A whopping seven billion people out of the total 7.6 billion world population struggles to meet their basic needs on a daily basis. Despite all the technological and financial advancements, something is wrong with this economic contrast! Imagine only six hundred million has the freedom to live a lifestyle of choices. These folks mostly reside in the developed world. 

A trade can include exchange of all type of goods and services in a society. Trade creates economic growth in societies. The common medium that facilitates trade is money. Money facilitates the exchange. The wealth and resources of a country, region, or community is proportional to the exchange and/or value of money and services.  It includes the production, trade, exchange and consumption of goods and services.

However, after implementing one economic policy after the other the governments are still without answers how to solve this gap in economic disparity. Billions of dollars flow to many poorer countries in the form of subsidies from World Bank, IMF and so on. Yet the economic problems at-large still remains the same. Any amount of aid is only trivial to meet the needs of seven billion people. 1.85 billion of the seven billion live in extreme poverty.

To understand a little better we need to go back to the period when modern economic era started leading to the industrial revolution. The current economic system is a more sophisticated system that was shaped over the past three hundred years.

Adam Smith (1776) is credited with the origination of the decentralized exchange of money system.

• He proposed that a free exchange and price system within a decentralized market setting coordinated individual decisions and
• Such free exchange results in a kind of equilibrium that benefits all.
• Also money unlocks the great increase in the quantity of work and labor.
• Currencies emerged as mediums of exchange due to division of labor.

The  same principles are fundamental to economics today. However, the financial system has grown into a complex monster

• Today, 250 years later, the financial markets from decentralized exchange have morphed into a complex system with debt and equity markets, including complex financial instruments such as derivatives.
• Unhinged human behavior of greed supplemented by lack of proper checks and balances in money system jeopardizes millions of consumers who are also plugged into the same monetary system like the global financial crisis of 2008.

Macro Economic Problems

Most economic crisis that happens in the macro level is also dealt with in the macro level. The crisis is most likely triggered by a few who sit in the upper echelon of economic chain of commands. It can be sparked from their willful negligence or ignorance of responsible financial decisions. Once the damage is inevitable the same people are given the responsibility to fix the system. So it happens to be that a few who  game the system does both invent the game and play the system for the benefit of the top players  which also includes the government.

In the recent 2008 financial crisis, the ones who got most hurt were the local economy and local communities. These communities had the least influence in triggering the financial crisis in the first place. However, in the current financial system when a financial crisis is triggered, the smaller economic communities are left with little to no option than tag along with the macro level monetary problems nad gaming. 

Why “Free Things” Are Not A Long Term Solution?

Since the 2008 financial crisis one of the solutions they came up with is to print more “free” money by the central banks. Since it is not backed by any assets they are created as and when these bankers decide. It is called Quantitative Easing(QE) by the central banks. The QE program injected money by central banks into the system. Now the central banks are once again entering new territory as it begins to wind down its trillion-dollar balance sheet.

More than benefiting the consumers and communities in the lower echelon, the QE triggered a artificial valuation of equity markets. This led to stock-buy backs by big corporations to game the market, following the footsteps of the gaming of the banking system by printing and bail out of banks. For instance, since 2003 there has been over $7 trillion of dictated stock buybacks by the self-enriching CEOs of large corporations. At the core such practice does not benefit majority shareholders or the growth of company revenues. Perhaps it helps stock speculators by improving the earnings per share ratio which does not affect the bottom-line much. So these incentives instead of rebuilding the economy of communities have only further increased the gap between the rich and the middle-class.

• QE helped stock speculators by improving the EPS ratio ignoring underlying healthy growth.
• Artificial Inflation and low return on savings
• The core practice of stock buybacks of corporations neither benefit majority shareholders nor the growth of company revenues.

As the saying goes, whoever has the gold makes the rules. It looks like whoever has the most gold in this rigged systems gets to make the rules. They get to game the system and play it. 

The temporal measures of easing from macro level has become futile

The monetary policies from a macro-level mostly benefits the same folks who came up the temporary fixes. In order to have a strong local economy that is less affected by inflation, currency wars and so on, the capitalization need to start growing strong bottom-up. Otherwise when the wholesale financial market made up of giant banks and corporations collapse, the retail market consisting of people and merchants buying goods and services have no option but collapse with them.

For the healthy growth of any economy, the interest of all stakeholders, majority of them being consumers and end-users, need to be represented alike. The monetary policies from a macro-level alone are not effective. The problems have grown too big in the macro level proving the temporal measures taken from macro level has proven futile as well. As Albert Einstein rightly remarked that you cannot solve a problem with tools that created the problem in the first place.

For local economies to prosper and local communities to thrive there needs to be a bottom-up monetary infrastructure in local communities. If debt is serfdom and all forms of capital is freedom, in order to have a strong local economy that is less affected by inflation, currency wars and so on, the capitalization need to grow strong from within the community bottom-up. 

The first step towards repairing and building healthy local economies is through education. Education brings the paradigm shift and securing economic systems to thrive locally in a community environment.