Invisible Reserves Theory

Abstract

Liquidity may be a serious challenge to growing nations especially in the absence of foreign aid or other necessary assistance like access to borrowing. This paper introduces the Invisible Reserves Theory which states that, “A country that is locked in a depression during the absence of effective aid and credit lines, can pull itself out if it considers its future capacity, by creating reserves based on future productivity.” The theory was designed due to its suitability under the Global Economic Crisis. The paper demonstrate the mathematical derivation of the theory. The advantages of the theory are well listed in the paper which include elimination of disadvantages of barter, low/no interest attached, no conditionality attached, facilitation of intra-trade, promotes oneness in the economy, it’s a home based solution to economic crisis and have spillover effects to the next generation. Important to note is that if not interrupted by politics, the IRs will induced high pace of development in the economy.

Keywords: Invisible Reserves Theory, Aid, Debt, Borrowing, Foreign Loans, Depression, Developing nations, Liquidity, Economic Crisis, Zimbabwe

JEL Classification: A10, A20, C50, C90, E42, E52, E58, E61, G20, G28, N17, N37, O11, O23, O55