FINANCIAL MARKETS POLICY
DO OUR FINANCIAL MARKETS CREATE
THE STABLE AND PROSPEROUS
WORLD ECONOMY THAT WE WANT?
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Summary and Aims of our policy.
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To create a stable world economy.
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To reward honest working people who create value for everyone.
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To discourage unscrupulous trading, and people who do not create value.
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Current unresolved issues.
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We have many complex markets that trade things like company shares, debt, derivatives, foreign exchange, and commodities, such as oil, gold, and wheat. I am going to call all these markets the financial markets.
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Many of these markets started innocently out of genuine need. People have traded goods such as wheat in exchange for other goods for thousands of years, international traders required money changers in order to carry out their business, and businessmen started selling shares in their company to raise money to expand. Markets sprang up in all these areas, in order to create efficient places where everyone could quickly get what they needed. Much more recently in our history there has been an explosion in derivatives. Possibly the first example of a derivative was a futures contract, which again arose out of a genuine need. Farmers, and the buyers of their produce, wanted to agree to trade a fixed amount of wheat at a fixed price, ahead of the forthcoming harvest, in order to reduce risk on both sides. These contracts were for a sale in the future, so were called futures contracts, and ultimately they lead to a fully fledged futures market. Futures are an example of a financial derivative, because they derive their value from that of an underlying asset, in this case wheat. With time the assets traded on futures markets increased hugely, and all major commodities, such as gold, oil, and many others started to be traded on futures markets. The next level of complication came when people started trading financial assets such as interest rate futures, and currency futures. This was just the beginning of the explosion in complexity in the world economy and markets. All sorts of ever more obscure and complex derivatives and financial instruments sprang up, much of this again out of the need to manage risk. For example options were created where traders had the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date. The current extent of the complexity of financial instruments and their markets is vast, and still increasing, for example we are now seeing the proliferation of crypto currencies.
There is another aspect to this story, which needs to be understood. Traders worked out many years ago, may be thousands of years, that they could make money by simply trading in the commodities, without having any need of those commodities themselves. These traders were not farmers who grew the crop and genuinely needed to sell it, and they were not buyers who needed the wheat for the people they supplied it to, who were going to eat it. They were simply traders, who's goal was to buy a large amount of wheat from anyone, and then sell it at a slightly higher price to anyone else who would buy it, without actually having any orders from customers which they needed to fulfil. Because of the large quantity they buy, the small increase in the selling price amounts to a tidy profit for the trader. History is full of people who have become very rich indeed from doing exactly this, Warren Buffett being a famous current example who not long ago was the richest man in the world. We can call these types of traders speculative traders, because they have no need for the asset they are trading, their only interest in the asset is speculating on how its price will change, and how therefore they can make money out of this price change.
This complicates, what is already a vastly complex set of world financial markets, even more. Speculative traders operate in all financial markets as a norm, in the past this was more within trading floors in major banks, and brokerages, but more recently any individual can speculatively trade in anything, on numerous online platforms. Another twist in the explosion of derivatives is that they create the opportunity for speculative traders to make money not only by prices going up, but also when prices go down, through the buying of the correct derivatives which make money in a falling market. Although speculative trading is carried out largely by responsible well meaning people, and is entirely legal, it increases hugely all the basic problems with our financial markets. Although I cannot find statistics on it, I imagine the vast majority of all trading done on all markets is speculative trading, rather than trading by people who genuinely need to sell the commodity they produce, or buy a commodity to use it (I will call these people primary traders).
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It is our view that governments, economists, people working in the financial markets, and people in general, are not aware enough of four very fundamental problems in our world financial markets. We do not wish to offend all the honest working traders in the financial markets, what we wish to do is improve the financial markets and the economy for all those that use it, and to this end we highlight the following problem areas:
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Manipulation and abuse: A complex web of many different markets and speculative trading opportunities, will attract, indeed encourage, unscrupulous traders to abuse and manipulate market prices so they can make more profit. The more profit they make, the larger the sums of money they can invest, and the greater becomes their power to manipulate market prices even more, to make even more money. It is a vicious circle which favours the unscrupulous, by giving them ever greater reward, for ever greater market manipulation. Given the vast complexity of the market, their manipulation is easy to hide, so effectively they can be pushing prices up and down, and remain out of sight of other traders and authorities. It is difficult to distinguish their manipulation from legitimate market volatility, and it is easy for their trading to be lost in the vastness of the world market, so authorities will struggle to find these people, let alone prosecute them. Market manipulation is one form of abuse of the markets, there are many others. The complexity of the markets gives endless opportunities for unscrupulous traders to apply pressures on people and organisations, create favourable situations for themselves, or take advantage of insider market information, in order to make profit.
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Hyper volatility: There are three fundamental components to hyper volatility. Firstly as described above, the simple law of supply and demand says that if demand for a product is high, the price goes up, and vice versa. We do not believe there is any viable way of avoiding this simple economic fact, indeed we believe when applied appropriately it is entirely beneficial, as it constantly balances all markets and prices with the physical facts of the world. However when speculative trading is allowed and becomes the major part of trading, rather than primary trading, it causes the market to become hyper volatile. Without speculative traders the market prices will react more slowly, steadily, and correctly to markets forces, and constantly balance supply and demand in the best possible way. With speculative trading the slow, steady, change becomes greatly exaggerated into rapid large changes. This is because the speculative traders have no need of the assets they are trading, so they are will sell all of it if they think prices will go down even a small amount in the future, and buy as much of it as they can, if they think prices will go up. Selling lots more asset in a falling market drives the price much lower, and vice versa. The effect is that the markets becomes hyper volatile to any sentiment in the markets at all, so for example news events can spook traders and the whole market goes haywire. If this is not bad enough, when the market is driven overly low, speculative traders know their stock is undervalued and that the market is literally going to bounce back to bring prices into contact with the physical reality of the market So the speculative investors now start buying as much as they can driving the prices up to the point that they are overly high, they then start selling everything to repeat the cycle over again!
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If all of this is not difficult enough for the honest farmer or manufacturer trying to produce and sell their product, in a hyper volatile market, things get worse, in a second way. Because of the complex derivatives available today, as explained there are, strangely, many ways in which investors can make money when the value of the asset they are trading in goes down. This is because derivatives were invented on the part of legitimate producers and primary traders who wanted to protect against the price of their product going down and them loosing their profit margin as a result. Speculative traders jump on this opportunity, and use it to bet on the market going down, and make money when it does. One of the ironies of this is that there will be speculative traders who are operating within the law, but who may make hundreds of millions or billions of profit, by capitalising on markets crashing in recessions, indeed the more it crashes, the more money they make if they betted on it. They are in effect profiting from others economic difficulty, and making the recession worse and deeper in the process. Then prior to the market bouncing back, they bet on it going up again, and if they are correct they can make the same amount of profit as the market goes up again.
Has this made the problem clear regarding hyper volatility? The thing many speculative traders do not want is a stable market; they have a range of derivatives available to them, which allow them to make the most money when they bet correctly on large market price changes. They want the market to be volatile and go up and down in large swings, as this gives them the opportunity to make more money if they bet correctly.
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So we have hyper volatility caused firstly by speculative traders using supply and demand, and secondly their use of derivatives to profit in both a rising and a falling market. Think back to the first point about unscrupulous market traders, who do not care how others are affected by market volatility, they only care about their profits. They will use not only supply and demand, and derivatives to make sure they will profit in any market, whether it goes up or down. They will now add their own manipulation on top of these hyper volatile legitimate market forces, that they have at their finger tips, to further increase the volatility of market. This completes the third fundamental force creating hyper volatility; investor manipulation and abuse.
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The injustice here is that all the honest working producers, and people who need to use the commodity, want a stable, fair, market where prices change slowly to reflect genuine supply and demand. But they are forced to trade in a market that is hyper volatile, and one in which they have little power to stabilise and ensure that it is fair. This makes the day to day running of their businesses risky, unpredictable, and stressful. Then all the speculative traders, who produce or use nothing, and have no genuine need for the asset, have the majority of the power to influence the market, and they want a volatile market, so they have the maximum chance of making more money. Those who genuinely need the market and want it to be stable, get instability, and those who do not have a primary need for the market, do get what they want, volatility, through their own causing of the market to be hyper volatile. This is not a financial system of integrity and justice.
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Waste: We understand that many speculative traders work sincerely and honestly to create a living for themselves, however a deep understanding of business and the economy will reveal some truths that will be difficult to hear by those in the industry. We do not wish to cause offence to these people, but rather our goal is to improve the economy for everyone's benefit and wellbeing.
Speculative market traders do not add any value to the world economy at all. Their job involves reading many financial papers and reports, watching the news, talking to people in related businesses, processing all this information, deciding how the think the market will change in the future, investing in some asset or derivative, that will increase in value if they are correct, and then watching the market and hoping they are right, so that they can sell and make a profit. They are carrying out a form of professional gambling, and this activity is no different to studying the form of horses and betting on them at races. Whether they make or loose money on their bet, the simple fact is that they have done no work of any value to anyone, other than themselves. They have not grown or manufactured the asset, they have not added any value to asset, they have not transported the asset to somewhere it needs to be, and they have not sold the asset directly to someone in need of it.
We call this waste, i.e. work that does not create any value. Waste is a massive issue in our world economy, it has become deeply embedded in our working practices, indeed it is quite often highly sought after, or revered, as people seek to make ever greater amounts of money, by doing less work, and calling it passive income. It distracts humanity away from a very simple truth; the only way any of us can ever have any wealth, is if we create something that is of value. Everyone is God passionately believes that if anyone wants to earn money, it must be by doing something that creates value for someone else, alongside themselves. Work that may earn money for an individual, but creates no added value for anyone else, will become strictly illegal under our policies, and will be rightly seen as something that should be avoided, as it is of no value to society at large, see our Value Adding Work Policy for a full explanation of this. Speculative traders are encouraged to not feel threatened by this, as the policy ultimately benefits them as well as all other people, see our Restructuring Labour Policy.
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Hyper complexity: We trust that the extreme complexity of the world financial markets and economy is made clearer by the above discussion, and there are many other factors that increase this even further, such as geopolitical factors, climate change, war, etc. The simple fact is that the world economy is vastly more complex than what anyone, any organisation, or any computer program, can understand. Some governments, banks, and financial institutions might argue that they understand what they are doing, and it is true that they might understand the workings of any specific derivative or market. However having a full understanding of the entire economy, which then allows them to make confident financial decisions, is something that no government or organisation is anywhere near, and this is proved by the fact of the continual financial volatility, recessions, depressions, and banking crises we have. It is therefore another simple fact that it is impossible to manage any system that we do not understand. If we cannot manage an economic system, we can not regulate it to make sure it is a safe, fair, and prosperous for everyone using it. Hyper complexity is therefore the fourth fundamental problem in all our world economy and financial markets.
No one really understands our world economy, and therefore no one can really manage it properly. Humanity is fundamentally out of control of it's own economics for a whole host of reasons. These are all solvable problems, and we have a set of simple policies to fix all of them:
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Our Policy - How it resolves the issues and achieves the aims.
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The main features of our Financial Markets Policy is as follows:
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Progressively phase out speculative trading.
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Progressively phase out non value adding work (waste).
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Progressively phase out nearly all derivatives, except for those that are strictly beneficial to primary traders in the market.
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Only allow producers, primary traders, long term investors, and end users to trade in the markets, through banning all short term speculative trading.
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We trust that it is largely clear how these policies would immediately solve the four main problems above with our world economy. One of the things we need to realise is that creating ever more complex derivatives in order to mitigate risk, actually increases risk overall in the market place. There is a certain amount of fundamental risk that cannot be avoided in any business, life is unpredictable, and so it should be if we wish to have any purpose to live for. If we try and mitigate this unavoidable risk, we must do it in ways that do not create more risk and trouble elsewhere. Generally it is better to simply tolerate natural risks, rather than being led into overly complex derivatives, which ultimately make things worse for everyone.
Our policy will reduce market volatility to the natural supply and demand variations in price, which correctly balance the world economy. So for example, if there is a shortfall in an industry area, let's say a lack of rice, the prices of rice will steadily rise, this then steadily attracts more people into rice farming as it is more profitable, and this steadily reduces the shortfall, and returns prices back to a balanced level. When we say steadily this could be over years or decades, so that people do not even notice volatility, and the market is adjust at all times in the best way for everyone.
Our policy means the opportunities to abuse the markets in any way will be greatly reduced, and the complexity of the markets will also be greatly reduced; primary traders in the market, will be able to understand, and influence the market in the correct ways, through the genuine supply and demand they create.
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Another point we would make is this, speculative traders sometimes argue that they are a necessity, and they do provide value, because they provide liquidity in the markets; they facilitate everyone being able to quickly buy and sell their assets at the best prices. Our view is that this might have been true to a limited degree back in history when markets were originally created, but in the scale of todays world, and the huge markets we have, primary traders are more than enough to keep markets fully liquid at all times.​
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Ultimate policy.
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We are fully aware of what is entailed in order to implement our policies, they are radical, and require huge changes in society and the way we work. As with all our policies, we offer Britain and the world simple choices, make fundamental changes in society and solve our problems, or stay as we are and continue to have them. We have ultimate policies that go even further:
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Progressively phase out all stock markets.
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Have a single world currency.
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Make all banking transparent, see our Transparent Banking Policy.
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Have a public database which contains all trading information on companies, see our Public Database Policy.
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We understand that these policies may cause alarm, so we explain them as follows. The first thing we would say is that as with all ultimate policies many things would have to change in our human consciousness first, before you could consider implementing them. It is deeply embedded in business and economic thinking that stock markets are an essential and good thing for businesses and economies. We believe otherwise, for all of the four reasons described in the issues above. Additionally to these reasons, it is our view that the whole environment of floating and trading companies on the stock market is waste, and distracts business people from doing work that is of value. It draws them into goals and activities that we believe are ultimately detrimental to world economy, such as: Get rich quickly business models, by floating on the stock exchange and inflating the stock price. Concerning yourself with your stock price, rather than on how good your product is. All manner of short term, short sighted investment, and destabilising trading in companies. We do not wish to be flippant, but stock markets and the broader financial markets, turn the basic world business environment into a sort of wild west, rather than a steady business platform, where dedicated business people and employees, are encouraged to make a healthy wage, by steady work and investment over many years.
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It sounds radical to progressively phase out all stock markets, but it is perfectly possible to do so. This is because much of world trading is carried out by companies who are not quoted on stock exchanges, and it was not that long ago that the whole world economy functioned without any stock markets. Investment in big companies is essential, and this would still be carried out, simply in the same way that it is currently carried out in private companies. We believe closing down all stock markets and company flotations would create huge benefits for all of humanity.
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A similar reasoning applies with one world currency, however it would require all countries to have stable, and similarly matched economies, otherwise it would cause difficulties, as in the case of the Euro. However if we are able to fully stabilise and match all parts of the world economy, one world currency would bring profound benefits for all of mankind, in that it would reduce all the four main problems areas of our economy, as described above, even further.
Our Transparent Banking Policy and Public Database Policy complete the total restructuring of our world economy. All of our policies together, if fully implemented, would create multiple layers of robust protection, thus creating a fully stable, fair, law abiding, and prosperous world economic platform for everyone. A platform where anyone who wishes to carryout poor quality work, illegal businesses, or profit without doing something of value, will get no where, and anyone who wants to responsibly carryout value adding work, will be strongly empowered to do so, and prosper from it.
Wellbeing and cost benefits of this policy.
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It is difficult to isolate and estimate the cost benefits of our policy, as it works directly with many others. Fully adopting our Financial Markets Policy, along with all our other economic and business policies, (see below), would completely revolutionise the entire British and world economies. We estimate that as a minimum GDP would double, and this could be achieved with a tenfold decrease in the stress of the working environment. This amounts to an extra £2.5 trillion of extra money for public services and increased standard of living in Britain. In the case of the world economy the figure is higher as many nations are not so near to industrialisation as we are, so the increase could be a three fold increase in GDP or an extra $200 trillion.
Humanity would trade in a fully safe and fair world economy, we would never be short of wealth and resources in any way, demand for public services such as defence, and health care would be greatly reduced, while at the same time the available funds for all public services would have increased many fold. This is the state of abundance for all people on Earth that Everyone is God is committed to achieving.
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Supporting policies.
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Witten by Marcus white, updated 6-5-2024
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