Here
is what I wrote as the abstract for my full papers of which this paper may form
a central part.
ABSTRACT of the Research Papers
A series of papers which throw new light on the sources
of economic fragility
Adam
Smith, in his ‘Wealth of Nations’, concluded that if the price of everything
was permitted to adjust so as to create a balance between the supply and
demand, this would significantly assist the economies of nations. It would help
to optimise economic growth and it would help to ensure that people were
gainfully employed.
This
is the first in a series of papers identifying five structures within most
economies, including the least developed and the most developed economies,
which do not comply with the above principle; plus three methodologies that do
not exactly follow engineering control systems principles.
The
five structures obstruct price adjustments, causing increased risk, increased
complexity and instability, creating fragility among financial institutions,
national wealth, and national spending patterns, upon which the security of
employment and economic growth depends.
These
structures are:
1.
Mortgages
2.
Related regulations,
3.
Taxation,
4.
Fixed interest bonds, and
5.
Index-linked bonds
The
three areas where engineering principles can assist are:
A.
Separate Provisions for international capital
flows and trade,
B.
Management of business cycles, and
C.
Stockpiling as a buffer from imported
recessions
This
series of papers provides a detailed and practical guide to re-shaping all of
these financial elements. This may have far reaching and beneficial effects,
reducing the complexity and the fragility of economies and businesses,
impacting on their competitiveness and their rate of growth, and underpinning
recovery from a recession. Complexity is a significant risk factor in itself.
The new systems significantly simplify the economic and business models.
Considerable
attention has been paid to the essential commercial aspects of the restructured
financial products which includes: marketing, the management of cash flows,
accounting, return on capital, and the ease of management.
This
first paper mostly deals with Housing Finance, with an interesting option for
pension funds, but also makes some reference to government and business debt
structures and changes many perceptions about the nature of wealth.
The
new mortgage model is named ‘Ingram’s Lending and Savings (ILS)
System’. It could be used to underpin the housing and banking sectors to
get economic growth onto a more secure footing, as could a new government debt
structure.
The
researches were done from a background of engineering control systems and
in-depth observations of economic behaviour, over the past four decades which
enabled the writer to stay ahead of the competition in investment portfolio
management. This is supported by access to data going back over two centuries
for equities and four decades for UK Housing Finance among other sources.
The
writer has benefited from considerable guidance, freely given, by a
considerable number of academics and business people from financial
institutions, and from interactive, still ongoing discussions, on the internet.
PRINCIPLE
OF SYSTEM FRAGILITY
When
all of the above ingredients are added to an already complex system like an
economy we are asking for trouble. Our economies are made very much more
complex and more fragile than they need to be by having the above listed elements
embedded within.
Jacek Marczyk identifies complexity as one of the biggest risk factors that a business faces.
He blames 4.5 million lines of software used to fly passenger aircraft for a fatal crash when the software became confused and took control from the pilots.
He says that one of the most effective ways to reduce risk levels is to reduce the complexity within the system or business.
http://www.zerounoweb.it/approfondimenti/business-intelligence/ontonix-vincere-la-sfida-della-complessit.html?goback=%2Egde_143424_member_136848470
"When
the point is reached that the controls cease to work properly, we have gone way
too far" - Edward C D Ingram.
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Further reading and a U Tube video - see the link on the Home page.
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