De-financialization
Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over the economy and the government’s economic policies. Macroeconomic and financial hocus-pocus are just a panacea, but prudent financial housekeeping and long-term strategic economic policies better promote the well-being of an economy. Some financial tools are necessary and are helpful to finance new business ventures or expand current business. For example, IPOs help raise money for further development. Dividends are fair payouts that share profits and reward investors for their investments and the risks they have taken. Other tools, like bonds, are equally useful for raising additional money as long as they are reserved strictly for furthering the business and do not provide short-term profits for shareholders. Hedging reduces risks in production and can act as business insurance.
However, wealth-creating financing methods and tools make up just a small fraction of the investment world. Most merely involve trading existing assets by relying on appreciation to achieve capital gains. Any money movement that does not create wealth by increasing production is just a waste of resources and an inefficient, unproductive allocation of money. A sovereign country must strive to reduce finance so that it is applied in only a limited form, only for activities benefiting the country’s real economy.
Financing Growth
Liberal capitalist systems rely on the В«invisible hand ofВ the marketВ» for economic development and growth. Nevertheless, it causes rushes ofВ money toВ one part or another ofВ the economy, where profits are greater. This situation is comparable toВ aВ boat tipping toВ the most weight-laden side. It clashes with the concept ofВ balanced development ofВ the economy, which should favor investments inВ either more undeveloped parts ofВ the economy or those where it is more needed. When it comes toВ achieving balanced development, the Sovereign Economic Model and other forms ofВ planned economics are superior inВ efficacy because they can influence, promote, and direct investments inВ those areas inВ need. That creates aВ more balanced, system-wide economic development and can raise under-developed parts ofВ the economy. Such an economic development can be achieved with economic and fiscal policies, but also with state subsidies and favorable conditions offered toВ private investors. The state itself has various tools toВ raise money, such as bonds ofВ different forms.
Government В«peopleВ» bonds are aВ clever way toВ raise money benefiting the state and its citizens. Just before the euro appeared, many European countries sold government-backed В«people mini-bondsВ» inВ local currencies and with good interest rates, allowing everyone toВ invest their savings inВ the short or medium term. This was probably the most stable and sovereign way for aВ state toВ raise money inВ local currency while giving its citizens an easy and safe financial investment with decent returns and keeping the debt local inВ local currency. They could help provide additional funding for infrastructure or other parts ofВ the sovereign economy. The maturity ofВ such bonds ought toВ be ofВ variable length: 3, 6, or 12В months for short-term bonds. This would benefit small savers who put money aside, for example, toВ buy aВ car or aВ home, but want toВ wait before making aВ decision. They could invest the small capital inВ aВ safe and productive manner. Also, it benefits the local currency itself, as people are afraid ofВ fluctuations and buy bonds inВ local currencies for only aВ short time toВ earn additional interest. Medium-term bonds ofВ 24, 36, 48, or 60В months are issued inВ В«saferВ» hard currencies, such as the euro or US dollar for medium-term investments. Bonds should start at 1,000В dollars or euros, maybe even less, so that normal people can earn aВ little extra interest on modest amounts invested. Bonds should have aВ low maximum limit equivalent toВ 100,000В dollars or euros toВ allow individuals toВ reap interest instead ofВ large financial institutions. Similarly, accrued interest should not be taxed. Special development bonds are suitable for specific investment inВ market sectors. As part ofВ the above described government bonds, some industry-specific bond types for development could be developed. Special В«bucketsВ» might be created for agriculture, e.g., storage, processing, seed production, veterinary medicine, and logistics, or for micro-electronics. Perhaps bonds could help the pharmaceutical industry toВ create additional factories and research centers or IT. This would allow these funds toВ be used inВ parallel toВ other public and private funds toВ make an industry sector grow, create employment, and progress.
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