well as job creation through the private sectors.

Aggregate Plan

There are additional stop gaps and modifications that can be worked into the combined plan but action would be immediate and be able to be regulated at any time as needed.  This would also eliminate the problems associated with longer down turns in the economy as well as help prevent an economy that is growing too fast to be supported.

In addition to the world financial crisis, we are losing productivity and causing short cuts to be taken to save money that result in accidents like the Gulf Oil spill.  A global improvement in infrastructure such as power grids will massively reduce consumption and pollutants by simple example.

Grant Curtis