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

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 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 pricefor 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!

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 $ $ Provision Pool Manager $ 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 “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”