Where Does the Currency Come From?

In the past, currencies were related to their equivalent value in gold. Today, countries create hard currency according to the combined value of their marketable goods and services. In essence, money is a point system that facilitates the exchange of goods and services.

Ideally, at regular intervals, central banks worldwide decide what value can be attributed to the combined marketable goods and services produced within their own national economy. Upon this basis, again ideally, the value of a country’s currency is determined. The closer to the reality, the “harder” a country’s currency will be.

From this perspective, a country’s currency is therefore a measurement of the value of its combined marketable goods and services.

In this context, there are two challenges our world economy faces today:

  1. In the rich areas, the problem is that of overproduction: there is the capacity to produce much more than is currently the case and even those goods and services that are produced, require massive advertising campaigns before they are sold. Production on its own does not expand the economy unless the products are actually sold.
  2. In poor areas, there are huge needs for goods and services, but the poor lack the purchasing power to meet their needs. The need for goods and services on its own does not allow the economy to expand unless it is accompanied by the necessary purchasing power.

In this way, economic power goes to waste and this can be harvested when we see our world as the whole entity it has become in so many aspects.

In Kooistra’s time it suddenly became possible to treat the whole world as one market place: by electronically connecting those seeking ways to produce more with those in need of extra goods and services. In this way, currency can then be created to cover the sale and purchasing of this whole new range of marketable goods and services.

This is a two-step process:

1.    Creating hard currency. That is currency that is “hard” to the degree it is backed by marketable goods and services.

To create this currency both producers and consumers are needed, for as we saw above, producers can not contribute to an economy unless they have the necessary consumers for their products.  

The initial decision as to how much currency can be created is undertaken by economists. who make an initial estimate. In the last quarter of the 20th Century when Kooistra first exposed his Plan to economists, the estimate was that the world economy would grow between 5% and 10%.  (The 1981 Nobel Prize Winner for the Economy, Jan Tinbergen, was just one of the endorsers of Kooistra’s Plan.) For his calculations, to show how the Plan would work,  Kooistra decided to use a conservative 7%. So, the answer to the question of how much extra hard currency can be produced to allow such a market place to function was established. With the Plan in operation renewed calculations would be made each year to establish the size of this supplementary economy. This would then provide an estimate of how much money could be created for the supplementary income. At the outset of each year, once the general estimate has been made, it is double checked at the outset of every year by making sure that what consumers want to purchase can indeed be produced. Once it has been established that both demand and supply can be met, then the supplementary income can be made available to all participants. Kooistra saw that this economy would come truly into its own if all people were embraced. 

Once the amount of hard currency that can be created to fuel this new supplementary economy has been established, the second challenge can be met:

2.    Providing People with the Purchasing Power, 

Once the question has been answered: How much hard currency can be created if production and needs were to be united into one economy, then it becomes possible to divide that currency between all people equally, remembering that to create the currency in the first place consumers are an essential part of the equation. 

It is estimated that an extra 7% increase in the world money supply could be generated worldwide by the end of a year, if all potential were to be tapped globally and if those capable of producing more sustainable goods and services worldwide were connected to those who need them. Extra marketable goods and services would be created, and thus, extra hard currency can be created.

This extra hard currency is referred to here as SIFA currency, since it would provide a Supplementary Income for All (SIFA). This increase would be the source of the digital SIFA currency (or to be precise, purchasing power) to be divided between all SIFA participants, who would be, ideally, all of humanity.

Each person would thus receive a share of this future global wealth to use for their own wholesome development. Thus, the SIFA currency would be created for a sustainable, supplementary economy for individual and economic development.

When Kooistra made his calculations with the help of economists of that time, it was estimated that once the cost of setting up the system and some other important general costs would be deducted, there would be the equivalent of US$200 for every women, man and child on the Planet. The present proponents of the Plan have estimated (as a means of illustrating the Plan) that it could be more in the region of $500 per person. Although this might seem very little to some and a fortune to others, all are important as consumers, the more diverse the needs the more diverse the types of production that can take place and the stronger this supplementary economy will be. 

In this second step of creating a supplementary economy we have two groups, each essential to the process and yet different in terms of remuneration:

  1. Consumers (in Kooistra’s Plam all people). These would each get an equal basic income regarless of their incomes in the “old” economy where they reside; and 
  2. Producers. These would also get their basic income and be consumers themselves. They would also be paid for the goods and services they would supply from the basic income of their customers.

The longer the Supplementary Economy exists the more the very poor will have been able to meet their basic needs and acquire training to become more active as producers. These would both be able to contribute to building up the clean water, sanitation, energy and educational infrastructure of their community, meeting the immediate needs of their family and fellow community members and eventually to produce products for other communities. In this way, the types of production and consumption worldwide would gradually expand.

A key point in the supplementary economy is that only sustainable goods and services can be purchased through this system and that all people in all communities are a part of a decision making process as to which goods and services can be seen as sustainable each  year from their supplementary income.

Further Regarding Currencies

Conversion of SIFAs into National Currencies

Inflation and Deflation

All participants (ideally, everyone in the world) receive an equal amount in SIFAs in purchasing power which is spent exclusively through the SIFA Administrative Agency, so that monitoring becomes both very easy and public for all interested parties. Leaks thus become impossible, because the supplementary economy is a closed circuit between extra production and extra consumption, and fraud is unlikely since all are subject to the same rules and the system is open for all to monitor. Moreover, it is constantly overseen by specially trained professionals.

Because there is simultaneous knowledge of both supply and demand and the balances of all people are directly linked to the interest-free prepayment to all producers, there is a breakthrough in economic relations. The SIFA Administrative Agency can create the maximum amount of hard currency possible at that point in time, fully covered from the outset by the extra production, ordered by citizens worldwide through the SIFA Administrative Agency.

Besides this first closed circuit, a second will come into being in the old economy, because all salaries received in SIFAs from the supplementary economy (by development workers, employees of the Administrative Agency and suppliers/contractors/employees) cannot be spent outside of the supplementary economy unless they have been exchanged for a country’s national currency.

In order to pay salaries in national currencies, the SIFA Administrative Agency will have to buy the required amount of national money from each state, thus providing each country with an equivalent balance in SIFAs. SIFAs in the form of digital transfers which are free from inflation are thus received in exchange for money that is subject to inflation, and so the SIFAs will begin to play the role played by gold reserves.

However, nations will be required to spend the SIFAs they gain within the parameters set by the SIFA Administrative Agency. In the poor countries, they will be spent to create a stronger infrastructure; and in the rich countries, for debt payment. Debts of poor countries are, as mentioned above, paid from the sustainable supplementary economy’s general funds.

The dangers of inflation, or a too-great increase in purchasing power in the national economies, are not as great as may be expected, if we remember that almost all those who will spend a salary of SIFAs in the national economy also have a previous income from the old economy, and that the extra purchasing power consists only of their additional income. 

If this is 10%, then only that 10% would become a burden on the national purchasing power, because 90% has already been paid by the SIFA Administrative Agency from the specially created Fund to counteract inflation and deflation, as mentioned above. For example, in the Netherlands, the increase in purchasing power with accompanying danger of inflation would only equal 0.08% of the GNP.

If, because of this, unexpected inflation were to occur in a national economy, then it can be compensated by the reserve fund of $25 billion, mentioned above.

It should be noted that this figure set out in 1989 will have grown significantly when the plan is actually implemented. In all calculations, we are assuming that the SIFA currency has the same value as the U.S. dollar. Once the SIFA has been introduced, however, its value would have to be determined on the basis of the average value of all national currencies.

It Would Be Impossible to Achieve the Same through World Taxes

The SIFAplan would be more effective than using world taxes to reach the same purpose. Organizationally, it would be very complicated and financially impossible to levy any form of world taxes to generate a worldwide development income for all people, administered by the SIFA Administrative Agency. 

In 1989, Nobel Prize winner Jan Tinbergen calculated that the U.S.A. would have to provide 2/3 and the EU 1/2 of their means if every citizen in the world were to receive a reasonable income. 

He quite rightly considered this impossible. 

Rich countries would collapse through a lack of funds. Money would become too expensive, and the poor countries would only be helped in an ad hoc fashion. Soon, there would be a lack of purchasing power.

Great Advantages for Existing Economies

Because the sustainable supplementary economy creates a constant upward pressure on existing economies, there are many advantages. After all, the same producers deliver to both economies.

Because of their extra income from the new economic circuit and the higher demands in terms of quality and environmental friendliness, producers could manufacture better quality products in the original economies. There is a wholesome interaction between all private businesses and those activities performed for the sustainable supplementary economy. This produces profit, spent differently in each economic circuit.

Thus, both economic systems can be transformed, enabling the development of body and mind of the individual citizen. This expansion of this economy will never cease as human creativity is fostered to further develop human ingenuity, while a part of human work is taken over by Artificial Intelligence. 

The supplementary economy synthesises market and planned economic approaches, and the resulting balance benefits all people in every aspect of their existence. Every consumer is encouraged to function as both a national and a global citizen through the use of their supplementary income. 

As a global citizen, they are directly connected to the SIFA Administrative Agency. No national government or organization can take away these human rights. At the same time, the increased individual well-being provides the stability required by governments to carry out their mandate.

The sustainable, supplementary income for all would help achieve the much-needed human rights economy, in which the development of body, mind and spirit are in balance. In this way, we can respond for the first time in history to the calling to produce a more equitable, compassionate and reasonable world community, to which every individual can contribute in their own unique way.

Precedents for the Creation of the Currency

The creation of SIFA currency applies commonly accepted economic practices that are used in many other situations.

Creating currency in anticipation of future sales of goods and services

Since the abolishment of the gold standard, central banks ideally create currency according to the value of goods and services that people within those particular countries expect to sell.

Hard currency is created in anticipation of goods and services that a borrower at a bank can sell in the future. If there seems a high degree of certainty that the borrower’s assessment of sales is correct, i.e. that the sale will take place for the anticipated amount, hard currency is created in anticipation of the sale. In the SIFAplan, the SIFA currency is created to enable the sale against the goods and services that are guaranteed to be sold later that same year.

Creating currency backed by future sales of goods and services can have a margin of error, as the exact amount of sales may not actually take place. Goods and services may, in fact, be sold for more or less than the amount initially assessed. If errors are made, the amount of money in circulation in a country has later to be readjusted to prevent inflation or deflation.

The SIFA is not subject to such miscalculation, as it is ONLY produced for those goods and services which have actually been ordered and can definitely be produced. Any supplementary income credit not spent in the space of a year elapses. People cannot accumulate SIFAs.

The SIFA is a hard currency, more stable than today’s hard currencies, as we shall see below.

Precedents of international currency

After the Second World War, two proposals were put forward for a new global monetary system: one by the U.S.A. and one by the U.K. The U.K. proposed an international currency. Eventually, the U.S.A.’s proposal was adopted, with the creation of the Bretton Woods institutions.

Now the European Union has the Euro, an international currency.

On July 28, 1969, the International Monetary Fund (IMF) officially created an international currency, called “Special Drawing Rights”, formed from contributions from Member States, to be administered by a new facility within the IMF. It operates as a supplement to the existing money reserves of member countries to offset balance of payment deficits in the same manner as gold or reserve currencies. Hence, it is called “paper gold”.1

Special drawing rights (SDRs) are thus conceived to be similar to other currencies, except that they are an international currency.

Since the IMF receives new funds annually to back that year’s activity, SDRs can be backed by anticipated future income. The SIFA currency is similar to SDRs both as an international currency and because of the quality that it is currency created in anticipation of future backing.

It differs from SDRs, because it is backed by actual marketable goods and services and not, as is the case with SDRs, by currency, which is a symbol for marketable goods and services and thus subject to a greater margin of error.

The SIFA currency would be used by people everywhere, not only by governments, whereas SDRs, although planned also for wider use, have been used only by governments.

Problems encountered by SDRs

SDRs are created by agreement. Instead of having the U.S. Dollar as the standard, the interest rates paid on SDRs are the average of the interest rates paid on the currencies involved. Originally the idea was to move toward making SDRs the standard for the international currency.

The value of the SDR is currently based on five currencies: the US Dollar, the Euro, the Chinese Renminbi, the Japanese Yen, and the British Pound Sterling.

Several problems frustrate their use:
  1. Countries’ fear that their currency will lose seniority.

    Countries with major currencies, such as those mentioned above, have a certain amount of leeway of error when they create their value, because other countries are eager to have them. They are considered a measurement for other currencies and to hold their value, whether or not they actually do. These currencies are said to have seniority over other currencies.

    To accept these five currencies as the measurement is just an agreement, which can survive as long as the countries providing them do not err too greatly in estimating their value. Consequently, when one is travelling and one runs out of the specific currency, even merchants will occasionally accept dollars, euros, etc. in payment.

    It is extremely useful for a country’s currency to have seniority over other currencies, since it guarantees its acceptance and allows the government to have a margin of error in calculating its marketable goods and services. They are understandably reluctant to give up seniority.

    Since SDRs, which produce interest according to the average of the five major currencies, are more stable than any single one of them, they would eventually get seniority, which can frustrate the use of the currencies.

    SIFAs, unlike SDRs, would not be in competition with the major currencies because the SIFA is a credit that can only be used in the supplementary economy. The major currencies’ position within the traditional economy would remain undisputed. In this way, the SIFA would not encounter the same opposition, encountered currently by the SDRs.

  2. When SDRs were created, developing countries moved to have proportionally the same share of the SDRs as the “developed” countries. The latter have not agreed. Therefore, there has been a disagreement between these two groups.

    This problem does not exist in the supplementary economy. Here, each person, rich or poor, receives an equal supplementary income and can contribute as he or she sees fit. One does not have to receive the supplementary income, if they do not wish to. One may earn an income as a producer, if one can provide goods and/or services that others wish to purchase, but, again, one does not have to. Those contributing goods and services to the system are paid. No one receives anything at the expense of any other person.

    Unlike the SDRs, no group of people or countries give up part of their wealth to benefit others. There are no losers. The supplementary economy has been created as a system whereby all benefit, including the natural environment. Its implementation would therefore not meet the same opposition encountered by SDRs.

  3. SDRs can only be used by national governments, not by individuals or organizations.