How to fund the economy of the future

by Joerg Jelden

The current crisis is really exceptional. At Trendbuero I am studying it for a while now, always looking for chances that may arise from it. For me, KashKlash is a great approach to discuss solutions in a world where credit is ultra-rare. Great opportunity to discuss questions like How will our economic system look like without money for investments? How can companies grow without available credits? How will innovation develop without money to invest?

These questions sound very banal. But they are not. A thumb rule of economists says that every percentage of GDP growth needs 4-5% of capital for investment. As our systems are doomed to grow, there have to be new forms of financing, investment and consumption. What came to my mind was the following:
So far companies need money to invest, produce, distribute, sell and pay back. With no money to invest, it might make more sense to start the other way round: Sell, pay, invest, produce, distribute.
With no money to invest in, the whole investment process has to change. This approach of crowd-funding could give an enormous efficiency boost. Companies could avoid the uncertainty of the first investment, massive overproduction, costs for marketing the produced goods. Consumers would become investors.
What  do you think about this? Has anyone ideas if this could work? Cases or success stories?

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David Birch 11/12/2008 12:07:04

Alternatively, companies could simply issue their own money as a claim on their future goods and services. The money would, initially, trade at a discount of course. But in time, the market would value them just as it values equities.

Joerg Jelden 11/12/2008 23:59:40

David, that is a really good idea. This is the idea of the Payback Pound or the Tesco Dollar, right?
It would be interesting to see what happens in term of exchange rates. Will they be dynamic? So, when you exchange more money to Tesco Pound you will get a better rate? Do you think it will be a problem, that in time the market would value these currencies as equities? At some point further down the road the financal system will work again.
I see this idea as complementary for those areas where prefinancing is not possible or suitable. The potential of reversing the system is to save money big time. For marketing and overproduction etc. Or as Prahalad says: N=1, R=global.

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