Financial Sovereignty

How to make an economy efficient (cheap), cost of business and chess

One way to make an economy competitive is to make its main "ingredients" cheap.

Low Taxes
Low taxes reduce the cost of produced items and services.

Cheap Labour
Cheap labour reduces the cost of produced items and services, allow s more employment of labour intensive industries.

Cheap Energy
Cheap energy reduces cost of heavy industry, transport and logistics.

Cheap agricultural resources
Cheap agricultural resources reduce the cost of food for people, so ir creates demand for different goods and services.

Cheap mineral resources
Cheap mineral resources reduce the cost of industrial and chemical goods.

Cheap Plastics
Cheap plastics reduces the cost of goods in general, especially consumer goods.


In global competition large companies always look for the most favorable country to run business operations. Usually it's about cheap labour and low taxes. But a country could also be competitive if it reduced the cost of the main "ingredients". Too often base industries like utilities, mining, oil & gas are owned by private companies which try to maximize profits. But by maximizing their profit, they often make whole industries uncompetitive. In some cases, cap the cost of "ingredients" to cost price, could allow many other industries to flourish.
In many cases such a decision would make sense, strategically speaking: a bit like in chess, where it is encouraged to sacrifice low value pieces short term in order to win the game longterm.
Russia did this quite cleverly, where profits from sale of oil is capped at 42 USD/barrel, all excess is going to the sovereign National Wealth Fund which invests in more strategic projects for longterm economic growth.

How to finance a sovereign economy


A while ago I wrote about sovereign bonds
http://www.sovecomo.ru/post/2021/04/24/Financing-the-sovereign-economy-with-sovereign-government-bonds

Lately I have been looking at various informal credit systems.

I believe that a mix of charity donations, crowd funding, P2P micro credit and angel venture funding could be interesting:

-Charity donations could be directed to public institutions like museums, libraries, schools or charitable organizations
-Crowd funding could be best for support of interesting inventions and ideas
-P2P micro credit is best for existing small businesses
-Angel funding is for more start-ups with high technical potential.

A system containing all of these options could broker both sides and direct money where it is best needed. Donors of any type could propose/bid for each venture and receivers could accept a mix of any type of offer.

Financing the sovereign economy with sovereign government bonds


I believe that one the best instruments for financing a sovereign economy are sovereign government bonds. They could help provide additional funding for infrastructure or some sectors of the sovereign economy.

Special buckets could be created for agriculture, e.g. storage, processing, seeds production, veterinary medicine and logistics
Or electronics, perhaps even for my proposed MCST Elbrus cloud system
Or Pharma to create additional factories and research centres

They should be of different time to maturity:

3,6,12 months for short-term bonds
This would be very good for people who have saved up a little money, for example, to buy a new car, a home, but want to wait a little time to make a decision. And also for the local currency itself, as people are afraid of fluctuations and buy bonds in local currencies only for a short time to get additional interest.

24,36,48,60 months for medium-term bonds
These bonds can be issued in more "safe" hard currencies, such as the euro, US dollar for medium-term investments.

Bonds should start at 1.000 USD/EUR (maybe even less), so that normal people can get a little extra interest on modest amounts.

I believe that bonds should have a low maximum limit of 100.000 USD/EUR to allow individuals to reap interest, rather than large financial institutions.
Accrued interest should also not be taxed.

It was also possible to issue perpetual bonds, but with reservations.
Mini-bonds with an ultra-low face value, as was proposed in Italy a few years ago, may also be interesting to evaluate.

I have too little information about this and perpetual bonds, so I would be happy to hear from a finance specialist.

State Capitalism - Investment strategies


Many still define state capitalism as socialism or communism.
What is it?
We can differentiate between different types:

Sovereign wealth funds
These are funds, usually accumulated by oil rich nations in Middle East, Norway,Russia.
In most cases these funds just want to optimize returns, ie. make the most efficient investments anywhere in globe, thus operate just like an investor.
In some cases, they are mixed, these funds also invest inwards, i.e. they finance business in their home country
In Russia, RDIF invests and co-invests mainly inwards. The most glaring example is the Sputnik V vaccine for COVID-19.

State owned companies
State owned companies were/are historically tied to energy, ie. Oil and utilities. Probably the fact that these industries are critical. While in West these we mostly or partly privatized, in the rest of the world this is the standard.
In developed countries, there are few state owned companies, while in emerging countries it is almost a norm.
As a paradox, the biggest growth seems to have happened, while the state had a larger ownership of companies, both in Europe as in Asia.

The State itself
A government can influence business with economic policies, taxed, regulation, permits. In fully deregulated capitalist countries the government does not pose many obstacles to business, and supports the largest companies. Usually the government has to step in if critical business have large losses or face bankruptcy.
In state capitalism, the state heavily regulates some sectors of the economy, own and/or controls large business, and effectively has the monopoly in strategic industries.

Investment Models
State capitalism allows a country to move a huge amount of resources to implement a plan. The State can move state owned companies, sovereign funds and internal funds to support an industry. This combination of finance, manpower and technological skills make it easier to complete large scale projects.
Let's imagine an infrastructure upgrade in rail roads: State provides financing, sovereign fund attracts foreign co-investment, state companies provide the technology (fast trains, management systems), state owned construction firms manage the project.
State capitalism investment strategies are generally more focused on long term improvement of the general economy though infrastructure, providing employment, favoring internal development of industrial and technological goods and solution, and spending the money within the country.
Comparatively, unbundled capitalism is not about rising a tide to lift all boats.