At the broad level, the financial system moves the economy’s scarce resources from those who need them to those who have them. It strips away the needs of people who live in our society and redistributes them to those who have money.
This phenomenon is known as income redistribution and has been a major force behind political evolution over the past tens of thousands of years.
In recent history, income redistribution was a powerful tool for creating wealth and promoting social mobility. During late-stage capitalism, where job security and regular pay weren’t readily available, income redistribution became even more necessary.
Today, with wage growth limited and job security nonexistent, Income Redistribution has become even more necessary than ever. People are forced into debts they can’t repay to buy things that make them feel valued as human beings.
Saver to saver
Just as our bodies require energy to function, our economies require energy to operate. Statues and buildings must have power to function.
Most importantly, money is how you buy things with confidence in today’s economy. If you do not have money, you cannot buy things!
That energy cost makes a big difference in how fast businesses operate and in how quickly they expand. With less money flowing into an economy, that can slow down expansion.
How much money is flowing into an economy also affects what kinds of people are getting hired and what types of jobs are available. As fewer people are spending their money in an economy with less activity, it reduces the overall well-being of that country or region.
This can have a negative effect on health care costs, expanded insurance coverage, and better quality of services because more people are being employed.
Consumer to saver
As we settle into the age of digital technology, we’re beginning to see how it impacts our daily lives. We’re becoming more connected through apps, notifications, and overall better quality of life benefits.
But with all the new tech tools we have at our disposal, there’s also a new way people save money. In fact, many people now don’t even use a savings account at all! They just invest their money with different companies and give them access to it via an app.
This new way of saving has confused most people, because it does not use a traditional bank account or insurance policies. It just gives people access to their own money without having to put anything into it.
This new way of saving is called non-traditional savings, or consumer to saver in terminology. It has become one of the most prevalent ways people save today.
Producer to consumer
As noted earlier, the economy depends on the movement of resources from producer to consumer. The more energy and resources are in circulation, the more money is made!
However, as we saw in previous articles, there are limits to how much energy and resources we can consume. This is due to our limited resource supply.
We cannot permanently purchase more energy or goods than we currently have access to. Thus, when money is consumed in buying goods and services, it goes into a flow state where new goods and services are purchased as they become available.
This is called an exponential curve- expansionary or producer oriented economic system. An exponentionary system moves resources from one entity to another based on needs and incentives. This system moves forward with little or no sitting back and planning for future needs.
Investment company to consumer
As the internet has revolutionized commerce and communication, it has also changed the relationship between business and consumer. Businesses have a hard time figuring out how to effectively market themselves to consumers because of how they are categorized.
Using social media is easy, as consumers are typically followers and critics of businesses. By using free marketing tools like Facebook ads or Twitter promotions, companies can reach a large audience.
By being able to directly respond to consumers on the internet, businesses can determine if they want to invest in their company or not. By being able to see what people say about their company, people with negative attitudes can be dissuaded from investing in them.
Being able to respond to people online will be an important part of becoming a consumer-focused investment company.
Investment company to investor
As the financial system continues to shift towards investment companies and investors, the economy will move scarce resources from productive to non-productive uses.
Investment companies advertise their products as something you can depend on, but they rarely hold their clients responsible for spending their money. They are paid by the investor to guide them in investing their money.
Individuals who run investments at the company level typically do not have a strong understanding of what they are letting themselves in for. The people running the investments may not understand that people who use the product may end up with a different kind of portfolio than they had anticipated.
Some investors have found that they are being swindled by individuals working for the company due to this lack of supervision. It is apparent that these individuals do not take enough care in monitoring and overseeing their clients, which is causing them to exceed expectations.
Government treasury department to consumer
The emergence of a cash-only society is a direct response to the economic system that exists today.
Currently, the economy is dominated by a barter system in which people trade goods and services for money or other goods and services without having to use legal tender. This is called unrestricted exchange and has been the basis of human civilization for thousands of years.
However, as money continues to grow in size and value, restrictions are placed on what people can and cannot trade with it. For example, while $10 might be enough money to buy one item, you would have to have $10,000 worth of items exchanged for one bill.
This changes how people think about trading and how much they are willing to pay in an unrestricted exchange situation. In an unrestricted exchange situation, more does not necessarily mean better as you cannot always count the quality of items traded. A restricted exchange situation forces individuals and groups to use legal tender so that someone out there can count themselves as richly rewarded.
Government treasury department to investor
Over the past few decades, governments around the world have established a system for managing public funds. This system, which we refer to as government finance system (GFS), has evolved over time to meet current needs and to ensure future prosperity.
In essence, the GFS provides investors with a way to buy shares in companies through publicly traded stocks and investment funds. It also allows firms to raise capital from external sources such as banks, foundations, and non-governmental organizations.
The GFS also plays a crucial role in moving scarce resources from one person or entity to another. For example, when firms need money but cannot get it from either banks or non-government organizations (NGOs), they typically seek funding from each other.
This is known as banking and NGO cooperation in fundraising.
Central bank to commercial bank
With the introduction of cryptocurrencies, new pathways into the financial system have been created. Thanks to new ways to transfer money, large corporations can now operate as central banks.
By offering users a legal way to transfer funds, they can issue paper notes and coins and then use them in an automated fashion as a form of payment. This has many uses including payments at retailers and funding new projects!
The new way of doing banking has many advantages over the old way. For example, users now have more choices about where they receive their credit cards and loans and don’t have to rely on one company to provide all of these services.
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