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Social contracts clearing union

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  • 1. The Community is the CurrencyA Guarantee Society ApproachChris CookBristol 20th June 2013
  • 2. “21stCentury problems cannot be solvedwith 20thCentury solutions”
  • 3. Market ParadigmsMarket 1.0 – decentralised, disconnected, physicalMarket 2.0 – centralised, connected, intermediated- Debt (Banks) and Equity (Joint Stock Company)- October 2008 – the Market 2.0 paradigm brokeHow do we achieve a resilient Market 3.0 ?
  • 4. Introduction - ResilienceResilience - the enduring power of a body or bodies fortransformation, renewal and recovery through the flux ofinteractions and flow of eventsResource Resilience – Natural GridFinancial Resilience – Open Capital
  • 5. Financial Resilience – Open CapitalPrepay – credit returnable in payment for valueNondominium- People-based (P2P) Credit – Guarantee Society- Asset-based Credit – Capital Partnership
  • 6. Guarantee Society - Seller accepts Buyers IOUSeller BuyerIOUValue
  • 7. IOU is guaranteed by Sellers & Buyers mutuallySeller BuyerIOUValuePoolGuaranteeGuarantee
  • 8. Seller & Buyer pay guarantee charge into Pool heldby CustodianSeller BuyerIOUValuePool GuaranteeGuaranteeFee Fee
  • 9. 1/ Buyer settles credit in £ or £s worth eg energy-based or land-based currencySeller BuyerValuePool GuaranteeGuaranteeFee Fee
  • 10. 2/System identifies a chain of IOUs A<B<C<D<E<Aand nets them outSeller A Buyer BPoolGuaranteeGuaranteeFee FeeBuyer CBuyer DBuyer EIOUIOUIOU IOUIOU
  • 11. 3/ Buyer defaults: system pays sellers and collectsfrom buyer if possibleSeller A BuyerDefaultPoolCollectsPaysSeller BDefaultPays
  • 12. Service provider sets guarantee limits, handlesdefaults & manages systemSeller BuyerIOUValuePool GuaranteeGuaranteeFee FeeManagerFeeService
  • 13. Clearing UnionGuarantee Society is the social contract within whichSellers accept Buyers credit and settle balancesSellers and Buyers pay a guarantee charge and sharecosts of operation and defaultsManager allocates guarantee limits, manages platform,ensures transparency, handles defaults
  • 14. Clearing UnionProducer ConsumerPool GuaranteeGuaranteeFee FeeManagerFeeService
  • 15. Itll Never WorkFor 140 years, Protection & Indemnity (P&I) Clubs havemutually guaranteed risks Lloyds wont coverFor 125 years P& I Clubs have been managed byThomas Miller
  • 16. Market 3.0 – Banking......but not Banks- networked, decentralised and dis-intermediated marketpresence = network presence- banking as value-adding service......not banks asvalue-extracting middlemen- theyll never do it? They already are – because risk iswith end users & so capital required is minimal
  • 17. 21stCentury problems cannot be solved with 20thcentury solutions.........
  • 18. …....21stcentury solutions pre-date modern finance

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