BOOK SUMMARY


How to End World's Economic and Financial Chaos
And Simplify Everything
A book as intriguing as it sounds - The logic is compelling.
Now everyone can see exactly where their personal and business problems are coming from.

Copyright © IngramSure (UK) Ltd – all rights reserved.

Front cover picture - Edward C D Ingram

BISAC
BUS039000  BUSINESS & ECONOMICS / Economics / Macroeconomics
This book takes macro-economics to the next level
BUS001010  BUSINESS & ECONOMICS / Accounting / Financial
BUS045000  BUSINESS & ECONOMICS / Money & Monetary Policy
POL034000  POLITICAL SCIENCE / Peace

This Second Edition: 2017
ISBN - awaited
First edition Title:
WHAT IS THE INGRAM SCHOOL OF ECONOMICS?
AND WHY IS IT ESSENTIAL?
First edition ISBN 978-0-7974-8870-0

Self-Published – Available from leading bookshops or by contacting the author.
Contact:
Skype: edwarding2
Email: eingram@ingramsure.com

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I, the author, Edward C D Ingram, assisted by Riekie Cloete and others mentioned in the acknowledgements, are pleased to announce that I have written a book entitled ‘What is the Ingram School of Economics? And Why is it Essential?’

The second edition has been re-named as above:

HOW TO END THE WORLD'S ECONOMIC AND FINANCIAL CHAOS
Based on the Ingram School of Economics - A New Macroeconomic Design

It is, according to readers, a new school of thinking - a new insight into what is wrong with econmies and how their management can be significantly simplified with mind-bending results. This will outdate all of the economics textbooks previously written.

Economies consist of people wanting to buy goods and services from one another and so they are naturally inclined towards full use of all resources including full employment up to the level that people are comfortable working. Given the money and its affordability as needed, they will tend to achieve this state of affairs.

SCOPE
On the financial framework, it only deals with the dynamics of prices, which includes costs and asset values, all of which may be affected by the changing value of money.

It is not concerned with most other things which may have an impact on prices such as monopolies and politics.

On the management side it deals with providing the instruments and the targets to aim at.

PRINCIPLES APPLIED ON THE FRAMEWORK SIDE

#1 The book identifies a theoretical platform called KFPP which stands for Keynes’ Floating Platform Paradigm. It is an imaginary pricing platform, taken from a paper entitled ‘A Tract on Monetary Reform.’ (JM Keynes, Macmillan, 1923). Keynes wrote in words to the effect that, if money halved in value and all prices and incomes, asset values, and costs, along with all forms of revenues / incomes were to double, people would be wholly unaffected.

In other words, if all prices, incomes, assets and costs, were to be placed upon this KFPP platform, (let’s ignore grammar and call it the KFPP platform), then there would not be the kind of wealth redistribution, confusion, costs, postponed investments, destroyed financial plans, businesses and homes, lack of confidence and the distrust which affects almost every financial plan being made today. All prices would adjust to offset the falling value of money before adjusting to their various other market forces. There are two components to price adjustments, not just one.

We will call them the 'core' price adjustment common to all prices, costs, and values, and the real economic price which can balance supply with demand regardless of what the core price (prpery adjusted) is doing. People would be wholly unaffected by that - well only in theory, but we can get close to that and have a whole new era in macro-economic output and completely new macro-economic text books.

From this KFPP concept we get a list of prices, costs, and values, to look at and see what is causing the deviations that take them off the KFPP platform.

THE INGRAM SCHOOL
In short, this Ingram School of thinking (I was first told it os a new schol of thought by Riekie Cloete who has mentored students in macro-economics) says this:

First get the financial framework to fly on its own through the up and down drafts as engineers would do for a plane design. Then look at the instruments needed to manage it and let it fly. The pilot's instructions and instruments will be relatively simple.

Here is the list of prices, (a word which in this case includes all costs and values), we need to free up so that they can all be on or close to the KFPP platform and not distort the economy or waste economic resources:
1.      Savings, Pensions, and Lending Contracts - their cost per month and the value of the contracts including annuity payments, bond maturity values, the monthly cost of home loan repayments, and that of commercial debt repayments
2.      Interest rates – this is the cost (price) of credit and the means to restore the value of savings and loan accounts
3.      Incomes - the cost (price) of hiring people
4.      The cost (price) of imports - a free market in the trading currency is needed to balance trade, and thereby to adjust the value of the currency to the falling value of money. This is also needed to optimize the use of the international resources of goods and services.
5.      The price of international capital - there has to be a balance between the demand by nationals to exchange their local capital currency for foreign capital currency coming from other countries and the demand by foreign entities to exchange their currencies for the local / national currency. The price must adjust to create that balance. This has to be a separate market in currency. There is no such thing as 'one price fits both markets.'

We need to look at how arbitrage operations can be limited by enough to make this work and save a huge amounto of costs which come from currency pricing instabilities affecting around half of all world economic output.
Currency trading is an issue to discuss to the extent that it has an impact on volatility and liquidity.
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Economists, please note that your idea of what free markets are led Joseph Stiglitz to get a Nobel Prize by proving that they do not, and maybe cannot, exist. That proof and that paper has NOTHING to do with what is about to be written below.

A free market in prices is herein defined differently - it is more about whether or not a price is elasstic. Can it stay on or close to the KFPP platfom. For example the value (price) of the maturity value of an investment bond is NOT elastic. It is fixed and unable to respond to any change in the level of demand or to the falling value of money.

#2 THE FREE MARKET PRINCIPLE (ablility to adjust and stay on the KFPP platform), is then applied to re-design these markets and contracts where they are circumscribed today and not allowed to do what they need to do to stay on the KFPP platform.

OPTIMISATION OF THE ENTIRE ECONOMY

This free market principle, optimises the use of every resource where it is allowed to operate. In this study it will be shown that this can increase world economic output by over 1.5% p.a.

There are three aspects of free market prices of importance:
I)                   Any price, cost, or value, which fails to rise in price to offset the falling value of money becomes relatively cheap and so the increased level of demand will tend to push that price, cost or value, back onto the KFPP platform.
II)                There are always some less elastic price exceptions to this and in any case, (like wages and the price of goods in the shops) all prices do not rise immediately or even at the same tiime, so it is important that the rate of inflation / devaluation of money remains low.
III)              When a price is at the free market level, it means that only those people / entities which are most in need of that resource, or those most able to afford that resource, will be able to buy it. Thus, a free market price optimises the use of the resource.

Explaing that: imagine that a manufacturer is able to supply what people are desperately wanting to buy. They will pay almost any price to get it. This means that the business is very profitable and it can afford to buy the scarce resource at the market price, whereas others may find that competing with others on the market price is less attractive. For them, the item in question is not affordable. The resouce goes to where it is most needed. 

#3 Once we achieve a re-design of items listed above, (1 to 5 inclusive), in the pricing part of an economy, we will have removed the sources of a great many problems which show up as financial instability and wasted resources.

It is the equivalent of designing an airframe which flies on its own without the need for a pilot except that a pilot gives it direction and manages the aircraft generally.

Unless the airframe is well designed it will not be possible for any pilot to fly the aircraft in a way that keeps the passengers comfortable. There will not be enough instruments available to manage all of the errors created by the unstable flight, and pilot training will take forever.

In the case of an economy there will be a multiplicity of problems and not enough information or enough instruments available to do a good management job.

But with a self-adjusting KFPP pricing model where market forces can operate on all prices, very little data will be needed to steer the economy, and the management system will be relatively simple.  Resoures will go to where they are most wanted and it will largely be a matter of looking to see where inflation and national output are headed, and taking simple actions to keep them within target range.

#4 COMPLEX SYSTEMS
The number of problems which the resulting proposed changes can solve, appears, at first sight, to be far beyond reasonable expectations. Economies are complex systems. Even when it is clear why this huge simplification happens many high-ranking economists don't feel comfortable. That was the experience of a high-level review panel of just the first part of this overall study in 2004 whose membership is given in the acknowledgements of the book, But they finally agreed that no one could find any fault. It was then accepted. Other economists realise that there are fundamental flaws being addressed, and they get increasingly excited the more they read.

If you want to know more of the background the story is told in the acknowledgements. It is exciting stuff.

COMPLEX SYSTEMS THEOREM

There is a well understood theorem which explains the simplification which is generated. Edward Ingram calls this the Complex Systems Theorem. “Remove the source of a problem in a complex system, and generations of knock-on effects disappear. Multiple problems which had always appeared to be intractable, simply vanish as if they had never existed.”
First identify the source problem, (in this case a lack of free market pricing), and then remove it. Allow free market pricing to operate. The benefits are mind-bending. This analysis, that of the Ingram School, demonstrates that the need to do this is financially, economically, and politically compelling because the cost of doing nothing is too great.
Try looking at this the other way around. We allow one thing to be priced incorrectly, like the cost of home loan repayments which jump around, and we get all kinds of problems. There are problems with house prices, home repossessions, collateral security, bank viability…and then we get interventions which draw funds from ‘here’ and put them ‘there’ causing more uncertainty to those who lose out. The political ramifications go on and on. 

Then add another wrong pricing mechanism and you get another cascade of confusion and complexity. 

In this analysis, we identify up to five things like this, five wrong forks in the road taken by economic text books. All of them can be addressed. 

Why do we not address them? How complicated do you want the economy, and the associated human behaviour changes in self-defence, to be?
#5 MANAGEMENT ISSUES
In order to have a free market price of credit, the banking system needs to be changed. The book explains that this will leave management with the task of creating the right amount of debt-based money (for lending) and the right amount of debt-free money for government spending or donating into the economy.

No economy should be as dependent upon people being in debt as the world's economies are today. 

Money gets put into spending circulation when banks lend it. But when people have borrrowed enough and an economy slows, and a recession threatens, lowering the interest rate or borrowing more money is not the only option. It can even be like pusjing n a string.

And anyway that is not the way to get a free market price for interest rates. Managing interest rates wastes huge aounts of an economy;s credit resources as we have recently seen: Money is borrowed by bad managers to take over companies run by good ones. Money is borrowed for investment in property causing prices to inflate. The same goes for equities. Money looks desperately for places where a good refurn can be earned. New issues in almost anything mop it up almost regardless of the likely profitablility of the enterpise.

THE CAUSES THE UNDULATIONS IN ECONOMIC ACTIVITY
Freedom of choice allows people to vary:
  1. ·         How much they save / spend down from savings
  2. ·         How much they borrow /repay
  3. ·         How much they import / export
All of these choices vary over time. They cause undulations in the aggregate level of spending, the level of spending in some sectors, and the stock of spendable money in circulation.

The management function is to step aside and allow these undulations to take place within limits. The limit / boundary is hit when there is a threat of a downwards spiral as the reduced spending raises unemployment which reduces spending further and affects the government’s revenues and expenditure.

Two responses are needed, both being aimed at maintaining the stock of spending money in circulation and at maintaining or restoring the level of spending as far as is practical in every sector


  • Providing more credit based (debt-based) money can reduce interest rates, and 
  • Providing more spending (debt-free) money and giving it to everyone to spend can help all SMEs (all small businesses) 


More money may be needed anyway because that is what a growing economy needs.

Big data analysis is not very important because any excess spending money created will be mopped up in higher prices, costs, and values without doing great damage, re-distributing wealth, or causing confusion. That is the role of the KFPP platfom.

END OF SUMMARY
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THE GOOD NEWS?
These ideas may be adopted by Zimbabwe now that we have a new government in place.

https://www.quora.com/answer
The question was:
What are the current state of affairs in economic growth?

Edward Ingram’s answer was:
Most economies are in a shambles. Actually, all of them are.

Just like the state of the financial structures in use.

There is a link: - make the financial framework of the world’s economies chaotic and the monetary policy instruments crude, and you have what we have now: poor to chaotic prospects in most countries.

The solution lies in my new book called “What is the Ingram School of Economics?” And why is it essential?” written to help the world to find the best ways forward.

And somewhat in my website:

MACRO-ECONOMIC DESIGN

You can apply to take the university course in this here:

THE MACRO-ECONOMIC DESIGN & MANAGEMENT COURSE
It is my course - I wrote it. It is based on my book. The course is almost free but the exams and university certificate at the end are not.

You can follow what I am doing by searching with Google “Macro-economic design at LinkedIn” and joining my group.

And you can follow me at Fin24 – Business & Finance News | Stock Markets Data | Investing where I write occassioal essays as an opinion columnist. Search the site for ‘edward ingram’.

We will see what happens.

PS
A school of economics is a way of thinking about how economies work. It is not a place. Other famous schools (mine is not yet widely known) include the Keynesian School, the Austrian School, and mostly derivatives of those two.

Mine is different because it says that first you design the framework so that it more or less flies in a stable way, and then you manage the thing. The school closest to this approach is the Austrian School but its ideas are far too rigid a framework. That can be costly.


The Positive Money Group in the UK is edging forward on the monetary instruments front, but they have not yet thought it all through; and they are limited by the unstable financial framework which they have left in place.

This essay explains some of that:


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