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  • 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 “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
  • 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 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
  • 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 “Money’s 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 today’s 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 TurbineCost £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 InvestorsCommunity “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 dividendInvestor “Co-owners” – buy energy at today’s 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 $ $ ProvisionTrading and Pool $ ManagerClearing in $ Default Rebateand $’s worth $ 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 “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.
  • 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”