Ethical is Optimal Simply does it Chris CookJust Banking Conference 20th April 2012
“21st Century problems cannot besolved with 20th Century solutions”
Money 3.0Market 1.0 – decentralised but disconnected; physical market presence; Money 1.0 was a physical objectMarket 2.0 – centralised but connected; market presence by middlemen; Money 2.0 is a credit objectMarket 3.0 - decentralised but connected; network market presence; Money 3.0 will be a relationship
“The Internet interprets censorship asdamage and routes around it” - John GilmoreDirect connection - Peer to Peer and Peer to AssetNew instruments are needed for people-based (P2P) credit and asset-based (P2A) creditNew generation of consensual agreements are needed as a trust framework for such direct credit creation“Law is Code” - Lessig
Getting to ZeroMaths - Plus One; Minus One; ZeroPhysics - Positive; Negative; NeutralEconomics? Conflicting Absolutes. No ZeroScotland shows the way: Guilty; Not Guilty; Not Proven21st century agreements will be neutral; interactive and consensualEast of Suez - consensus is normal and trust is assumed eg Shariah“US has as many sumo wrestlers as Japan has attorneys”
Financing and FundingFinancing – people-based credit; short term; high riskNeutral framework agreement – Guarantee SocietyFunding – asset-based credit; long term; low riskNeutral framework agreement - Nondominium
Guarantee SocietyMutual guarantee of Peer to Peer credit between buyer and sellerBuyers and sellers cover system costs and make provisions into a pool in common ownershipCredit allocation and management by a service- provider-formerly-known-as-a-bank
OutcomesCommunity owned VISA credit clearing systemNot for Loss operation with no payments to rent- seeking shareholders or fat-cat managersValue stays within the community
NondominiumA smart US lawyer wrote a new co-ownership agreement and called it a CondominiumThe Condo went viral in the USDebt funded Condos are now a US standard, codified with state by state quality controlClassic reality-based, bottom up policy – what works (except for the debt funding!)A Nondominium agreement is a Condo with financing and financing credit on the inside
NondominiumNondominium simply integrates two complementary associative agreementsA Joint agreement between the stakeholders collectivelyA Several agreement between the stakeholders individually
Nondominium - OutcomesNeutral – removes ego and politicsCollaborative - stakeholder interests aligned – no principal/agent problemSocial – shared surplus/ not for loss - relationship- based not transaction-basedSustainable - everyone has an interest in minimising cost of use over time
Stock 1.0 – Sovereign CreditStock – part of a tally stick, used either as a receipt (memorandum tally) or as an IOU/ credit tokenIssued by the Exchequer to creditors at an agreed price in exchange for value received by the sovereignReturnable in payment of taxesBy 1694 some £17m of tally stock was in issue when cost of government was £2m to £3m a yearIn 1694 the (private) Bank of England started to create credit – partly backed by gold - and buy stockThe rest is history: the public credit has been privatised.
Stock 2.0 – Asset-based CreditStock - undated credit returnable in payment for use value of productive assetSold at a discount – eg £1.00 of Rental Stock sold for 80p gives an absolute return of 25%Rate of Return is literally the rate at which Stock may be returned to the issuerRate is not fixed, but depends on the quality and quantity of the flow of value
OutcomesCollaborative – all stakeholder interests alignedCo-operative Advantage – absence of economic rent & compound interest out-competes conventional modelReality-based – may be introduced by consensual agreement with no change in any lawComplementary – not new organisations but agreements between existing organisationsNeutral – agnostic as to legal forms
Applications - LandFinancing – Sustainable Development – energy efficiency and good quality are in everyones interestsFunding – Resolution of unsustainable housing debt – Release of a pool of development credit – Affordable Housing – absence of debt
Applications - EnergyRenewables - MegaWatts – Energy loans – funding through selling future energy productionEnergy Savings – NegaWatts and NegaBarrels – Energy loans repaid from energy savings – A Green Deal that will actually work !
Ethical is OptimalGuarantee Society and Nondominium share risk and reward equitablyBoth are immediately recognised by Muslims as Shariah compliantPerhaps Ethical is in fact Optimal?