| 1. | The Kaidara model is a financial system architecture that aims for the following objectives by applying the network equation: I. Business Orientation. The purpose of a financial system is to facilitate economic activities, but today's economic environment forces economic agents to be structured according to the extant financial system. Kaidara seeks or creates a cultural homogeneity among economic agents and networks them in a financial relationship wherein the network equation provides the financial intelligence. With the financial intelligence inherent in the business nodes of this network, contrary to traditional finance where the banks (network links) carry the intelligence overhead, the facilitation of economic activities become a natural process. II. Exponential Growth of Gross Domestic Product. The traditional exchange equation network equation (QP=MV) is a linear function of the products and services (Q) of the economy wherein the price (P) and quantity of money (M) are manipulated to achieve the desired GDP. But there is no guarantee that such manipulations can produce the desired effects. Besides, the financial architecture supporting this model limits the level of GDP attainable. The network equation on the other hand is a quadratic function of Q wherein M will ultimately turn out to be a stable relationship, P tends to zero, and the velocity of money (V) will be the most important variable to determine GDP. III. Organic Growth Investment Returns. The average return on investment with savings in traditional financial institutions is below 10% per annum whereas the cost of credit is usually above 10% per annum. Lenders would like to have high interest rates, borrowers prefer low interest rates, and the banks would like to maximize its share of the returns from the investment they have facilitated. The search for equilibrium for the three parties in this tugofwar relationship is a neverending exercise. In fact, from a perspective of a single economy or system, this process is cannibalistic. In Kaidara, money is lent at zero interest while the return on savings is above 20% per annum. IV. Exchange Rate and Monetary Stability. Every node in the Kaidara network is kept in total economic sync with the rest of the network by setting the cost of transactions at both local and international levels to zero. Multiple netting is used to facilitate economic activities among the nodes and with entities outside the network. In the network equation, M would not cause inflation, and M will ultimately turn out to have a stable relationship with the other variables of the equation. V. Social and Financial Security. The primary element of Kaidara is the total welfare package that translates into a pension plan upon retirement. The welfare package is defined by an insurance schedule that covers all social and economic hazards. The ideal policy of this package multiplies a unit of money during a period of forty months into a thousandunit benefit. An ideal policy passes through forty states, whereas a nonideal policy may pass through more than forty states to attain maturity. A policy will get to retirement only after a waiting period of sixty months of maturity, with the condition that the policy owner is above fifty years old. There is only one retirement policy per person. VI. Government Revenue. A 10% tax on all payments to claimants is a significant source of government revenue in a country with wide coverage. |
Kaidara is based on a macroeconomic model that assumes a decreasing cost supply curve and an increasing returns to scale production function. Contrary to using the traditional exchange equation QP=MV, the model here employs a quadratic network equation Q=MV2 (where the P of the exchange equation is set in an inverse relation to V). The network equation is general in such a way that it is applicable both at the macro and micro economic levels. In designing the applications of Kaidara, system theory ideas and a systemic approach is taken.
1.2. Background of the Invention Due to its adherence to the"Bretton Woods"architecture that is characterized by the 'Impossible Trinity' (see 1.3. 1 below), the present financial system is not adequate. Amidst calls by world leaders for a new financial architecture for the new millenium, economists and economic policy advisers look for new ways to apply traditional economic thought. Pulaaku economists, however, have opted for a footloose unregulated financial system based on a web of relationships characterized by a cultural homogeneity that goes beyond market-place concerns.
The basis of this option is that the present financial system is not designed to support the practices of both regulators and regulated. Governments, especially those of poor countries, help themselves with their citizen's savings by negative real interest rates and inflation, whereas, unregulated markets can lead to disaster. International capital markets are international but are supervised and regulated locally! The IMF and World Bank, apart from being made redundant, lack the resources, mandate and experience to deal with a global capital-market problem.
1.3. Considerations behind the Kaidara model The following considerations are some parts of the ideas in Wurie Jalloh's'Pulaaku economics'that have been instrumental in the design of the Kaidara model.
If it is true that"money"as a store of wealth is barren because it yields no profit or interest, investors or hoarders should not prefer saving a $200 bill to breeding a cow that reproduces and produce milk.
If it is true of gold and silver that, (unless it is maintained that their attributes are changed by authorities), their values are governed by the rules of production and consumption, investors or hoarders of wealth should not prefer hoarding metals to herding cattle.
Monetary policy cannot target simultaneously on the money supply, the exchange rate or interest rate. Focusing upon one may have undesired implications for the other two. The wisest solution might involve the setting of conditional targets where the target is compromised if other variables move outside an estimated range.
Monetary authorities usually have some target for monetary growth. In practice, the- monetary aggregates are largely ignored because they all behave differently, and a nominal interest rate target is adopted instead. The suitable aggregate to target need not be
any of the standard single sum measures Mn (where n= 0,1, 2,...) but, rather may be some kind of weighted index determined by objective economic criteria.
1.3. 1. The Impossible Trinity continuing national sovereignty 'supervised and regulated markets exploiting the benefits of global financial markets This trinity is what underlies the instability of today's global architecture.
Adhering to any two will exclude the third.
1.3. 2. Monetarist Propositions and dilemma Velocity will ultimately turn out to be a stable relationship.
Money causes inflation.
The main effects of fiscal policy are on the public sector component of output. (This is consistent with the monetarist view that fiscal policy can affect the composition but not the level of output, except in the very short run. Money growth, on the other hand, can stimulate output in the short run, but with a no cumulative effect).
1.4. The Kaidara Model The proposed macroeconomic model is based on a general theory that assumes a decreasing cost supply curve and an increasing returns to scale production function. The model here employs a network equation Q=MV2 (where the P of the exchange equation QP=MV is set in an inverse relation to V). The network equation behaves the same way the equations of quantum mechanics and relativity theory in physics do, in that it is applicable both at the macro and micro economic levels. The financial system architecture based on applications of the network equation will be self-regulating.
Implementations of Kaidara Multi-Service Card This customer card would have pre-paid calling, banking, and insurance functionality in modules that can be activated as required. This card will be a universal credit card that is accepted by all members of the Kaidara network of relations and businesses. An information system in a wide area network links all the customer access points to the Kaidara multi- purpose database.
Services 1. All Risk Insurance We propose a kind of insurance policy that covers all kinds of risk and gives the maximum return to policyholders. By combining finance with other activities we bring down the costs of setting up structures and operations, reduces the massive duplication of operations that are common in bureaucratic structures, and reduce delays.
The Insurance Schedule is the blueprint for the insurance policy. A unit of currency per month must be paid by the policyholder in order to receive the due benefit in case of an incident. The due amount is the maximum payable to claimants for the policy's state, and the actual amount paid is the amount of loss attributable to the incident (if this is not more than the maximum payable). A state is equivalent to a month in the schedule, and the unit of payment can be in any agreed upon denomination in the location where Kaidara is employed.
A policy starts with zero risk for all persons, and there is no waiting period. Failure to pay the monthly due has a regressive effect on the policy's state. No reminders are sent to policy
holders and no penalties imposed. If a policy at state 9 is not paid for to get to state 10, this policy is automatically set to state 8. If this policy is left unattended for 9 continuous months, the policy expires.
An important feature of the model is that it is modular. An individual can have as many policies as he or she can handle, whereas each policy has its own life and is independent of the status of the individual's other policies. The only exception is that no one can have more than one retirement plan, and that life insurance is payable only once per person.
Insurance Schdule Month Due Month Due 1 5 21 160 2 8 22 180 3 11 23 200 4 14 24 220 5 17 25 250 6 21 26 280 7 25 27 310 8 29 28 340 9 33 29 370 10 37 30 400 11 44 31 440 12 45 32 480 13 50 33 520 14 60 34 560 15 70 35 600 16 80 36 650 17 90 37 700 18 100 38 800 19 120 39 900 20 14 40 1000 2. Policy Expiration A new policy has zero initial risk status. With usage, the policy accumulates risk according to the amounts paid out, and the remainder (rest) from the amount due determines the state of the policy. When the risk status is higher or equal to the amount due at any given state, the policy expires.
The periods in the schedule are like energy levels wherein the amounts due specify the potential energy of the policy at the given levels. With time each policy should go through various states toward maturity and retirement. Whenever a policy is used, it diminishes its capacity to increase energy; in other words it accumulates negative energy (risk). The difference between the positive energy and the negative energy of the policy is the determinant of the policy's state.
Examples: Month Due Withdrawal Risk Rest 5 19 10 10 9 1 5 15 0 0 Month Due Withdrawal Risk Rest 20 140 40 40 100 18 100 20 60 40 11 40 30 90 0 0 Month Due Withdrawal Risk Rest 20 140 40 40 100 18 100 0 40 100 19 120 20 60 60 14 60 0 60 60 15 70 0 60 60 16 80 10 70 10 2 10 5 75 0 0
Month Due Withdrawal Risk Rest 20 140 10 10 130 19 120 0 10 120 20 140 0 10 140 21 160 0 10 160 22 180 0 10 180 23 200 140 150 60 14 60 50 200 0 O
3. Savings and Investment Options This table shows the investment and savings possibilities that Kaidara offers, with an example for a one hundred US dollar investment. Duration of % Example for Amount Due Deposit per annum $100 deposit 6 Months 20 100 + (20/2) $ 110 12 Months 40 100+40 $ 140 18 Months 50 100 + 50 + (50/2) $ 175 24 Months + 65 100 + (65*2) $ 230
Should an investor decide to withdraw savings before the due date, the table below shows what returns can be realized. No savings under the Savings and Investment Options can be withdrawn earlier than three months. Time of Pre-mature Valid Deposit Options % Return withdrawal Less than 3 months None 0 Less than 6 months All 6 Less than 9 months 12-24 Months 9 Less than 12 months 12-24 Months 12 Less than 15 months 18-24 Months 15 Less than 18 months 18-24 Months 18 Less than 21 months 24 Months 21 Less than 24 months 24 Months 24
4. Money Transfer The aim is to charge 0% transfer cost and save our customers from foreign exchange rate fluctuations. In the Kaidara model, there is no need to promote intermediary operations at the expense of commerce and industry. We therefore offer the money transfer service free to increase the velocity of money circulation, thereby increasing GDP.
5. Borrowing and Loans In the Kaidara financial model only policy holders can borrow money. The amount that can be borrowed is limited to the amount due of the policy's state. No interest is charged, and the repayment period is limited to the number of states the policy has achieved. For instance, if a policy is at state ten, then the policy holder will repay the loan in at most ten months. Each policy has its own borrowing right, but an individual can only borrow with at most one third of the number of policies held at within a six months interval. Thus a person with three policies can use only one policy to borrow in six months. A person with six policies can use two policies to borrow.