Interest Rates & Loans 1 to 7

A need to rethink the dynamics

(UPDATE Oct 2015: This series of papers was begun c2002, before understandings of deeply entrenched global finance fraud scams were brought to light through CDADD's R&D.

In short corporate (mainly Western) Organised Crime has aggregated into global Economy Terrorism – the results of which are unfolding daily around the World – Greece collapse, ISIS, fundamentalism, Syria … and on and on ….

Economy Terrorism has been around since man was conscious of exploiting his fellow man – in the more recent past it was Colonial oppressions that was the underlying flavour to Economy Terrorism – but, since Donald Gordon masterminded pension/investment frauds, along with Grant Thornton, and globalised it through a fraudulent demutualisation process – ALL the leading international auditing firms are deeply entrenched in maintaining Economy Terrorism through its current flavour of corporate Organised Crime → vis: Price Waterhouse Coopers, Deloittes, Arthur Andersen, KPMG, Ernst & Young, Grant Thornton.

PWC are presently (as of Oct 220125) involved in the fraudulent liquidation of UK's Caparo steel works, and of Dublin's Clerys department store – these are minor issues in&of themselves but are indicative of the global stretch to which PWC (& other International auditors) are entrenched within global frauds → corporate Organised Crime → aggregating to Economy terrorism.

SA's Constitutional Court ignored the realities of Interest Rates as an economy control device in CCT 74/03 Jaftha & Van Rooyen case (see paper: Celling Constitutional Court visitors Mis-information) – the (late) Chief Justice, Arthur Chaskalson, ignored CDADD's warning of the fundamental importance of addressing this crucial issue (Interest Rates as an economy control device) – CJ Chaskalson essentially threw away the Constitution.

Today (Oct 2015) incompetent central bank governors maintain near zero rate interest levels – these governors, and Governments, fail to understand that an Interest Rate is both a brake AND an accelerator.

Furthermore they fail to recognise the supersaturated global money base & supply - consequent from 5 decades of fraudulent pension/investment scams – which has allowed money to be counterfeited, laundered & defrauded in ever increasing volumes – money is in the wrong hands, in the wrong places & doing the wrong things – which is why there is increasing anger turning into fundamentalism.

Nevertheless it is important to understand the fundamentals of Interest Rates as an economy control device if one ever wants to attain optimal economy stability – for, without sensible Interest Rate device & control then optimal Economy stability can never be attained.

(End of UPDATE)

_____________________

 

Interest Rates & Loans 1

A need to rethink the dynamics

The Financial playing field is historically uneven with unfair rules that favour the strongest team. There is a need to level the field and develop sensible & fair rules for all the players.

Social systems develop over time; but “time-windows” for change to take place are invariably long, taking generations for meaningful change to be effected – in the interim frustrations leading to anger play their role in social dynamics to effect necessary change the sooner.

The world is learning new ways of effecting meaningful peaceful change and within reasonable time-windows. South Africa is in the forefront with a multi-racial, constitutional, state creating an awareness of the complexities that come with extreme diversity. Despite the Constitution having been emasculated, small changes are coming about – unfortunately the changes are often ill managed, or improperly considered. This is due, partly, to “separation of powers” of government being taken to the extreme such that constitutional matters before Courts are not freely debated before judgements are given. They are argued solely by legal professionals, a miniscule minority of the population, who are wealthy and have no feel of the real people issues they are arguing. Consequently meaningful change is small & slow.

An example (in simple terms) is the shift in the definition of insolvency (Constitutional & High Court rulings) as moving from “liabilities exceeding assets” to including “not being able to meet current creditors”. This shift alone has significant implications on borrowers but banking practises have not been changed to allow for the inherent dangers.

Banking methods are firmly entrenched through decades of protective legislation developed through collusion between powerful corporates and the various governments. Focus leans heavily to the banks interests as opposed to a fair balance of protections between lender & borrower.

Current practise is that banks have the right to unilaterally withdraw overdraft facilities at a moments notice (courts will back them up); they also arbitrarily determine the value of assets (often debtors book) pledged against a particular facility. The resultant effect is that companies who were previously deemed “solvent” can be moved instantaneously into a position of “insolvency” by the arbitrary & unilateral action of a bank – with huge impact upon the lives of people within the company who have no say in the matter, & rippling into dependents and families. With the new requirement for “meeting current creditors” companies placed in this position are forced to close down – the alternative is that directors are in danger of reckless trading. Once unscrupulous attorneys & advocates become involved they attempt to push back the deemed date of insolvency so as to attack the directors in their personal capacities. Once this starts then legal vultures strip the carcass of a once healthy company leaving employees jobless, and society the poorer in many ways through economic mechanisms.

The operation of the legal system for handling insolvencies (private or corporate) is little different to that in the divorce arena. A destructive “adversarial” justice system focuses on destroying parties through prolonging & enflaming disputes rather than “mediation” as a first stage & integral justice process that seeks prompt amicable solutions to disputes.

(Recent media debate indicates that thoughts are now turning to a pre-court mediation process – this will not work because it will not be a process integral within the courts. The courts are still adversarial based and it is the courts who have ultimate say and it is here that members of society become isolated and face extortionate & unjust practises by the legal professionals.)

The aforegoing is a simple overview of the current position, but with all social systems other dynamics come into play that need to be addressed to effectively solve the dilemma. But to implement an effective solution, once one is found, requires co-operation between the different arms of government (executive, legislative, judicial) – the current mindsets in these different arms does not lend itself to achieving this.

Nonetheless solutions need to be found first before they can be implemented.

The King commission started an initiative called “corporate governance” – although this was a positive step it failed to address the true problem holistically – vis: Moral Leadership instilling Moral Governance in all spheres of society. In recent months there has been a slight shift towards this but not sufficiently to bring about meaningful change – it is still very much in the “talk” phase.

It is the lack of Moral Leadership, and hence Moral Governance that is at the root of societal problems of which unfair business practises is one. The lack of Moral Leadership within society comes about because government are not setting the example of Moral Leadership instilling Moral Governance.

Governments method of controlling the economy through interest rate adjustment has recently brought the spotlight onto the plight of the poorest, but it also affects all of society and all detrimentally with the negatives far outweighing any possible positives.

Government needs to rethink the way in which the “interest rate” is used to manage the economy .

The “interest rate” is a crude control device that is used by government to (hopefully) speed up or slow down the economy. Unfortunately this control device was developed long ago and has not been redesigned to meet current needs, especially in 3^rd World Countries of which South Africa has a large component. Current media articles clearly show that cranking up the interest rate does nothing to alleviate the poor – we can clearly see that it seriously harms them. It marginally (debatable) restrains people from incurring further debt, but it also puts healthy companies & persons under severe stress from an increase in interest payments – i.e. increases insolvencies.

None of this makes sense.

Money is a good or commodity as is a tin of baked beans.

On what basis should a company or person have to be faced with the uncertainty of a variable cost for the purchase/use of a “good” (a particular loan facility) once purchased. We need to reconsider what an “interest rate “ is and what it is there for.

Interest Rate has, or rather should have, a number of components:-

• a “time cost” component for money to offset the depreciating effect of inflation – determined by CPI – a stipulated right for all lenders (a savings account = loan to a bank) – this is a “value protector” not “income” therefore non-taxable

• a “risk cost” component which a lender is entitled to charge – determined by lender & borrower through competitive forces & within stipulated bounds

• a “service cost” component which a lender is entitled to charge for ongoing services rendered in assisting the borrower to correctly manage their business finances – determined by lender & borrower through competitive forces & within stipulated bounds

• a “fiscal control” component (an economy “accelerator/decelerator”) which acts as a deterrent or incentive to the community to take out a loan.– it should apply only to new loans not for existing loans – determined by government

Limiting the “fiscal control” component to new facilities immediately brings competitive forces into play.

Competitive forces are determined by Relative differences between competitors not by Absolute change amongst all competitors. Companies raising new facilities will be at a greater disadvantage through interest rate differentials relative to their competitors than the current practice of seeing Absolute change. This impacts instantaneously on manufacturing/service input prices and more so through the multiplier effect that determines consumer pricing. It is the consumer price relative to competitive products/services that determines the success or failure of a product. But to remain competitive a company is deterred from increasing its prices – it is this economic pressure that forces business to act responsibly and maintain sound financial control. This improves general price stability thus reducing inflation threats.

And Price stability is where the poor need to be helped.

Improved control on Interest Rate leads to responsible lending/borrowing which helps to stabilise money supply

Transferable overdraft facilities would create a secondary market in which a facility can be bought/sold. This feature also assists in stabilising the money supply – as at any moment the overdraft facility is a given – therefore the transferring (buy/sell) of a particular facility does not increase/decrease money supply.

Banks, who in the main are the lenders, need to be more mindful of correctly servicing their clients and in providing ongoing financial assistance & advice. They are receiving payment for this from the “service cost” component of interest – it is time that banks started earning this income which historically has been a freebie. Facilities must be fairly governed and through a consultative process between lender & borrower. This will also cause banks to focus on their operations and to ensure that they are providing the right levels of services and in the right areas.

Insolvency needs to redefined as “not being able to meet interest repayments on liabilities” – this is a more lenient but fairer approach. It effectively allows borrowers flexibility in altering the term period of repayment when short term business fluctuation difficulties occur.

These proposals would apply pressure to lenders to act with greater responsibility when granting facilities. The “tech” era created a hype of activity that saw banks lending ridiculous sums to companies. The mindset was (and still is) that any problem can be solved by throwing bucketsful of money at it – clearly this is incorrect.

For a company a loan facility should be secured solely by a specific level of shares, for an individual against specific assets only – this places responsibilities on both lender & borrower to ensure that loans are sensibly and correctly determined & managed. It would also reduce insolvencies as liabilities are clearly pre-defined. (Hence it would also assist in ridding the legal profession of unscrupulous vultures - this huge benefit alone justifies the adoption of the proposals herein).

The implementation of the solutions are not complex issues, nor are they insurmountable, they merely require the desire of government to move to Moral Leadership to instil Moral Governance.

Chris Addington Pr.Eng. +27 83 962 7098, This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Interest Rates & Loans 2

Who pockets the interest?

 

Pressing on a brake pedal causes a vehicle to slow down. If in the process a brake lining binds, the wheel locks up, the vehicle becomes unstable and enters into a skid.

This is all intuitive, we observe the effects of a skid by smoke from the tyres – in other words we do not need to know that “the brake pedal operated linkages that caused a ……, which drove a ……, that caused the wheel to lock up.

We intuitively see the link:- that smoke from the tyre means the braking mechanism of the vehicle is defective - it is intuitive because it is a tangible system.

Financial systems are “intangible”. Of all the money we have, we have only a very small amount in tangible cash notes at any time. The other amount of money we have are in intangible forms which are represented by numbers printed on a piece of paper, or held electronically in bits & bytes on some computers memory.

When a financial system becomes unstable we have difficulty in detecting it promptly or at all because we do not have the physical evidence to observe as we do with engineering systems.

Further complications occur with a vehicle if it is not correctly maintained, if pieces of wire hold the brake callipers together the probability of catastrophic failure increases.

Social systems, which includes Financial systems, cannot be sent to a repair shop for part replacement as can a vehicle. Social systems evolve over time with many forces at work which affect the manner in which systems are repaired & developed. Invariably social systems become like a vehicle that is held together by pieces of wire – the probability of instability, even catastrophic failure, increases.

Interest rates are used by government to control the economy:- the view is that increasing the interest rate slows down the economy, lowering interest rate speeds up the economy. But an increase in interest rate has other effects – and the interest rate is levelled on all loans, new & old.

It is argued that investment and saving is affected by interest rate (saving directly diminishes spending) – and that the higher the interest rate the greater the inducement to save, i.e. not to spend.

But applying an interest rate increase to existing loans increases spending through higher interest payments – which counters the intended control effect of reducing spending.

Also the interest rate has become marginalised in its control effect due to the fact that the interest received by consumers is nominal relative to the borrowing rate, and that the interest earned is taxed. Therefore an increase in “i” has little benefit to wealthy consumers – thus the effect of “i” as a control device is reduced.

In addition, the percentage of consumers who have sufficient to save is relatively small, and more so in 3^rd world countries. Alternatively stated: the majority consume all their income, and what little assets they may have, simply to survive, thus there is no saving. Therefore the poor do not justify the use of “i” as a control device.

But does a simple interest rate “control” device benefit 1^st world countries?

Historically Banks & Financial institutions have colluded with governments to develop the laws that govern the financial systems – and the laws are designed to benefit the banks & institutions primarily, with consumer issues of lesser importance. (see latest Financial Advisory & Intermediary Services Act of 2002). These have been built up over time by trial & error, and luck, as well as lots of bad-luck - it was/is not a case of engineering principles being applied, meticulous planning, precision manufacturing. Because of the historicals societies have “accepted” the financial systems that we have, simply because it is “so”. The “so”-ness of the financial systems is such that they are, analogously, “held together by pieces of wire, bits of gum, sticky tape & so on”.

Societies have thus become accustomed, desensitised, to money being sucked out of their disposable income when interest rates increase. But where does this money go?

It is argued that banks borrow from the Reserve or Central bank at a particular interest rate and that that determines the interest rate, which is set by government - therefore Commercial banks receive interest but also pay interest – a zero sum scenario. Brief considerations shows that this is not correct.

The purpose (part) of the Reserve Bank is as a “lender of last resort”. Commercial banks are required to maintain a liquidity reserve level, which is set as a percentage of total deposits. If on any particular day the reserves are below this level then the banks must borrow; either between banks or from the Reserve Bank. The Reserve Bank charge to Commercial Banks for a loan is high; this so as to act as a deterrent to banks for failing to control their reserve requirements. But the shortfall of reserve requirements is usually small (in percentage terms), also the charge (interest) levied by the Reserve Bank is actually a penalty, a fine, it is not an interest payment per se – even though the penalty is determined by an “interest rate”

Therefore the Reserve Bank interest rate for shortfalls on liquidity reserves is not the mechanism by which the economy is (partly) controlled. The prevailing interest rate will influence the Reserve Banks penalty rate, but the penalty rate is not the interest rate control itself.

Government bonds & bills are issued with varying terms but each with fixed interest. Although the level of fixed interest is influenced by the prevailing interest rate it, also, is not the primary control device which determines the interest rate.

The exchange rate of a country’s currency relative to another country is affected by the interest rate. The exchange rate will adjust through market forces to compensate for differences in interest rate between the respective countries – this is a technical adjustment. Any further changes in exchange rate come about due to the perceptions that markets have regarding the prevailing conditions of that country.

However perceptional changes in exchange rate do not directly impact upon the interest rate within that country – simply because the interest rates are determined by government and not by market forces. Market conditions influence governments who then may decide to change “i”.

An increase in “i” will again feedback to a technical increase in exchange rate which in turn affects consumer prices as suppliers perceive that global prices have increased. This coupled to profit-maximising contributes to an upward push on general price levels.

When a government does change the interest rate the effect it has is destabilising, if not catastrophic. It causes money to be sucked out of the economy and (solely) into the coffers of the commercial banks – no where else. The increased interest rate is levied on all loans, old & new. Hence the volume of money sucked out of the consumers disposable income and into the banks coffers is huge – and damaging to an economy. This has a destabilising effect upon the country:- input costs increase leading to inflation, businesses & private persons struggle to meet the increased costs, liquidations increase – this in turn destabilises societies as a whole within a respective country; and instability in one country can destabilise other countries..

The economies of 1^st world countries have the financial inertia to drive through these destabilising turmoil’s with relative ease even though they experience some destructive effects, but 3^rd world countries, and those in between, do not.

Governments then generally react with further interest rate adjustments & other equally inefficient controlling devices – all of which causes further turmoil and instability throughout the world.

Thus the current practice of using interest rates as a control device is highly destructive to those that most need help and of little influence to those that have wealth.

It becomes clear that the current method of interest rate control has no sound basis – it is simply a case of government announcing an increase in interest rates, which has the sole effect of sucking money from a set of persons (majority) to a minority set of persons (banks).

Reiterate: The use of interest-rates as a controlling device has come about historically because of collusion between financial Institutions & Banks with Governments, solely to benefit the institutions & banks. At the time that legislation was developed to put these destructive & inequitable laws into place it is likely that money passed hands to get the proposed legislation passed into law. Societies have through time become accustomed, desensitised, to this kind of social injustice. In past centuries developing 3^rd world countries were not an issue to be considered – and the populations of 1^st world countries had no real say. Thus interest rates as a control device was simply imposed and has remained as such to date. Unquestioned.

It becomes intuitively clear that, even in 1^st world countries, using interest rate changes on existing loans, as a controlling device, makes no sense. In 3^rd world countries it simply destroys attempts to develop an economy.

Simply stated; the current practice of interest rate as a control device needs to be re-engineered. (see Interest Rates & Loans 1). Under an alternative scenario:- new loans would be initiated with the prevailing interest rate, but as interest rates decline then the interest rate on existing loans would decrease as well, when government increase interest rates to cool the economy down then only new loans would be affected by the increase.

Banks have been feeding off of the interest receipts – the nett effect is that the services that are provided by banks are not correctly focussed. Banks need to redevelop their operations to provide the appropriate services.

Society, as a whole, within South Africa is being unequally treated – which is a social injustice in contravention of the Constitution.

On what basis are banks (minority persons – juristic) able to receive huge cash incomes from the whole of South Africa (the remaining majority – natural & juristic) simply on the say-so of government that interest rates increases apply to existing loans?

From the aforegoing it is now clear that the current practice seriously harms the poorest, destabilises the economy, has minimal effect on the wealthy – and all to suck huge sums into the coffers of the banks – solely for their own consumption.

Re-engineering financial “control” devices so that they give meaningful outputs & results will assist in stabilising the worlds economies.

(But should not government be setting the interest rate on monies deposited with banks rather than on loans - market forces would then set the interest rate fee for specific risks & services rendered on loans. And should they not be scrapping tax on interest to increase the effect of the control device.)

As an aside:- Perhaps banks should develop common areas such as a unified ATM operation, centralised in locations. This would improve security & controls. Currently each bank has it’s own ATM’s. Therefore one shopping mall has a number of ATM’s, each in isolation – this increases the security risk and operational costs.

Banks also need to refocus their services & office/retail space. Contrast the floor space allocation for depositors versus that for borrowers, this discrepancy is solely to attract borrowers because this is the banks real future revenue stream, along with the huge gap between deposit & borrow interest rates. The banks’ focus, on this floor space mis-allocation, stems directly from the fact that historical legislation has come about through collusion & solely for the banks’ interests, and to society’s detriment.

In conclusion:

The practice of applying interest-rate increases upon existing loans has come about through historical irregularities – consequently there is a need to re-engineer the method of controlling the financial system so that meaningful control is effected & social justice is restored.

Chris Addington Pr.Eng.

South Africa

+27 83 962 7098, This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Interest Rates & Loans 3

A too simplistic “economy control device” maintains slavery

 

The unreal Iron Curtain came down amidst the dust of the real concrete of a dividing wall. Following, on a macro scale, close on its heels, Apartheid disintegrated into a constructive rainbow.

Two transitions altered the way the world thinks.

But Sept 11 has radically shifted the way the world thinks - 1st World countries are realising that the world has shrunk and that it has become an international community of nations in which the poorest are an indictment against the wealthiest.

From the constructive South African rainbow the world has seen the most advanced Constitution develop. The core of this intangible concept is the principle of a separated power structure of government coupled with an enshrined Bill of Rights - in which the judicial, executive & legislative have clear boundaries and are separated, but nonetheless call for co-operative government.

But is this sufficient for creating a stable environment?

A stable environment calls for stability within political, economic & social structures. The judicial, executive & legislative powers comprise the political component. The economic component is primarily provided by the will of the collective business communities, and the social component by the collective will of the citizens.

It is important to recognise the distinctly separate construct of these power bases if solutions to any particular environment system problems are to be developed. But there are grey areas between the boundaries of these structures which create many complexities that thwart potential solutions to any identified problem. Thus solutions to problems create more problems requiring solutions that conflict with the initial solutions, which require modifications to the initial solutions

Interest rates, as previously canvassed, is a case in point.

In the BC millennia, of around 4 or so, society realised that time had an impact upon the future value of stored goods. Society created an “interest rate” (a simple unitary “cost” component for levying against goods received prior to payment made) Over time money as an exchange medium developed and interest rates became a formalised concept of a percentage per annum charged upon outstanding monies owed. One can imagine a bronze sword wielding tyrant with his followers manipulating the environment to determine the prevailing interest rate.

Fast track forward to 2 millennia AD and we find that the Political, Social & Economic structures have changed dramatically but not so the, unitary in nature, economy control device of “interest rates”. It is still a simple one factor component that is levied according to the dictates of the powers-that-be. (And the weight that backs them up have shifted from bronze to steel, titanium, plastics etc.)

The reality is that in today’s terms the financially religious “Greenspan's”, “Brown’s”, etc. pontificate in their respective collective huddles to debate the current economic conditions and after a period of time will announce that the “interest rate lever” will be ratcheted forward or backward by a determined degree. The world which has been waiting with baited breath to the decisions of these pontificants either display pain or cheer according to the impact the decision has upon their respective social group.

On a macro scale a reduction in interest rates generally cause upliftments. But an increase causes many woes.

Within a developed country a decision to cool the economy is followed by an increase in interest rates An interest rate increase causes overheads of a financially geared person to increase which pushes that person closer to insolvency

There has thus been significant change in the social & political environments in the intervening millennia but none with regard to the interest rate device that has been used to control the ever developing economies.

In millennia BC human rights were not a priority issue, Have’s treated Have-Not’s harshly, and Have’s that lost their wealth were invariably sold into slavery to offset debt.

The Have’s developed the concept of a unitary component of “interest rate”; consideration of the impact that such a simplistic economy control device had upon the Have-Not’s did not enter the equation. And those that were adversely effected did not complain, or if they did were quickly dealt with.

Slavery as such, within 1^st World nations, was abolished around 150 years ago, but economic forces have maintained this concept through sub-standard wages. It becomes a grey area whether a poorly paid person is effectively a slave or not.

As previously identified the increasing of a unitary interest rate to cool down the economy has destructive effects upon those in debt, pushing them closer to insolvency, it also counters the intended economy effect by increasing inflationary pressures. Within underdeveloped countries an increase in interest rates is catastrophically destructive - it pushes the poorest, trying to uplift themselves, back to the bottom of the pile.

But 1^st World nations are only now becoming aware of the impact that a unitary interest rate component has upon Have-Not’s and under developed countries.

Reiterate the need to develop a multi-component interest rate:-

Interest Rate Components

CPI

Profit

Risk

Service

Fiscal Control

• a “time cost” component for money to offset the depreciating effect of inflation – determined by CPI – a stipulated right for all lenders (a savings account = loan to a bank) – this is a “value protector” not “income” therefore non-taxable. Acts as a feedback mechanism (adjusted every half, quarter, month?)

• a “risk cost” component which a lender is entitled to charge – determined by lender & borrower through competitive forces & within stipulated bounds

• a “service cost” component which a lender is entitled to charge for ongoing services rendered in assisting the borrower to correctly manage their business finances – determined by lender & borrower through competitive forces & within stipulated bounds

• a “fiscal control” component (an economy “accelerator/decelerator”) which acts as a deterrent or incentive to the community to take out a loan.– it should apply only to new loans not for existing loans – determined by government. This component paid to government.

• a “profit component” - determined by lender & borrower through competitive forces & within stipulated bounds

Implementation of this model is fairly easy, as it simply requires the components to be identified within the prevailing absolute level of interest rates, develop the accounting tools to measure & control each component, set the levels of each component - then allow; market forces determining CPI, initial negotiation between Banks & Commerce representatives to determine Profit, Risk, Service, and Government to set Fiscal, so that initial interest rate equals that prior to component settings. Market forces will work towards establishing competitive norms.

Historical & progressive collusions between Political & Economic personae created the current scenario of interest collections flowing into the coffers of banks. The crossings of these boundaries need to be separated.

Countries previously colonised have suffered because of political, economic & social vacuums. Attempts of uplifting themselves have been thwarted. Given stability within Political & Social components, the effects of a unitary interest rate control device is sufficiently destructive to destabilise these other components. This is an important result flowing from recognising the deficiencies of a unitary interest rate.

Those nations that have progressed and are now recognised as developed 1^st World, have retained, essentially unchanged, the unitary interest rate economy control device. They have been able to do so because the disastrously destructive nature of this unitary control device within a developed country has been softened by alternative social structures to assist those (some of) that were negatively effected by this device. But historically those that were negatively effected were of slave or near-slave status.

Populace of those countries that were colonised also did not enter into the equation when the economic structures of the then more advanced & developing nations were being constructed.

There is a clear & urgent need for this unitary economy control device, interest rates, to be developed, through business engineering, into a multi-component control device so as to cater for correct control of the national and international environments.

There is also a need to understand the urgent requirement for an engineering function to be developed within the Political, Economic & Social structures of any environment – it is as important as identifying the similar function within the business arena.

The ratio of population within developed countries to that of undeveloped countries is low (possibly 2 to 4 Billion) – thus the greater majority of global population is under developed – clearly then addressing the Interest Rate as an economy control device is of significant importance. A too simplistic “economy control device” maintains slavery

Chris Addington Pr.Eng.

CDADD Consulting Services

South Africa

+27 83 962 7098, This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Interest Rates & Loans 4

Implementation of redesigned multi-component model,

disempowering of Corporate bullies,

& establishment of Development Fund Levy

 

Implementation of CDADD’s redesigned multi-component Interest Rate model can be done at any time, and with ease. But, it must be pointed out, not without significant inflationary ripples throughout the world; this would require management by 1^st Worlds, BECAUSE, currently, the selling price of money has been lower than the cost price.

The other important consideration is that it requires that sufficient time be allowed for banks to restructure themselves into multi-bank retail outlets. This would also compel banks to restructure their businesses more efficiently and would also reduce both security costs & security risks for banks.

It is important to note that the purpose of a bank should be purely as a facility for secure deposits, transactions & loans. It is not an investment facility per se, and banks acting as investment advisers are in a position of conflicting interests and are violating laws & ethics concerning financial advice.

Currently (2005) USA, European & UK interest rate levels have been at irrationally low levels. US Fed’s Alan Greenspan has been incrementally increasing interest rates, which are now currently at around 3.5%. But this level is still far too low for rational multi-component control.

The fact that the major 1^st Worlds have to increase their rates to a rational level means that it will have a negative, inflationary, effect on 3^rd Worlds – this is unavoidable. It is imperative, if Global Stability is to be aimed for, that Interest Rates are rationally controlled; it simply means that 1^st Worlds must assist in buffering the interim ripples to 3^rd Worlds.

The inflationary impact into 3^rd Worlds resulting from the necessary interest rate increases in 1^st Worlds will simply feed back to the respective 3^rd World country’s inflation component, and provide auto feedback control into their local economy.

It is important that nations understand these interim ripples for what they are, an unavoidable, resultant, effect from a necessary adjustment so as to achieve rational global control over economies; and not to see it simply as an inexplicable disruption to react to.

It is necessary that the profit, risk, & service components be determined within reasonable level bands. The inflation component will be determined by its current level; however consideration must be given to determining what the appropriate inputs must be so that a correctly calculated inflation component results. It is pointless having an inflation component that does not correctly reflect the true inflation that prevails at any time – an incorrectly calculated inflation component would defeat the purpose of the automatic feedback control aspect that an Inflation component brings to the model.

A further point regarding the Inflation component – as proposed, the receipts for the Inflation component from loans in existence would flow back to the depositors; this would act as a value protector. But, since banks have to retain a reserve level not all deposits may be lent, therefore the inflation component would need to be averaged out amongst all depositors, this would cause a differential between actual inflation and actual inflation receipts to depositors. However, this would be small. Further insights would be gained once implemented which may yield additional positive measures.

Establishing rational control over economies through the implementation of CDADD’s multi-component Interest Rate model would also disempower the corporate bullies that banks have been.

A further benefit of CDADD’s model is that it allows for accumulation of substantial funds through a Levy which would flow into a Development Fund for both National & International upliftment projects.

The levy would see flows from the “Economy Control” component as & when it is invoked; in addition each nation could have a distinctly separate Levy component.

The accumulated Development Funds could be divided into National & International (via, say, UN) developments. They can be discretionally used in any area in need of development & upliftment.

With regard to South Africa, a 1^st World economy with massive 3^rd World poverty:

By implementing the identified components within the current interest rate level (prime = 10.5% at September 2005) gives the following:- the inflation component is a given, the profit, service, risk component bands can be set. The remainder are the Economy Control component, and optional Development Fund Levy component. The Economy Control component would initially be flowing to banks whilst they restructure, but reducing within a reasonable time frame and with flows being redirected to the national Development Fund.

During the phase in period the absolute interest rate level could also be adjusted about its current level (10.5%) by the respective shifts over time in the inflation component, this would give SA exposure to its underlying “control effect”.

If we look at some figures to get a feel for magnitudes:

If we assume an average per capita debt level of R10,000 and population of 30 million. This would give total debt of R300 Billion. By implementing the Economy Control on a phased approach, a 1% shift (i.e. flowing into Development Fund instead of banks) would yield an annual/monthly inflow of R3 Billion/R0.25 Billion.

SA Statistics are unreliable, but Reserve Bank data indicates that credit is in the order of 3 times this estimate – this implies a 3 x yield per 1% of interest rate (around R0B75 per month)

SA’s interest rates are such that by maintaining the current absolute level (10.5%) that an immediate 1%, even 2%, of this could begin to flow into the Development Fund. Such a change would not impact detrimentally upon banks. It would also give an immediate signal to banks to restructure along more efficient lines, and promptly.

To the banks position it would be no different to an absolute reduction in Prime rate, but to SA as a whole it remains static; thus a margin is created. This margin is what flows into the Development Fund for social projects.

These inflows would thus yield cash-in-hand for social projects without destabilising the underlying economy. In fact it would enhance economy stability and substantially close the historical economic gaps which have impoverished all, not just blacks – it is constructive Economic Empowerment in its holistic sense, not a narrow racially biased & destructive BEE.

THEN,

… by implementing an open tender approach to purchasing land SA would become accustomed to a phased, free market, change in land policy.

It is important to note that the first few tenders should, perhaps, be done on a two or three phase approach. In other words: calls for tenders to sell at a tendered price, publishing of bids to create awareness (but with option to exercise), then a further tender to bring bids into a more narrow free-market price band. This could be repeated, initially, for a 3^rd time. “Learning” would allow for model adaptations.

These approaches would yield a stable, constructive, change to societal structures.

However, it is clear that consideration has not yet been given in deciding to whom the farms would be handed to when purchased. The skills are not sufficiently developed to simply give free hand-outs and expect farming production to continue. Therefore, perhaps a phased approach with the purchase price being paid in instalments, and with an additional monthly salary component to the selling farmers to train new incoming owners.

Chris Addington Pr.Eng. +27 83 962 7098

This email address is being protected from spambots. You need JavaScript enabled to view it.;

 

Interest Rates & Loans 5

Unwarranted fear deterring implementation.

Unfair Rules, that are causal of disparity creating despair leading in the extreme to poverty, need to be business engineered to create Fair Rules.

Economies globally are unstable because of many unfair rules that have been in use for decades, centuries, millennia.

The biggest obstacle to changing from an Unfair to Fair Rule is the actual implementation – unwarranted fear is deterring implementation of bold initiatives.

____________________________________

South Africa’s Reserve Bank, headed by Tito Mboweni, has, over the past 12 months or so, given a number of inflationary warnings along with indications of possible interest rate hikes.

As a “control” measure the giving out of a rate hike warning is highly destructive, only surpassed by an actual hike. The warnings sends signals throughout the economy, and globally, which has the effect of deterring job creation, and alerts companies to possible cut backs => job losses => stifling stable growth.

Should an actual hike occur major disruption comes about.

As oft repeated in this series of papers the current unitary model interest rate control device is massively destructive because of the fact that an increase sucks large volumes of money (economy life blood) out of the economy from the majority, and into the coffers of the miniscule minority power players that control banks & institutions.

Economic Momentum is dramatically reduced by at least the square power of reduction of Money Supply (see Economic Momentum – under Historical Archives, Home Page, lhs panel).

Despite Tito (and also Finance Minister Trevor Manuel; and also George W & Tony B) long being aware of the dynamic, business engineered, multi-component interest rate control device, he has stalled on implementing.

It is difficult to determine Tito’s actual reasons because he has remained silent – but fear is a definite & valid reason. And it is unwarranted.

But it is clear nonetheless that heed is being taken.

The reason for Tito maintaining a static rate level is because understanding, to a degree, of a unitary model’s destructive impact has come through. But Tito’s understanding is not fully materialised, for if it were then Tito would/should have no hesitancy in implementing a rational multi-component model.

The reasons for warnings being given of a possible rate hike were because of detected inflationary pressures stemming, as argued by Tito, from oil & domestic debt increases.

What Tito is overlooking is that inflation is caused by supply & demand, commodity & monetary, pressures.

If the value of currency decreases, or the level of demand pressures increases, or supply restrictions increase, then the price of the commodity increases – straight forward.

But, herein, we are concerned with the monetary issue, and more specifically in one of its control devices, interest rate.

Within an economy people store money in banks & institutions with low, or zero, level of interest rate return. In the eyes of the consumer their money, and hence the bulk of stored money within the economy, is losing value – simply because inflation is not only caused by an increase in commodity prices but also by a decline in currency value.

The fact that there is no compensatory inflation component within the current (unitary model) interest rate control device exactly causes inflationary pressures. (The risk, service, profit components are pure costs to a borrower; economy control component is simply a “deterrent” cost)

It can be argued on a macro-scale that an overall nett general price increase offsets the effective monetary devaluation (through inflationary losses) and hence that it is a zero sum game – but this overlooks the disparities of all those within the total game. Whilst it may be true to argue a zero sum game at a macro level, those with wealth will be enriched at the expense of the less rich and poorer to achieve that nett zero sum (if this zero-sum argument were to be shown to be true at a macro level).

BUT, the whole purpose of designing a rational multi-component interest rate control device was to remove one of the unfair rules that cause disparities.

If any one economy were to remain structured with a unitary interest rate control model, and all others structured with a rational multi-component model, then it would be immediately clear that the currency of the odd one out was losing against all others.

BUT, when ALL economies are structured around the same form of destructive unitary model then its destructive impact is not realised until full understanding comes about. And the cause for this understanding coming about stemmed from analysing why a massive chasm exists between Haves & Have-Nots.

It requires courage for major governments to take, as they would see it, the political gamble of taking on the major global financial players; it would therefore take a massive amount of courage for any one government, or individual Reserve Bank Governor, to do it alone.

But it can be done & without too much transient harm, and which could be minimised by effective control action along with appropriate economy protections.

And the long term benefits would swamp any transient negatives – it is impossible to accurately quantify these issues but intuitively the long term benefits of a rational control device bringing about greater economic stability will clearly offset transient losses.

South Africa would take the leading position in world financial reform if she were to muster the courage to effect the change.

Tito should muster the courage to defeat the unwarranted fear deterring implementation.

Chris Addington Pr.Eng. +27 83 962 7098,

 

 

Interest Rates & Loans 6

 

bloodsucking quackery prevails

 

SA’s recent interest rate increase precipitates massive instability.

SA Reserve Bank Governor recently increased the interest rate level by 0.5% it has precipitated significant unwarranted disruptions & instability.

The 3TMs have also irrationally blocked significant economy reforms.

If you wanted to slow your pace down would you suck blood from your body to do it?

Why then ……….

_______________________________

(It is suggested that the preceding papers in this series be studied first – see Historical Archives, lhs panel)

There was a pressing need within SA for an interest rate increase – BUT – applicable only to new, future, loans – NOT on existing loans.

In applying a rate increase on existing loans it means that disposable income is being sucked out of the economy population, from the tens of millions, into the coffers of the wealthy & financially powerful few.

Money is the life blood of an economy

This rate increase, as a means of economy control, is no different to sucking blood from your body simply to slow yourself down – mindless nonsense that is reminiscent of medical quackery centuries ago.

A significant opportunity (multi-component interest rate economy control) to reform global monetary mechanisms was placed on a platter for South Africa, but irrationally rejected by the 3TMs (Thabo Mbeki, Trevor Manuel, Tito Mboweni)

Fear (cowardice?) deterred the ANC Government from implementing groundbreaking reforms that would have allowed swift advancement from the impoverished/enslaved positions that many millions of South Africa’s disadvantaged have been held in for centuries.

BUT, SA’s position must be strongly contrasted to that of main 1^st World economies.

USA, UK, Euroland have interest rate levels that are far too low, in certain time frames the interest rates were below inflation levels.

i.e.:- the cost of borrowing money was well below the actual cost of the money borrowed.

Recap from the first paper in this series (see under Historical Archives, lhs panel):-

Interest charged by banks is simply a “cost” of capital borrowed – but it requires a rational structure.

There are a number of components that make up this cost in totality – it is not simply a unitary amount.

- The first cost that must be met is the “time cost” of inflation. If interest rates are below inflation rate then the lender is losing money – a fast route to disaster.

- The lender must make a profit, and also cover for risk variances, two distinctly separate components.

- For a nation to “control” the economy, into the future, it needs to have a separate component (an economy control component) – this flows into state coffers not into the banks coffers.

- For developing countries, and for developed countries to aid developing countries, an added “development fund” component can be added – which can simply be viewed as an added risk-avoidance (or deterrent) premium.

The developed nations have no option but to increase their interest rates to rational levels because their levels are too low; in doing so it will cause global disruptions, it’s unavoidable.

But this DOES NOT apply to South Africa, there was no need for a unitary model increase; there was a definite need for an increase on the economy control component within a multi-component model, but this would apply only to new, future, loans.

It is difficult to speculate as to why the ANC Government are refusing to implement significant stabilising economy reforms.

It appears that they are locked into simplistic, but grossly defective, economy models – and cannot see their way out of them.

Their framework of understanding is of defective 1^st World economy models that have not worked, cannot work, within 3^rd World countries. These 1^st World models are also destructive within those 1^st World countries.

e.g. the model:

X-rate => PPI => CPI => interest rate => DEMAND => GDP => TRADE BALANCE => BoP => (back to) X-rate

…. This is a simplistic model; it is, inherently, grossly defective – it ignores the real dynamics that occur in a nations activities.

The model is entirely wrong.

But this model is “sold” to nations, globally. Why???? …..

….. because, the financially powerful few can, globally, manipulate markets under the guise of an “open global economy”, but in the knowledge that the masses will not understand the dynamics.

The proofs of this is simply to tune into any business programme, CNN, Sky, etc. – listen to the guest “specialists” and piece together the models upon which their views are based – they are grossly defective

In a similar way in which Donald Gordon defrauded many millions out of hundreds of Billions; so too does this model (and many other defective economy models) defraud economies.

The model presupposes rational derived demand; it totally ignores, amongst other factors, the prevailing irrational, destructive & fraudulent nature of speculative demand (see SA Bonds – siphoning & churning).

Correct economy models need to be developed through sound business/economy engineering if there is to be any hope of South Africa avoiding a Zim style collapse – but time is running out.

Bloodsucking quackery prevails – one might just as well throw bones.

PS: UK Prime Minister Tony Blair has also refused to engage interest rate economy control reforms to enable advancement of impoverished/enslaved countries.

Chris Addington Pr.Eng.

+27 (0)83 962 7098

 

Interest Rates & Loans 7

 

Further Perspectives & Consequences

The current credit crash has again shown the massively destructive nature of the unitary-model Interest Rate control-device.

The failure to reform to a rational multi-component model is having serious destabilising effects on the world.

Putting further perspectives onto the radar screen – CAUSE/EFFECT issues, such as the sabotage of Margaret Thatcher’s policies & government.

___________________________________

It is recommended that you read the previous papers in this series – click on ‘view now’ Historical Archives (lhs panel).

This series highlights the gross defectiveness of the prevailing ‘unitary-model’ Interest Rate economy control-device that is causing massive destruction within 1^st Worlds and catastrophic destruction in 3^rd World countries.

(Please Note: This website is about the pioneering of ENGINEERING into the SEBFL environments, it is about seeking truths; it is NOT about journalistic waffle, or mere theories; it is about facts and engineering sound solutions to real & significant global problems.

If you are seeking journalistic waffle then simply enter the name of any mainstream newspaper into your search engine.)

Explaining transmission mechanisms is NOT doom-prophecy, it is explaining probabilistic reality.

(SEBFL = social/economy/business/finance/legal environments)

___________________________________

INTRODUCTION

In following developments at this site you will understand how societies can be easily distorted by defective economy structures & controls.

Just as trying to drive a car with defective brakes, erratic throttle, loose steering wheel, it invariably produces destructive outcomes; so too do defective economy controls & structures.

What are government’s doing about this? Nothing effective.

Tuning into any government parliamentary broadcast invariably finds elected MPs engaging in rhetoric & slanging matches with no intelligent debate, and certainly no honesty & transparency.

The blame rests squarely with governments in toto - ruling, opposition, minorities, independents, statutory heads, etc. – not one is calling for transparency over your pensions & investments being stolen by these corporate crooks, or over the massively destructive unitary-model interest rate economy control-device, or other defective issues that negatively impact the world.

And you, as with everyone else, are feeling the effects of this. BUT, not as oppressively as those starving & dying in undeveloped countries, or those that are enslaved to the developed nations through cheap sweat-shop imports (which also destroy industries in developed nations).

There continues to be resistance to engaging with a rational multi-component Interest Rate control-device which resistance is greatly affected because of fear of reform unknowns, which fears are fuelled by the successful sabotage of Margaret Thatcher’s policies & government.

But further thought brings added value:-

___________________________________

INTEREST RATE

Recap:

The interest-rate economy control-device that prevails is a unitary model, i.e. if central banks want to ‘control’ economies they raise, lower, or retain the interest rate level.

As we have seen in the earlier papers in this series this is entirely destructive because it does not provide rational control. Hence the development of a multi-component model by CDADD to bring about rational control – but this has been ignored in the main by governments & central banks. And leading economists refuse to engage transparently & honestly on this & other major issues. Certainly there is greater understanding within governments as a result of the proposed multi-component model but it has only produced more guarded responses with less severe shifts in interest rates.

Despite the reduced shifts there are still no rational control features within the unitary-model, hence:-

- there is no direct positive control;

- the consequences of any unitary-model shift is massively destructive to the extent it swamps any potential positives.

- there are inflationary consequences in not having rational control.

(Note: Sucking huge sums of money out of an economy directly reduces economic momentum by at least the square of reduction in money – see paper: Economic Momentum; E=cM^2)

The incorrect unitary-model interest rate sucks huge amounts of money out of economies.

What is clear from the Northern Rock issue is that there are super-profits within the unitary model that wrongly allows additional middle-players.

All of these issues destabilises economies - to understand this we need to progress the thinking of the earlier papers.

[An aside: there is an immense rift between societies that operate under a unitary-model interest rate and those societies that are opposed to usury.

The consequent violence (such as twin towers) has part-root in this rift.

It makes sense that in thinking of interest rate reform that we also consider changing the terminology to reduce/remove this rift.

When thought is given to the necessary components that should be developed it becomes clearer that such a terminology reform is possible.]

_________

As we saw earlier; Interest Rate has implicitly, but not previously recognised, a number of components all rolled up in one, the proposed multi-component model identifies these components and how they should be modified to bring about effective economy control:-

• a “time cost” component for money to offset the depreciating effect of inflation – determined by CPI – a stipulated right for all lenders (a savings account = loan to a bank) – this is a “value protector” not “income” therefore non-taxable – BUT, there is also an erosion component, see later

• a “risk cost” component which a lender is entitled to charge – determined by lender & borrower through competitive forces & within stipulated bounds

• a “service cost” component which a lender is entitled to charge for ongoing services rendered in assisting the borrower to correctly manage their business finances – determined by lender & borrower through competitive forces & within stipulated bounds.

• A ‘profit’ component – determined by lender & borrower through competitive forces & within stipulated bounds.

• a “fiscal control” component (an economy “accelerator/decelerator”) which acts as a deterrent or incentive to the community to take out a loan.– it should apply only to new loans not for existing loans – determined by government, but flows from this component should go into a Development Fund not state coffers.

The risk, service, profit, components should have set bands that are not affected by ‘time cost’ or ‘fiscal’ adjustments. Bearing in mind previous rate levels the summed percentage of these components should not exceed 2% or 3%

The ‘fiscal’ control has a neutral short term effect upon the prevailing economy and can be raised to any level to give effect to it without immediately retarding economic momentum; but obviously would also have medium & long effects if retained unreasonably.

However, since CDADD developed understandings of interest rates & a multi-component model, the current unitary-model has been used with caution by governments/central banks – this caution does not remove the destructive effects, nor does it bring rational control into effect – to understand this we need to understand the dynamics of each inherent component and of its effect in an economy.

oOo

‘Risk’ & ‘Service’ costs:

With the prevailing unitary-model an increase in rates sucks money out of a nation, reduces economic momentum exponentially, and pushes people into stress and towards liquidation.

A reduction in rates increases money supply and fuels inflation.

(Note: It is important not to ‘short’ transmission mechanisms and argue future countering effects; those countering effects, if valid, do not impact upon the players meaningfully or timeously within an economy

Also, when raised, the current unitary model gives banks & institutions added super-profits on the money they lend out; which money is borrowed, churned, or siphoned from original investors (see paper SA Bonds – siphoning & churning).

On top of this there is artificial, imaginary, money because of the ‘doubling’ effect of defrauded pension monies, which further fuels inflation – see paper: Economists inexact models exactly defective 1).

To understand this super-profit concept it is necessary to think in terms of the money being lent at say 5% now being increased by 1% (to ‘control’ the economy), to 6%, as having a nett increase on each of the service, risk, profit components when the banks have done nothing to justify such an increase. (Think in terms of ordering a pizza for $5, then 30 minutes later after eating it being charged $6).

Alternatively stated, a variable ‘risk’, ‘service’ and profit charge is an unfair concept, and even more unfair when governments/central banks arbitrarily raise the interest rate simply to ‘control’ the economy; when in fact it has no control effect but only massive destructive effects.

Why should a bank gain added super-profit simply because the central bank or government want to cool down an economy by raising interest rates through an irrational & destructive unitary device?

Why are governments using this as an economy control? - it doesn’t control, it destroys.

If governments adopt a bounded ‘risk’, ‘profit’ & ‘service’ cost, it would force banks to restructure efficiently and towards multi-bank retail outlets (similar to airports – one airport, many airlines).

The usual argument in opposition is that free markets have been shown to be the best option. But, this is a loaded statement – markets are not free, they are narrowly owned & controlled.

oOo

‘Time’ cost

Previously it was argued that Time Cost = Inflation, this is incorrect because transmission mechanisms were collapsed.

Consider: Time Cost = (erosion of currency) + (inflation of price of goods)

NOTE: it is important not to collapse transmission mechanisms, mark-up of prices is a physical observable task, erosion of currency is a silent unobservable mechanism; they are distinctly separate.

The fact that your one unit of currency buys you 5% less than last year means that Time Cost over that year was 5%, but this was due to both erosion of currency AND inflation of prices (physically marked)

Inflation comes about because of prices being physically marked at higher prices.

Erosion comes about because people, collectively, in an economy, who lend or deposit money in banks/institutions do not receive their Time Cost value adjustments into their accounts. The value of money is eroded. Hence it adds to Time Cost for successive time cycles.

Without Time Cost value adjustment the money value is eroded with each time cycle (say monthly) and compounded with each successive time cycle.

There are two components that affect erosion; one, that Time Cost is not paid at all to lenders/depositors; two, and if paid there is a time cycle compounding effect of any delays in Time Cost being paid to original lenders/depositors.

Even if Time Cost were paid it needs to be within reasonable time cycles (say monthly), to ensure compounding does not increase erosion rate.

With the prevailing unitary model, holding interest rates static for long periods of time (the ‘cautionary’ aspect of government/central bank control) brings about, induces, erosion of the currency, hence loss of confidence, hence physical mark-up of prices.

Regular & correct use of Time Cost component into lenders/depositors corrects inflationary pressures and before it reaches a more rapid (compounded) rate of increase.

Further, because original lenders currently do not receive correct Time Cost value adjustment it means that they do not act rationally, hence economies become distorted by this effect as well.

The consequence of not having frequent & correct Time Cost adjustments back to original lenders is that the level of control that must be applied later, when inflation indications become clear, must be far larger - this creates greater shock waves into economies with destructive consequences – which is what we are seeing in the world currently.

What this all means is that incorrect control, inadequate control, and delayed controls, all produce inflation, and at accelerated levels.

By not having regular & correct time cost adjustments into depositors/lenders accounts the effect is to cause double effect inflationary pressures and at an increasing rate.

THE ABSENCE OF PROPER CONTROL INDUCES INFLATION AND AT AN ACCELERATING RATE.

oOo

The lack of regulatory protections to prevent multiple, vertical, layering of investment institutions/banks is a separate issue not pursued herein – the papers on Annuities in Retirement & Mastermind of Organised Crime gives clear insight to some of the massive problems.

These have the effect, partly, of reducing effective savings value, increasing imaginary money supply, etc. - hence pressuring inflation – but these are lesser & indirect relative to the direct destructive effects of these underlying fraudulent scams.

oOo

If we now think in terms of the various ‘cost’ components as being exactly that we then greatly reduce the effective terminology of ‘interest’ (which is a huge rift issue with nations opposed to usury).

That would leave the time cost & fiscal control – one could look to terms such as ‘value adjuster’, ‘fiscal control’, ‘economy regulator’.

But it is also important to develop thinking about ‘usury’ because understandings within nations that support this concept is as grossly distorted as the understandings of the unitary-model interest rate is within western nations.

Regardless, what is clear from the credit crunch & pension/investment frauds is that REFORM is urgently needed – but it requires honesty & transparency to achieve this, which is absent within governments.

oOo

SABOTAGE:

If an airliner were to crash investigators would painstakingly collect all the pieces put them into an ordered layout, and conduct in-depth examinations to determine the cause & nature of the crash.

If irregularities were found with regard components or operating procedures it would add to the overall picture.

Deductive processes play important roles as eliminating unreasonable options leaves only reasonable ones, which, in time & with investigation, the most reasonable one takes shape.

_________

Economies are crashing regularly but nothing is done to rectify this, despite earth shattering engineering insights developed by CDADD.

What sorts of issues deter governments from making reforms to the destructive so-called ‘free’ market system. Fear of the unknown is a real issue – as John Major acknowledges, politicians do not have the qualifications or experience.

[The ‘free’ market system is essentially the ‘open global economy’ initiative that, unstated, has No Protections, this is massively destructive. Developed & Lesser nations clearly need Protections’.]

The Poll tax disaster is a case in point – the cause for this is that firstly, appropriate engineering was entirely absent from the R&D & Implementation processes of the Poll tax, and secondly, and most importantly, for such a disastrous outcome and with such violent response of rioting from the UK public it could only have been sabotaged.

And without engineering sabotage is very easy to effect.

John Major contradicts himself in his Autobiography by initially stating that the Poll tax was ‘impeccable’ (Pg 169) and then later stating it was ‘proved a disaster: unfair, unworkable and unacceptable’.

This is not to knock Major, but the truth is that Thatcher was a scientist and was far better qualified; but still not an engineer. Major was/is not qualified to comment on the technical/engineering aspects.

How is it possible that a grossly unfair rates system was able to maintain peaceful existence within the UK, and then for a fair (fairer) Poll tax to cause such violence?

How was it that Poll tax receipts were allowed to exceed the levels seen under the rates system?

It could only be through sabotage!

And with engineering absent it was easy to do.

If appropriate Engineering had been present then the problems would have been solved.

BUT, appropriate Engineering was not present hence ‘fault finding & solving’ was not possible.

Engineering was absent, hence sabotage was easy.

How could a host of European countries implement a successful shift to the Euro (the induced disastrous consequences over the past decade is a separate issue), yet the UK could not implement a fair (fairer) Poll Tax?

It can only have been sabotage.

_________

Put some known facts together to form a greater picture:

Donald Gordon Masterminds pension frauds & launches Liberty Life in South Africa and over decades expands internationally, and expands the scams internationally.

Other Institutions jump on the band wagon and join the pension fraud scams by demutualising, and also expand their scams.

Branson integrates with Gordon’s international fraud network.

Common currency is developed with the Euro amidst huge fanfares – yet it is now clearly proven as a destructive model.

The destructive ‘open global economy’ objective materialises with all its destructive consequences that we are now seeing.

How is it possible that such massive institutional frauds can be masterminded and successfully implemented yet the UK could not implement a fair (fairer) Poll Tax system?

It could only be sabotage.

Consider also significant interest rate increases (say 5%) giving an additional annualised burden of £3000 on a £60K mortgage/bond – were there riots of the nature of the Poll Tax? But rates increases were far higher – and no riots.

Riots over the poll tax were rigged; just as Poll Tax was sabotaged.

_________

Consider also that Thatcher’s ‘handbag economics’ was a very real threat to the corporate world and especially to the minority high-powered financial players.

The handbag economics was effectively Scientist Thatcher’s move into ‘engineering’ solutions for the UK, and the world.

It does not require much thinking to realise that had Poll Tax been successful (i.e. not sabotaged) that clearer thinking about economy issues would have developed. And ultimately, and within a not too long time frame, the fraud scams re pensions/investments & other issues would have come out. Hence it was in the interests of financial-powers to ensure that Thatcher’s policies were thwarted.

Fraudulent financial institutions/powers had a direct, primary, hand in this as Thatcher posed a threat to their emerging ‘open global economy’ initiative that has been proven by CDADD to be entirely destructive to societies & nations, and only of benefit to the financially powerful few.

Simmering resentment within unions no doubt added fuel to the fire.

Thatcher’s policies, and hence government, were sabotaged – and Major’s tenure, although sincere, had no technical insight. The sabotaged early beginnings of ‘engineering’ into economies put Britannia (and the world) back into chaos; the longevity of pop-Labour government has been possible because of the economy lifestyle being bolstered by slave-labour imports & harbouring a fraudulent financial market, not because of labour or other policies – the slave-labour & fraud bolstering has merely covered over & delayed the underlying deficiencies of the economy becoming visible -

– hence the decline in Britannia’s circumstance, the entrenchment of defective & fraudulent schemes & scams and her prostitution, as we now see Britannia today.

It was the sabotaging & destroying of early ‘engineering’, that was emerging from scientific thinking, that has continued the world on the path of chaos.

Gordon Brown is in turmoil because he does not understand engineering; Cameron is merely taking up a pop-role to fuel another cycle of (baseless) euphoria, just as Blair did during the inevitable collapse of Major because Major also did not understand engineering. Cycle after cycle of chaos/euphoria/chaos/euphoria – the consequences of sabotage.

The same, similar, circumstances are occurring in Ireland, with the added component of blatant dishonesty in government – because financial powers long ago had bought off the Irish government. And, unfortunately, what appeared to be independents have also proven to be under the control of financial powers.

The same circumstances occur in South Africa with Mbeki, an economist, also not understanding engineering – but also with the added component of dishonesty, intensive & extensive. Mandela is benefiting from this dishonesty. SA is in decline.

We saw it with Zimbabwe.

The global chaos is occurring because engineering is absent and hence economy structures & controls are defective; because financial powers are able to distort/contaminate academic institutions and especially economist/economics models. And governments, with their lack of qualifications & experience, listen to these ‘experts’ instead of scientific & engineered thinking.

The contamination of the Nobel Prize simply adds (false) credibility to defective economist’s models.

Can you really blame the Osamas of the world for being angry with widespread enslavement imposed upon the majority?

What could they be expected to do. They do not have high level education so they have no chance of understanding the lack-of-engineering issues that are causing their enslavement. If the Browns & Bushes are having difficulty, which is reinforced by defective economics advice, then how can one expect those enslaved & uneducated to understand.

BUT, they see & feel their gross disparities.

It leaves them only violence – because western governments will not think, will not realise that high-powered financial players have engaged in a silent 3^rd World War under the guise of a defective & destructive ‘open global economy’ objective.

Western governments are swayed by academics that have become contaminated by high-powered financial inducements - their defective, untested, non-engineered economics models are wreaking havoc.

_________

Sabotage is easy when engineering is absent.

Look at advertisements for economic/business/finance positions – they all seek accountants/economists – engineers (systems & controls) are excluded. Accountants count, economists propound theories - they do NOT engineer. Nor do scientists. Not even Margaret Thatcher, now or then.

Note: 1 Engineer + 1 Commercialist does NOT equate to 2 Business Engineers, not even 1.

Add to all of this the ongoing defective economic models that are being put forward by academics, and being wrongly rewarded by the Nobel Foundation. Academic institutions have become contaminated/prostituted by high powered finance for the purpose of developing defective models behind which fraudulent scams can be hidden.

Economics models are not tested nor engineered. See paper: Economists inexact models exactly defective 6 (Nobel Prize Hijacked).

In the absence of engineering sabotage is easy to effect.

Consider also the numerous fraud scams that were being developed by international auditing/accounting firms that became exposed in the last decade. These were not isolated, they were part of a larger, global, plan – vis: an ‘open global economy’ that would have no protections against a new world order controlled by a few financially powerful players.

These long term frauds were developed with the assistance of well known international firms – Arthur Andersen, Deloittes, Price Waterhouse Coopers, Ernst & Young, Grant Thornton.

oOo

One does not need to give a rational explanation of why irrational behaviour occurs, one only needs recognise it and develop rational measures to combat it. BUT, that is precisely what governments are failing to do, hence irrational behaviour continues - unfair (or less fair) government systems; systematic defrauding of investments, defective economy models, etc., etc.

Governments are actually eroding their power by NOT demanding the prosecution of the likes of Donald Gordon, Richard Branson, Lord Levy, the various auditing firms and others.

The rigged & baseless decision by UK’s Crown Prosecution Service shows that the CPS is contaminated – it erodes government’s power.

The cover up of investigation & prosecution of Donald Gordon by the South African Police & National Director of Prosecutions has eroded SA government’s power.

What is clear is that an in-depth investigation needs to be conducted on the Poll Tax issue – but that is for the police to do.

But since the Metropolitan Police Commissioner Sir Ian Blair refuses to properly investigate Lord Levy, Donald Gordon, Richard Branson for pension/investment fraud scams it is not likely that he will investigate the sabotaging of the Poll Tax.

Since the Met Police Commissioner socialises with Lord Levy it is highly unlikely.

And Lord Chief Justice Philips is unlikely to query the contamination of the Crown Prosecution Service which brought about the disgraceful baseless decision not to prosecute them.

Reports that the Commissioner has brought about a reduction in crime are incorrect – the fact that terrorists are quietly scheming is a crime itself and it is on the increase as increasing aggression & oppression is pored into mid-east countries.

oOo

With all the economy turmoil we see in the world, increased because of incorrect controls, and with all the frauds that we now know were being planned at the time of, and before, (and after) the Poll Tax, is it likely that financial powers would sit back whilst Margaret Thatcher attempted to bring about more sensible policies?

Absolutely not.

Global Financial powers sabotaged the Poll Tax and Britannia’s government.

oOo

Does the threat of sabotage justify governments not developing progressive reforms? No it does not.

Western nations cannot expect some 5 Billion people to quietly sit in abject poverty as a result of destructive western economy models being imposed upon them.

UK, USA crime is not diminishing – it is rapidly increasing as more & more people are converted to terrorism because of Unfair Rules & Practices that are imposed upon them by immoral western governments.

The greatest positive reform impact would be realised with a shift to a multi-component interest rate economy control-device, because it is the most visible reform measure and has immediate & significant direct impact; and would have significant indirect impact by reducing global tensions.

It just requires appropriate & sound engineering to ensure successful & positive reform.

Chris Addington Pr.Eng.

(Under enforced exile from South Africa due to ANC government’s oppressive XDR-nazi system and oppressive economic isolation by corporate & academic worlds.)