Compounding interest is not an unsolvable predicament. Introducing the Cash Flow Token, a saver that favors simple interest.

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kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Compounding interest is not an unsolvable predicament. Introducing the Cash Flow Token, a saver that favors simple interest.

Figure 1: An illustration of a hypothetical Cash Flow Token (CFT)
https://upload.wikimedia.org/wikipedia/commons/thumb/8/89/Cash_Flow_Token_Coin_%28One_Dollar_Each_Month%29.png/477px-Cash_Flow_Token_Coin_%28One_Dollar_Each_Month%29.pngImage to the Right (Figure 1): This image was of a US $1 coin, which was photo-manipulated to depict a realistic-looking "cash flow token", a hypothetical token having a fiat value that accrues at a nominally fixed rate. The fixed nominal rate depicted in this picture is "$1 each month". The value obtained from such a token, if it were real, is equal to $1 times the number of months the token is held in possession, with the value being accrued by the primary holder of the account in which the token is deposited.

Uses [Proposal]: The cash flow token can be used to encourage transparency in promised weekly, biweekly, monthly, bimonthly, quarterly, and semi-annual transfers of funds such as those relating to wages, salaries, rent, membership dues, and other funds transfers.

Issuance [Proposal]: The issuance of a cash flow token may require a withdrawal from a savings or debit account at a rate matching the rate of withdrawal labelled on the token. Alternatively, those who change the size of the money supply may do so by issuing such cash flow tokens without any corresponding withdrawal, which increases the supply of money at a steady, linear rate, or decommissioning them, which decreases the supply of money at a steady, linear rate.

Depositing [Proposal]: Cash flow tokens would be deposited in a new type of banking account called a "cash flow token account" (or CFT account). One can issue a cash flow token (or CFT) with approval of automatic withdrawal of money periodically from a savings or debit account. The CFT, which is to be backed by the scheduled withdrawal of money from the said savings or debit account, can then be deposited in one's cash flow token account. That CFT account can serve as an additional savings account or debit account. The cash flow token can be transferred to other CFT accounts as payment for wages, salaries, rent, membership dues, etc..

Valid as payment for simple interest [Proposal]: Cash flow tokens can be collected by creditors to settle payments for simple interest. Banks can collect this simple interest to cover the costs of banking as well as to allow a person who cannot afford to continue paying into a cash flow token he or she issued to get off the hook. Once a principal is fully paid, all cash flow tokens involved in paying down the principal and interest should be returned back to the borrower or lessee.

As a stimulus for innovation of goods and services [Proposal]: Cash flow tokens represent relationships, not goods and services in of themselves. Instead of fitting prices to cover the costs and profits that result from providing services and/or buying and selling goods, with cash flow tokens, the good(s) and/or service(s) should be adjusted in quantity and/or quality to fit within the price put on the relationship between the account holders. This encourages more innovation in goods and services so that some combination of quantity and quality is met in conjunction with a fixed budget of expenditure.

Not to be confused for price fixing of goods and services [Proposal]: This is not to be confused for price fixing of individual goods and services, which establishes a price on each good or service. What these cash flow tokens are suited for is not price fixing of individual goods or services, but rather they are suited for pricing the economic value of the relationship between different account holders, which represent an adjustable number and quality of goods and services. Such account holders can be that of buyer and seller, employer and employee, member and membership organization, charity and beneficiary, etc..

As a budgeting device [Proposal]: When we budget, we have areas in our budget such as housing, electricity, water, gas, groceries, merchandise, insurance, cable, satellite, internet, cellular, vehicles, wages, salaries, rent, tolls, taxes, legal, alimony, etc.. Cash flow tokens can simplify the process of budgeting. For example, if one obtains 3000 cash flow tokens from one's employer, each providing $1 per month, those tokens provide a transparent way of seeing the limits of one's financial means. Online, or periodically in the mail, a person would receive a bank statement containing information concerning one's CFT account. The CFT account statement is presented as a statement of cash flow.

Figure 2: An illustration of a hypothetical Cash Flow Token (CFT) account statement

Cash Flow In Cash Flow Out

Employer
3000 $1/month CFTs

Alimony
50 $1/month CFTs

Apartment
800 $1/month CFTs

Electricity
300 $1/month CFTs

Water
20 $1/month CFTs

Natural Gas
20 $1/month CFTs

Groceries
500 $1/month CFTs

Merchandise
200 $1/month CFTs

Insurance
600 $1/month CFTs

Cable, TV, Internet plan
80 $1/month CFTs

Netflix
8 $1/month CFTs
 

Previous balance of funds in CFT account xxxxxx1057 as of end of the previous monthly statement (September 10, 2012):
$17,200

Net balance of CFTs for the previous statement period:
522 $1/month CFTs

Current balance of funds in CFT account xxxxxx1057 as of end of the current monthly statement (October 10, 2012):
$17,722

Savings Rate:
17.11% = 522 / 3050

Time to double balance:
2 years and 10 months

As an alternative to current methods of economic stimulus [Proposal]: Tokenizing cash flows does several things which are good for business and consumer confidence and thus for economic stimulation. It makes budget trends transparent, whether they relate to housing, electricity, water, gas, groceries, merchandise, insurance, cable, satellite, internet, cellular, vehicles, wages, salaries, rent, tolls, taxes, legal, alimony, etc.. With CFTs, the economic relationships between buyers and sellers, employers and employees, members and membership organizations, charities and beneficiaries, etc. are tokenized, quantified, measured, and accounted for in a simple-to-track way, as is shown in Figure 2. Transparency of one's financial position leads to greater confidence in making more decisions which are financially sustainable. Promoting transparency of cash flows through use of Cash Flow Tokens can also be used to prevent promises of wages and salaries from being broken. When fulfillment of those promises are in doubt, CFTs account statements can be used to show whether or not those promises are being met.

I, kmarinas86, believe that the Cash Flow Token (CFT) and the Cash Flow Token (CFT) account are worthwhile concepts that merit future study by financial and economic experts, and I believe we all deserve the practical real-world implementation of these concepts in all economic sectors.

kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Computing Currency Conversions With "Cash Flow Tokens" (CFT)
kmarinas86 wrote:

Promoting transparency of cash flows through use of Cash Flow Tokens can also be used to prevent promises of wages and salaries from being broken. When fulfillment of those promises are in doubt, CFTs account statements can be used to show whether or not those promises are being met.

My inadvertent pluralization of CFT in "CFTs account statements" is perhaps a useful typo. CFTs may come in different varieties. Not only may they be based on different periods of time other than 1 month, but they can also work with different currencies. With CFTs, the currency conversion rates would not be based on the present currency exchange ratio, nor would they be based on the midway value between the initial and final currency exchange ratio at beginning and the end of the specified time period. What must be known is the average currency exchange ratio measured with respect to equal separations in time, using the smallest units of time which are still reasonable.

wisetraveler's picture
wisetraveler
Status: Member (Offline)
Joined: Mar 24 2012
Posts: 15
the predicament of interest

Earning interest assumes that the economy is always expanding. When hard limits are hit, and contraction results, interest can no longer be "earned." That's my understanding of the predicament, in any case. It doesn't matter if you collect dollars, CFTs or sea shells. What we're going to see over the next several decades is the end of the rentier class, a large group of people who collect the majority of their income from interest on investments. I think this is why charging interest historically was called usury, and was criminal, because there was no such thing as a free lunch (there's no free lunch now, either, but the glut of cheap energy in the recent past and the wealth pump of empire sure made it seem that way).

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