Economic 'System' - Monetary 'Policy' - Banking 'Process' - Market 'Product'

ECONOMIC SYSTEM (System of Frugality, Simplification, Minimizing waste)
Economics is intent of mutual co-operation manifested in exchanging goods and services from one to another for satisfying the needs of both.
Economics is an art of distribution. In Sanskrit, this term of System (Shaastra) of Distribution belongs to Luxmi. When Samudra Manthan (churning of minds, scientific and industrial development) takes place, it becomes a source of very many useful products. These products create conflicts as to who should first get it. Maha Luxmi then takes the responsibility of distribution in such a way that each one gets it without any infighting. This 'system' of satisfying need by mutual enterprise of give and take is Economics. Imagine how could automobile once invented by Damlier in a village of Baveria before a hundred years is found in Delhi and Gorakhpur and so many places across the world? The distribution goes unhindered and is largely peaceful. How did it happen?

• In fact, the aim of equilibrium of exchange (demand and supply) in a system of market is to ensure lowest entropy (absense of heat, stress, conflict), which is a sustainable state of market
• i.e., free of conflict (no broken agreements), without arm-twisting (equality, voluntary, independence), and without waste (efficient).
  
• If purpose of economics becomes 'control' instead of 'exchange', the System comes to a halt with jerks and becomes a source of war. 
• Money is 'future' and comittment in futures without control over it, vitiates contract. Economics that uses money is flawed and errors of it cause conflict. Fluctuating value of money is hazzarous. 

Although every player (practitioner of economics) is free to take his/her own decision in valuation of product (and services) in voluntary spirit, but this is not based on a natural trust. Samudra Manthan (market and technology) was an unusual enterprise of evils and divine (called DEVA-ASUR SANGRAM). Market and technology is a place of war or conflicting points of view in ending at a compromise. Because of this (severe lack of trust), every transaction is an agreement or compromise, that requires safeguards of measurement (accountancy, in give and take) and laws (deterrent, punitive action in case of breaking agreements). Mother and child also have give and take but that is not a state of agreement and none of them have a sense of enemy. Because of this absence of intent of enemy, markets (network of agreements) cannot take place, and any laws and measurement becomes unnecessary.

Markets are short term compromises (network of agreements) and this fear of short term diverts human mind from log term goals of life and co-existence. More intensity of short term is less intensity of long term. 

Secondly, waste rises with high and conspicuous consumption and insecurity. By increased consumption, property of competition and comparisons in markets sucks the life force from age old cultures and deserting it. Imagine how monkeys, birds and human relieved of money can somehow live in a natural forest but not in Delhi or NY. For a person without money, Delhi and NY are destitute cities. This fake attractiveness of market is in fact, desert (insensitivity) of a new kind. In India, villages who produce milk have their children starved of milk and every ounce of milk can earn for them more rupee from cities. Families fearing girls drowning to an alien culture of market, resort to female foeticides in India. Technology is unnatural advantage. A man with gun in hand cannot be a developed person, and may have no mind of his/her own. Addicts of technology are idiots and are in limit of their persona as they cannot express in their language, cannot think and not even calculate independently. 

Benefits of markets cannot offset costs of division, loss of culture and tradition and conflicts. One must remember that the System of equity and transparency in give and take (distribution) following three principles a) free of conflict (no broken agreements), b) without arm-twisting (equality, voluntary, independence), and c) without waste (efficient) are a condition of market.

Market Equilibrium
Source (seller) and Sink (buyer), and Agreement

MONETARY POLICY
Exchange of goods and services can take place only when it is surplus at one place and deficient at another place. This difference in potential or ‘positive’ potential difference is called ‘Self Worth’. Similarly, Deficiency is a Liability (or promise to repay) or ‘negative’ potential difference. Any movement or current flow between two nodes is an unending activity of inequality aiming at equality. This causes a wave of transition. In economics, that sitting at top of mountain or at high altitude (with positive self worth) is called Seller and those at bottom of valley is Buyer. Individuals i.e., in role of a buyer transitioned as seller and vice versa, maintain a neutral state for sustainable equilibrium of a market by equating Liability (negative, buyer) and Self Worth (positive, seller).
Agreement
Act of Balance, Equilibrium of Market or fall of Entropy
Potential Gradient (x, y) where x = Self Worth i.e. before giving and y = Liability After giving. If x > y then it is Source, and if y>x, then it is Sink. Sink becomes source if others in market have no Self worth.

A was first day in +10, then in second day 0 and then third day 10
B was first day was 0 then 16 and then 0
C was first day 6, then, 0 and then 6
In this market there are 6 agreements in three players with total transfer of value as 48 and individuals (A, B and C) have at the end of market reached at Zero potential gradient.
In this market there are 6 agreement of total transfer of value as 48 and here Market is not reached at Zero potential gradient and activity will continue at least for A and C.

For reasons of equilibrium of market, nobody gives anything free even if he/she has surpluses. This resistance of giving is called Price. If the Price is more, this means, seller does not really have the intent of selling for various reasons to a buyer. Intent and Measurement go together. Significance of Price is in a framework of measurement with law/regulation; for example, high price of weapon and drugs and new technology have ‘fear of unknown’, and ‘penalizing waste’.

Price is measurement of resistance agreed between buyer and seller for allowing flow of product in between them. Imagine the activity of a market like an electrical network. Electrical system and economic system serve exactly the same purpose. Flow of current in a cable, which is linking two points one at higher, and another lower is a demonstration of the exactly same phenomena of economics.

• a) Voltage or Potential Gradient or Self Worth ‘V’= gap between demand and supply of product
  b) Resistance or Friction or Price ‘R’ = price as measure of ‘resistance to flow’ of product across cable in the market
• c) Current or Goods flown ‘I’ = ‘amount of transfer of product’ take place across cable in the network
  

Ohm’ law says: V = I R or V- IR =0

• Higher is the Voltage, higher will be the Current but this ratio between Voltage and Current is measure of Price which is a property of the cable. With changes in cable (agreement), the Current and Voltage will have different value of Prices.
  

In economics, players of market engaged in buying and selling act in an equilibrium of demand and supply but Price is a property of Agreement (cable property) i.e., valuation or measurement policy and laws that ensure fulfilling agreement. Price is not a property of Product. Same product can have different Prices in different Agreements.

• Price has certain benefit of Reducing Waste. If prices i.e., R become Zero, supply and demand will be equalized. And excessive waste will be a disadvantage for Supply Potential as well as for Demand Buyer. When R = 0, V will be 0.
• In absence of cable, Resistance is infinite. Supply or the goods flown will cease and I = 0.
• When the demand supply gap or potential gradient (V) is finite and like different cables connected to it, many different agreements of (R) Prices exist in a market; then, lowest Resistance (Price) will flow (I) all goods.
• Σ V-Σ IR = 0. Each of the Buyer and seller is connected by different agreements. Price (Resistance) is property of Agreement (cable). In a network of agreements, every Buyer must also be equal Seller in order to have a right to freely exist in the Market without breaking any Agreements. In other word, buyer gives a promise to seller that he/she will reduce the Resistance of equal amount in reverse movement when he/she becomes in position of a seller. In other words, when an account of all individuals in market is summed up, total Liability (IR) should be equal to total Self Worth (V).

Monetary policy is a policy and not a system. Policy is typically a management (artificial, man made) issue. System (for example economic system or electrical system) is not a management as these are based on natural laws. ‘Artificial’ Management policies take the advantage of ‘natural’ System so that effort is minimized and conflicts do not occur. Effort is a sort of resistance in going against the nature. For example, effort is more when as pulling the cart uphill than when it falls by pull of gravity. When Management is with System, it making things become effortless and when it is against it, any work is painful.

Monetary policy is policy that ensures that individuals in market should be committed to
a) Not break the agreements (wiring, cable) R = ά then I=0
b) Not waste (including over-production) i.e., R=0 then V=0
c) Self worth must remain equal to Liability i.e/, V-IR =0
If the monetary policy is in place, it will create Economic Growth’.

1. Agreements on rise = economic growth
2. Agreements broken = failure of Market
3. Agreements on decline = Recession

BANKING PROCESS

This job of accounting of Resistance in agreements in Market place is Banking. Protection of failed agreements is part of the job of Legal warning system of the Market.

Banks cannot produce anything and therefore have no ‘self worth’. Bank is not an entity of market because it provides no real value, which can qualify it to enter a market. A scorekeeper in a cricket match cannot qualify as a player. Banks have no right of giving ‘credits’ because money is a promise and those with potential ‘Self Worth’ only can take potential Liability.

Money is not a derivative of real goods and services. Money is a unit of measurement. For example 10 kilometres is measure of distance. Kilometre is a standard and 10 is the quantity. 10 Ohm is a Resistance of cable, which carries current. Similarly, 10 Rs of Agreement of market is using Rs as standard or unit of measurement of Price (or Resistance) and 10 is the quantity or multiplier. Banking is about ‘Correct Accountancy’ for implementing the monetary policy in players of the market. Those so-called bankers, who consider a role for themselves as a trader in derivatives of real product and services, are not profession of banking and as implementers of monetary policy.

Counting is job of Banks. It must have something, which cannot be counterfeited, and integrity of accountancy of market is possible to be maintained. Gold, which is difficult to find, is associated with currency fro a long time not for value of gold as exchange product but its property of integrity in accounting, because gold is not easy to get and counterfeiting becomes not wise decision. Money has no real value but is a intellectual property used as unit of measurement. A note of one USD is not a paper and ink, but more than it as an instrument or unit of measurement.

If money is considered a real value product and not a unit of measurement, it is failure of the very concept of Banking as implementation agency of accountancy, monetary policy in the game of the Market.

Banks have no consideration with amount of money circulation in the network i.e., number and size of agreements. It should only ensure the monetary policy of individuals in the market by proper accountancy, and warning system.

Monetary policy is policy that ensures that individuals in market should be committed to
a) Not break the agreements (wiring, cable) R = ά then I=0
b) Not waste (including over-production) i.e., R=0 then V=0
c) Self worth must remain equal to Liability i.e/, V-IR =0

DERIVATIVES MARKET
So-called Banks which are essentially Currency Markets in name of Federal Reserves and secondary money markets are not the institutions of Banking but a sort of commodity or futures derivatives. This money is ‘negotiable’ in value and therefore these are agreement, and not a measurement unit.

One USD in 1990 is not same USD in 2008. The printed value has no real significance. Significance of the USD as unit of measurement is lost. Imagine what will happen if 1 kilometre in 1990 is different than 1 kilometer in 2008. Can the world run on such a stupid way?

Sanctity of Banking as a model of management (integrity of accountancy) of monetary policy, and monetary policy as a model of Economic System must be restored.

What is the idea of liquidity? Why it is a danger to the idea of a sustainable market? This is a situation in market when a buyer makes agreements with seller and not considering Price a big issue. They by ease of credit of banks promise something without any control on future. But in due course, when buyers are not in position to sell something in equal amount, agreements they are tied to with, gets broken. As a result, idea of the market fails. And rewiring (network of agreements) or re-creation of market takes time till confidence returns. This reluctance to buy is called Recession.

In interpreting the 2008 US Financial crisis, when Credit is cause of Liquidity and excessive buying-selling by Credit Liquidity fails fundamental of Markets, and Agreements start to fail, Recession is bound to come.

As long as network of agreement is secure, price or money is not a problem, as mathematics is never short of numbers provided these are sanctity in measurement unit and is not negotiable. But if agreements start to fail and at the same time, money or credit or liquidity is increased, then markets will surely die. Management can solve this problem by restoration of trust required for rewiring of market (network of agreements). Markets are therefore are victim of Law and Measurement failure (banking) which inducted Credit (easing resistance) without ensuring that credits will be repaid.

Summary:

Economics (Intent of mutual co-operation) ‘demand supply equilibrium of Market’

Monetary policy (framework of Agreement: Measurement and Laws) ‘framework of price in agreements between buyer and seller to maintain sanctity of economics’
Agreements on rise = economic growth
Agreements broken = failure of Market
Agreements on decline = Recession

Banking (Quality/safeguards of agreements in market) ‘safeguard of credibility and prevention of defaults of monetary policy’
Accountancy and Measurement

Derivatives Market including Currency Market
Credit, liquidity