Money, Credit & Investment

A Partnership Approach

Chris Cook
Partnerships Consulting LLP
 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”
 What is Value?
• Value can be defined only in relative terms
• Value is the “Relativity of Desire”
• Value is “Money’s 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
 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
 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”
 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
 Trusts
– Common Law basis– judge made
– Examples
• Canadian Income/ Royalty Trusts
• Macquarie Bank business model
– Issues
• Risk Aversion
• Management
• Taxation
• Legal complexity and cost
 Limited Liability Partnerships
• Q. When is a partnership not a partnership?
• A. When it’s a UK Limited Liability
Partnership (“LLP”)
• Q. What is it if it’s not a partnership?
• A. A corporate body: with limited liability:
and………er, that’s it!
• Not to be confused with a US LLP
• Nearest relation US LLC
 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
 The “Capital Partnership”
• “Capital User” Member
• “Capital Provider” Investor Member
• Jointly acquire a productive asset
 Return on Capital
• “Capital Rental”
• User pays Investor a revenue share in
Money (or “Money’s Worth”) for as long as
Capital is used
• Rental paid before due date is Investment
• Outcome “Co-ownership”
 Return of Capital
• Capital may be returned over time in the
form of output (eg energy)
• Capital Provider/ Investor purchases
production forward at today’s price
• Capital User gets interest-free loan
Community Partnership
Community

Capital Rental

LLP Trustee
Ownership

% %

Investors Managers
 Community Partnership
• Trustee Member
• Investor Member
• Developer/ Manager Member
• Occupier Member
 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”
 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
 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
 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 today’s price for 25 years
– allocates 10% of production to Developer/Operator
– receives Balance of 50% as energy dividend
Investor “Co-owners”
– buy energy at today’s price valid 20 years: beats gold!
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)
 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
 Guarantee Society

Buyers Subscription/
Service Charge

$
$
Provision
Trading and
Pool $ Manager
Clearing in $ Default Rebate
and $’s worth
$
Repayment
$
Subscription/
Service Charge
Sellers
 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
 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
 Conclusion
• Community Assets give rise to streams of Debt-
free “Money’s Worth” available for Exchange
• Individuals’ Time constitutes “Money’s Worth”
available for Exchange
• Money’s 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.
 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”