Money, Credit

1

• Money, Credit Investment
• A Partnership Approach
• Chris Cook
• Partnerships Consulting LLP

2
What is Money?

• Money Barter Network Credit Value Unit
• Barter Exchange of Value
• Credit Time to Pay allows Split Barter
• Transaction 1 (now) Buyer receives Value
  receiving Credit
• Transaction 2 (later) Buyer gives Value settles
  Credit
• Transactions require a Value Unit

3
What is Value?

• Value can be defined only in relative terms
• Value is the Relativity of Desire
• Value is Moneys Worth
• Value may be Static or Dynamic
• Capital is Static Value
• Money is Dynamic Value, existing only in the
  instant of exchange
• Economics is the Physics of Value

4
Creating Value

• Assets or Property produce a stream of Value
  available for Exchange eg land, power plant,
  intellectual property
• Individuals time stream of Value as labour or
  services
• Credit is not Value but a claim over Value
• Asset-based Finance is Investment
• Deficit-based Finance is Credit/Debt

5
Investment - Asset-Based Finance

• Ownership through Property in assets and their
  revenue streams
• Legal wrapper around assets and revenues
• Limited Liability Company
• Trust
• Limited Liability Partnership -Open Corporate

6
Companies

• Statutory basis Companies Acts
• Types
• Limited by Guarantee - Not-For-Profit
• Limited by Shares For Profit
• Private
• Public
• GM eg IPS, CIC
• Issues
• Conflicts shareholder value and CSR
• Management the Principal/Agency problem

7
Trusts

• Common Law basis judge made
• Examples
• Canadian Income/ Royalty Trusts
• Macquarie Bank business model
• Issues
• Risk Aversion
• Management
• Taxation
• Legal complexity and cost

8
Limited Liability Partnerships

• Q. When is a partnership not a partnership?
• A. When its a UK Limited Liability Partnership
  (LLP)
• Q. What is it if its not a partnership?
• A. A corporate body with limited liability
  ander, thats it!
• Not to be confused with a US LLP
• Nearest relation US LLC

9
Why an Open Corporate?

• Open to any stakeholder to be a Member, as long
  as they subscribe to the Member Agreement
• A legal wrapper like a trust, but without
  the drawbacks - for any assets or revenues
  anywhere in the world
• Tax transparent

10
The Capital Partnership

• Capital User Member
• Capital Provider Investor Member
• Jointly acquire a productive asset

11
Return on Capital

• Capital Rental
• User pays Investor a revenue share in Money (or
  Moneys Worth) for as long as Capital is used
• Rental paid before due date is Investment
• Outcome Co-ownership

12
Return of Capital

• Capital may be returned over time in the form of
  output (eg energy)
• Capital Provider/ Investor purchases production
  forward at todays price
• Capital User gets interest-free loan

13
Community Partnership
Community
Capital Rental
LLP
Trustee
Ownership


Investors
Managers
14
Community Partnership

• Trustee Member
• Investor Member
• Developer/ Manager Member
• Occupier Member

15
Community Land Partnership (CLP)

• Land freehold held in trust like a Community
  Land Trust
• But no lease, no tenancy and no borrowing to
  develop and maintain property
• Co-ownership between Occupier and Investor

16
CLP Example - 4m Investment

• Community asset - 200k inflation-linked rental
• Capital Repayment
• 4m Capital cost, repaid over 50 years
• 80k initial Capital repayment 40 of revenues
• so of 40 revenues (instead of 80k) repaid each
  year
• Capital Rental
• 2 initially 80k or 40 of Revenues
• Reduces with Capital after 25 years 20 of
  revenues
• Community retains balance of 20 (increasing)
• If Community has a bad year so do Investors

17
Community Energy Partnership (CEP)

• Asset held in trust
• Investors pay now for future energy production
• Developer/Operator commits no capital and shares
  production, thereby aligning interests
• Community receives interest-free loan from
  Investors and balance of energy production

18
CEP 1 MegaWatt Wind Turbine

• Cost 1m 20k Mw/hrs at 50.00 Mw/hr
• 2,500 Mw/hr per year 50k Mw/hrs over 20 years
• ie 40 of production sold to Investors
• Community Co-owner
• sells 40 of production at todays price for 25
  years
• allocates 10 of production to Developer/Operator
• receives Balance of 50 as energy dividend
• Investor Co-owners
• buy energy at todays price valid 20 years beats
  gold!

19
Credit - Deficit-based Finance

• Interest-bearing (from Credit Institutions)
• Asset-backed/ Secured by a claim on assets
  (mortgage or charge)
• unsecured
• Non interest-bearing (Trade Credit from
  suppliers or staff)

20
Mutual Credit the Guarantee Society or
Clearing Union

• Common Bond -geographic or functional
• Sellers
• extend trade credit subject to a Guarantee
• Buyers
• have Guarantee Limit
• pay agreed provision into Default Fund
• Service Provider
• operates network and sets guarantee limits
• receives subscription/service charge from all
  members

21
Guarantee Society
Buyers
Subscription/ Service Charge


Manager
Pool
Provision

Trading and Clearing in and s worth
Default Rebate

Repayment

Subscription/ Service Charge
Sellers
22
How it Works

• A sells item to B for 1000 - 60 days credit
• B pays 1 per month provision into Pool
• B pays only 500 on due date
• Alternatives
• A gives more time to pay
• A accepts barter payment of 500 worth
• A receives 500 from Pool and either
• Pool gives extension to B, collecting 500 over
  agreed period
• B pays Debt to Society in hours at agreed rate
  or
• Pool writes debt off
• Combination of the above

23
The Community Pool

• Pool is not invested in bank deposits
• Pool invests in future revenues of community
  owned assets eg future property rentals and/or
  energy production
• Dividend from pool to community members unable to
  pay, in fuel poverty etc etc

24
Conclusion

• Community Assets give rise to streams of
  Debt-free Moneys Worth available for Exchange
• Individuals Time constitutes Moneys Worth
  available for Exchange
• Moneys Worth circulates on a Barter Network
• A mutual guarantee results in a Clearing Union
  where Time to Pay is interest-free but with
  shared costs and shared defaults.

25
Consequences

• Money has no cost when issued
• Public does not need to borrow to invest
• A National Equity as well as a National Debt
• Community Dividends from Commons assets in
  Community Ownership
• A Society consisting of a Partnership of
  Partnerships ie neither Hierarchy nor Anarchy but
  Synarchy