Sustainable Economy in Brief

Sustainable Economy (SE) is defined as the type of economy whose underlying variable components are fully facilitated using sustainable measures. The variable components of sustainable economy are kept at sustainable levels using a sustainable funding stream (SFS) called ‘the cost of prevention’ (COP) and the whole economy itself is fully insured or protected using another type of sustainable funding stream called ‘the cost of cure’ (COC). Both COP and COC are sustainable funding streams that must be setup from outset - that is, from the very first day that the development of the economy begins or at any point in time when the whole economy is ready to reschedule and rejuvenate itself. Both require predetermined Transitional Periods (TP) to grow to maturity.

When does COP Mature? COP matures at a level equals to the total liquidity value or subsidies required to keep the variable components of the economy such as prices of assets, goods and services, salaries, shares, debentures, bonuses, wages, deposits, contracts values and interest rates at sustainable levels. For example, in a financial institution it is reasonable to summate that COP matures when its cumulative value is at a level equals to the sum of its investors’ deposits. Consequently ,COP at maturity is what every financial institution needs to prevent or avoid the so-called ‘bank runs’, a notorious and most feared market phenomenon largely blamed for being the main cause of bubbles in the financial market and in the wider economy. A COP grown to the same level as the total amount of deposits held by each financial institution is an extremely powerful financial instrument that can prevent not only the internal ‘deposits runs’ but also the ‘bubbles’ in the wider financial market. My gut reaction instinct is that if the depositors or investors rush to withdraw a huge amount of their deposits from the financial institution as they usually do whenever a volatile economic climate causes them to fear the worse, any financial institution with a matured COP already in place will not be affected. Well, even in the worst case scenario where all the deposits are completely withdrawn by the investors, I predict that the financial institution in question will still not be affected because they have a COP the size of the total deposits withdrawn by the investors. The financial institution has the liquidity value needed to survive the storm and only those without it will bite the dust.

When does COC mature? COC on the other hand matures when its cumulative value equals the total value of the business. COC is a very strange sustainable financial instrument because not only does it retain its liquidity status (ready-to-use cash status) but also it is a ‘do-nothing-while-you-wait’ raw cash. To keep cash the size of your total business value not only in liquid form (ready-to-use) but also almost completely idle (do nothing) is very strange indeed and it is every investor’s worst nightmare. It is a taboo that every investor would dread confronting, let alone accepting it as the most powerful financial security on the planet. It is a sustainable funding stream designed from day one and grown to maturity specifically to protect and rescue a business or the whole economy from total failure. People who wonder what sustainable funding streams are and why they are very powerful tools for keeping business variants in check while at the same time fully protecting the whole business from total failure should sit down and do a little bit of thinking themselves. They should ask themselves these questions:

1. All the businesses (large and small) that collapsed throughout the human history of applying the current problematic business concepts, would they have failed if they had matured COP and COC sustainable funding streams already in place?
2. What other suitable economic mechanisms are there for securing equity in wealth redistribution that we often crave for?
3. Can people think of any other means by which we can cure all types of economic problems (downturns, bubbles, rogue trading, inflation, depression, debts culture, unemployment, phantom transactions just to name a few) that are usually associated with the current economic model?

The suspicion that haunted my conscience since childhood is that it is the unpredictable and uncontrollable underlying variable components of the classical economic model that constantly shake the very foundation of businesses and subsequently to their failures. When the variable components of a business or an economy repeatedly shakes its very foundation what result are a wide range of economic problems that lead not only to business failure but also to unnecessary human hardship. My own view is that COP and COC sustainable funding streams are powerful tools worth considering. We could at least do a pilot test to see if they work, that is, if they can be used to update and breathe a new lease of life into the current problematic economic model with countless fluctuating and unpredictable parameters.

NOTE: This is just a brief description or definition of Sustainable economy and the basic fundamental principles that drive it. I must also point out that careful use of the topics on the main category or link category section along with some of the main pages should systematically reveal the whole picture as you work from one topic to the next. Besides, there is a follow-up topic to this which details and distinguishes sustainable economy from unsustainable economy on the main page called “How to Immunise an Economy”. And for additional information, see the definition page on the top menu called “Defining the Key Terms of Sustainability”.