The introduction of a real financial instrument inherently begins the development of a real monetary system. We begin to define financial instruments in real (or constant) dollars and real rates of interest (after deducting the rate of inflation). While this appears to be a minor procedure, we have created an instrument that simply does not fit into our nominal monetary system. We soon discovered that there were virtually no real financial products and services in the marketplace, and those that do exist are having certain problems.
We wanted to create mortgages (Real Mortgages™), that were based upon real terms. We soon learned that we cannot write just one Real Mortgage™, for no investor would buy it. Then we learned that we had to securitize the Real Mortgages™, so that we could obtain institutional-quality credit ratings. To obtain these credit ratings, we learned how to resolve the credit-related problems associated with Real Mortgages™. This enabled us to obtain a Preliminary Credit Rating Letter from a major credit rating company.
Then we discovered that we had market-related problems, which impeded the acceptance of the Real Mortgage-Backed Securities™ (RMBS). In particular, real financial instruments factored out the inflationary premium, which created a negative interest-rate-anomaly. Institutional investors look for positive interest-rate-anomalies, assuming an equivalent level of risk. So, who would buy our RMBS? Then, our real fixed-rate mortgage was priced out of the market, by the high real yield on the Treasury Inflation Protection Securities (TIPS); so we created a real variable-rate mortgage. Then, the Treasury yield curve went flat, and later inverted; which priced our real variable-rate mortgage out of the market.
Still learning, we discovered that real financial instruments, such as the TIPS; were inherently illiquid; when offered in a nominal monetary marketplace. So, we learned how to bring liquidity to real financial instruments. Slowly, we resolved the market-related problems; and discovered that the solutions applied not only to RMBS and TIPS, but to all forms of real financial instruments. Hence, we filed a patent on the software processes required for this purpose. In preparing the patent application; we began to realize, that we had the technology to create the foundation for a real monetary system. The real monetary system would resolve the problems of integrating real financial instruments into our nominal monetary system. Inasmuch as the monetary system is the circulatory system of the marketplace, we realized that we had taken the next logical step beyond enterprise software to create marketplace software.
Finally, we learned that if you want to offer real financial instruments successfully in the private sector, then you must initiate a real monetary system. We had heard this before, but now we take it seriously. So, we initiated a real monetary system, by issuing a private currency. The private currency will allow us to create a liquid market for the TIPS. The resulting fall in the real yield on the TIPS, will make it possible for us to offer Real Mortgages™. The liquid TIPS, and the resulting RMBS will provide the assets to back the private currency; thereby creating a market for the liquid RMBS and TIPS.
In summation: we can't originate one mortgage, securitize one pool of mortgages; or even, create one liquid mortgage market alone. First, we must create a liquid market for the government's real bonds (or TIPS), which cannot be achieved without initiating a real monetary system. This in turn requires the issuance of a private currency. Along the way, we must create sophisticated software, that can integrate our current nominal monetary system with the coming real monetary system. Then we must recreate the current pantheon of financial products and services in real terms, convince the regulators of our good intentions and try to find investors that can begin to understand what we are doing.
Our final discovery was the need to create a real financial industry. We had to break down our needs for various real financial products and services into a number of separate enterprises; which could be commenced in a sequential effort. Each successful company will then create the demand for the products and/or services of the next company; until we have created a real financial industry. Virtualmoney, Inc. will be the first to offer a viable product, and related services. Other companies will logically following in their turn.
The Affiliates are the companies we must develop to create the real financial industry, which we need to initiate the real monetary system. This will allow us to do Real Mortgages™. To learn more about our Affiliates, visit our Web site at: www. RealMortgage.com.
