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BW Businessworld

Banking In A Planned & Organized Deficit Spending (PODS) Economy

All equity can be converted to debt by issuing deposits in Banks which will earn 10% p.a. tax free interest, but these monies can be used digitally only, and cannot be used for speculative purposes.

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The PODS Economy Banks would only be in the government/public sector, and they would support physical production & consumption. As the Banks would know what and how many TVs (to continue the example of the pre identified desirable product of a TV per person/economic unit) to firstly produce, and then have this production consumed, the numbers of both units of monies as well as units of TVs would be duly channelized into the respective and relevant Demand & Supply Pipelines. Standards of quality, pricing and choices, (meaning how many types of TVs should be offered to a potential consumer) be it technical or design choice, for Demand & Supply of TVs, would have to be determined. Loans both for production & consumption would be issued with no interest…..why add to cost for both the producer and the consumer….and that too, when a producer could also be a consumer of the same product in question.(For e.g. A TV factory worker) And when the monies lent or borrowed are in any case, the Public’s via the government controlled DIGITAL ELECTRONIC MINT.

Banking as it is made out to be today, sadly so, even in India, is unnecessarily only adding to the cost of money. These additions to the cost of monies cannot be justified, but can be accounted or looked at in another manner. Especially, if market economics of money is to be taken hand in hand!! In India, the Reserve Bank of India’s Repo Rate is 5.5%, but Banks are taking deposits at 6-7% while the reverse repo rate is 4.9%. Is this Banking?? In the PODS system, the Bank lending and borrowing/taking deposit rates would be the same, with the cost of running the Bank and servicing these loans and deposits the allowable “deficit” or “cost”. What I am getting at is simple, that loans intra bank or to bank clients can be issued at Zero interest rates and in fact even at negative interest rates. Bank Loans instead of equity will be issued at negative interest rates as long as physical production of goods & services as well as employment targets are sustainably met and these negative interest rate credits will be crebited against loan repayments until the loans are fully paid. However, if physical targets are not met, then interest rates will become positive and both interest & principal amounts will become liable from the loanee promoters, who would be replaced by a new set of more capable promoters/loanees, while the initial promoters will be stripped of their wealth until principal & interest is recovered back in full. Judicial delays in recovery of owed monies will not be entertained whatsoever.

Big corporates have huge accounting infrastructure that could directly engage Central banks for their fund requirements. In these cases I do not see what a Bank branch in between would provide? This deficit or cost would be a public figure and accordingly accounted for. A bank will be judged by this accounting figure and will always remain accountable to its customers and its Central Economic Bank (CEB) by this manner. This does not necessarily mean that the lower the ‘deficit’ or “cost” the more efficient a Bank is. These lending and borrowing rates should be fixed in their quantification and remain so. The number that should in question be arrived at, can be arbitrarily decided, but one thing is sure, that the higher this arbitrary number, the higher the impact on the pricing of any pre identified product or service that has to be produced and consumed. A Zero rate of interest could be also considered acceptable. However, deposits will earn 10% p.a. digital interest. As the Banks are only in the Government Sector in this PODS economy, there really should not be any problem in managing monies thus. Any bank here is just another branch of the CEB. And any application for a loan or to place a deposit, in a way, is directly made to the CEB via its “branches”……. To be specific for India & its Indians: We would need to know exactly how many Indians there actually are, and then have each Indian open his/her bank account. This task would require the Indian Government to delegate this exercise of identifying every Indian and providing the same with a Bank Account. The delegation of this exercise has been done lately in the manner of a Unique Identification Number (UID now Aadhaar Card) for every Indian citizen, & this UID is linked to a bank account also. The linked account should be an One Bank Portable Multi Bank usable Account only, and not multiple bank accounts per individual.. (Remember there are no Taxes so your deposits need not be hidden any longer). All cash & black monies will be invited into banks and a fixed 10% tax free rate of interest will be paid with the condition that these funds will not be used for speculative purposes whatsoever. Not in commodity markets and not in equity markets. And all deposits could be 100% guaranteed as long as they are used digitally or electronically. NO CASH WITHDRAWALS or CASH HOARDING. I am not against equity markets; it’s just that only 4% of the Indian population is involved in the equity markets and to judge the entire economy on stock market performance is totally wrong.

All equity can be converted to debt by issuing deposits in Banks which will earn 10% p.a. tax free interest, but these monies can be used digitally only, and cannot be used for speculative purposes.

 A system which makes you save for the future is not a sound system as it inherently does not provide for the future of its citizens. Savings are in a way leakages from a demand or consumption perspective, and create unknowns as how is one to assess what an economic unit would save (though one could monitor this economic unit’s bank account) and to save how much less the unit would consume, and of which product or service. If the State does its due diligence on what products or services an economic unit would require during its life time, and provides the means to access them, then a citizen need not save and have the government’s social security net as he/she ages. Elders or Senior citizens after a certain arbitrarily decided age should be a CEB priority concern also, that too with dignity, and these citizens should not be wished away or ignored. In my opinion Old Age homes are a strict No No and younger citizens must be made to responsibly take care of their elders via funds made available for such services to the youngsters,

The Supply lag (the only assumption in the PODS model) would exist even if FDI conditional on an export obligation in the FDI currency, would be the route to finance projects in the local economy. Instead, the FDI route would be expensive...The CEB would receive the FDI which would then be converted to the local currency, and then let into the system for the particular project. FDI would create an outflow once initial capital & profits remitted back to the FDI economy starts. What I propose, is going direct to the CEB for funding the project instead of the FDI route. For example, instructing the State Bank of India to give an Adequate INR (Indian Rupee) Interest free Line of Credit to TESLA to manufacture “Zero Emission Cars” in India. Maybe a dedicated Bank for such invitation purposes & to support Make in India or Atmanirbhar Bharat projects, could be created. Start ups from anywhere in the world should also be supported& this should be marketed under the “Incredible India” campaign. However, support of startups should not be supported if the sole purpose is to exit by selling out. With PODS banking, venture capitalists, angels etc would be not required. Visas, Land, MBAs & Engineers will also be provided and can be factored into the economics of this invitation to TESLA. Bona-fide loans will charge no interest. In fact, Funds/loans to priority sectors could be given with the fund receiver/loanee being paid additional monies, by way of a rebate/ inflow on loans taken. This rebate/inflow rate could be floating: higher if top most priority and lower on lesser priority. ……Priority for the product or service in question.  Local & domestic production capacities would also enjoy similar funding and will continue to enjoy all these as long as actual manufacture and production targets in quality, quantity & generating employment are continually sustained, and met. All economic targets, especially those requiring physical production & manufacture, will have to be met, and not doing so, would attract maximum punishment.

Bank risk concerns on public funds/capital/monies will be offset by manufacturer/producer execution & operations risks so savings that would be generated with there being no interest on Capital/Fixed & Variable/Working capital costs, could be passed on to the labor in the manner of higher wages along with zero interest loans to buy products or services. For example, in the Real Non PODS economy, in many cases, the interest outgoing for Land, Plant & Machinery is more than the entire wage bill of the labor force of some plants in this respect & question. Also, if these interest savings are passed on as higher wages to the plant’s labor, the plant will still remain competitive, while its labor will be able to enjoy a higher standard of life at the same time implying increased purchasing capacity which individuals could use to empower their desirable requirements as and when the desire appears. Higher productivity would also result as these savings can be directed into better working conditions & environments. However, I do agree that Bankers should be paid well and looked after so as to be able to run all bank branches transparently with minimal or no corruption.

The CEB has infinite amounts of monies at its fingertips and charges interest on a risk assessment of a particular business loan. As a business person: My "risk" is greater (practically) than the banks, because I have to contend with the business environment, which is dismal in India. A CEB or any of its branches will be known for what they utilize monies to produce goods & services,(Brands) and that to locally, and would run deficits instead of piling up NPAs. Of course banks would have to have large audit & enforcement departments which would work closely with their clients in seeing to it that all supply & demand objectives are met in a sustainable manner.

Lastly, a lot of monies were loaned post COVID lockdown. If loanees qualify for negative interest rates, their loan accounts should be debited via their credits earned via negative interest rates especially after they have met all their physical production & employment targets. Do note that in a PODS economy the supply side is critical and as long as supply keeps up with demand, availability of money will never be a problem. COVID has taken a heavy toll on businessmen and to make them re-start again, would require an attractive stimulus to produce & manufacture. PODS banks make the availability of monies a given in any market, thereby enabling producers (Supply) and consumers (Demand)without inflation or deflation, all the way up to saturation of the entire lot of products & services markets economies, that the government chooses to select and fulfill.

Thus, there is no reason whatsoever for the government to not being able to cater to the demand & supply of needs like hygienic food, potable water, clothes, education, shelter, judiciary, health, transport and a sustainable clean in sync with Nature environment. That too in a PODS economy where banks function as described here.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Vidur Raj

The author is Self taught & thought intellectual academic, in out of the box macroeconomic policy, since 1984-85. His website is

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