Chris Cook is a former director of the International Petroleum Exchange. He is now a strategic market consultant, entrepreneur and commentator.
He lives in Edinburgh, UK. His homepage is http://www.opencapital.net/ .
He writes in a regular diary at http://www.eurotrib.com/user/ChrisCook/diary .
Additional updates on his work can be found at http://nordicenterprisetrust.wordpress.com/ .
Additional articles are published at http://www.labourlist.org/chris_cook
Presentations on Slideshare: http://www.slideshare.net/ChrisJCook/presentations
Peer to Peer Finance and Capital Partnership frameworks http://www.policyinnovations.org/ideas/innovations/data/000085 http://www.slideshare.net/ChrisJCook/money-30
3 bases for currencies http://nordicenterprisetrust.wordpress.com/2009/04/12/towards-an-economics-of-common-sense/
Reference to kilowatt cards http://www.kilowattcards.com/template/page.cfm?id=92
On fixing the Credit Crunch by way of a Debt/Equity swap of secured debt for Units in a new breed of quasi-REIT 'Rental Pools' which are effectively redeemable in the right to occupy property. The market for distressed debt is a huge market. http://www.youtube.com/watch?v=I5mgnR5lagI
collected form a thread of emails
Some thought provoking and chewy material here. I believe that our current position is that Humpty Dumpty is broken, and cannot be put back together again.
The reason for this is that it doesn't matter how much credit = money is created by credit institutions even when re-capitalised by States - there are simply not enough creditworthy people left. The toxic combination of the mathematics of compound interest on debt, and absolute private property in land has done what it always has done throughout history, and has concentrated wealth in the hands of the few to such an extent that the system has collapsed.
As pointed out, there isn't really any difference between Public and Private - both are sets of legal protocols which connect individuals together through the creation of institutional Organizations which impose themselves "one way" through force of law - (in France) contrats de mandat - upon the largely unwilling people. We either suffer from the legal protocol of the State and central planning, or from a legal overlay of "finance capital" consisting of the Twin Peaks of Debt and Equity - two conflicting claims over the same productive assets.
I believe that there is now emerging another - partnership-based - approach involving consensual "two way" agreements or (in France) "contrats de societe" . Our "Anglo" system is predicated upon imposed contracts - French jurisprudence extends to the consensual agreements with which many societies -eg the Japanese and Islam - are familiar.
I advocate Systemic Fiscal Reform. What I mean by this is the abolition of all imposed taxes on earned income and their replacement with consensual levies on privilege. Also the abolition of means- tested or no benefits, and their replacement with a national Dividend payable by right to all citizens from a National Equity.
Firstly, the privilege of exclusive private use of the Commons of land - I agree wholeheartedly with Henry George's analysis here, and advocate a levy on exclusive rights of use of location (as opposed to money's worth invested in a location...)
Secondly, there is the privilege of exclusive rights of use of the Commons of energy - whether renewable or non-renewable. Here I would add an additional carbon levy to a levy on enclosure of renewable energy.
Thirdly, I advocate a levy on the privilege of limitation of liability. This would be made on the GROSS revenues of any "For Profit" entity whose investors benefit from limiting their liability. In many cases this would also act as a levy on "enclosed" Intellectual Property, and the "Intellectual Capital" of individuals accumulated knowledge and experience.
These mechanisms are all simple, inescapable, and (I would argue) fair at a fundamental level. They apply a tax on unearned "rent" extracted through privilege. In this way we may rebase the tax system in a form to which most people will consent, I think. These taxes and levies then form the base for the direct issue by Treasuries of credit. There is no need for Central Banks or any other banks as intermediaries, and there never has been. But there is a need for banking as a service. ie the management of bilateral creation of credit.
Credit costs nothing to create, but in order for a credit creation and clearing mechanism to work it requires a framework of trust. In fact, the economic value provided by banks IS trust - they provide an implicit guarantee that the borrower's credit is good, and they back this guarantee with a proprietary pool of capital and an interest charge which covers their costs, defaults and (historically) a handsome profit/rent which has been shamelessly and unsustainably maximised.
I believe that the enabling mechanism for a new generation of finance lies in a partnership-based framework or protocol which will enable both direct Peer to Peer credit and direct Peer to Peer investment. The Carnegie Institute recently published this article of mine on the subject
The networked society I envisage has no more "organisations". Instead it will consist of an organic network of consensual framework agreements within which individuals will self organise to agreed purposes.
Property will cease to be an "object" to be transacted, and instead becomes a relationship within which individuals share the fruits of mutual cooperation.
A partnership-based enterprise model is optimal, I believe. Capitalism will be hoist by its own petard, because profits to rentiers are actually INEFFICIENT, and those enterprises who pay them will be outcompeted by cooperative enterprises (whether formerly private or public) who do not,because they operate "Not for Loss" as what Dr Yunus of Grameen Bank calls Social Businesses.
This recent presentation of mine in Bristol went down reasonably well in that respect
In conclusion, I think that we are very close to a decentralized peer to peer market operating system, and that this is capable of spreading virally because the proposition to users is so compelling.
(a) Peer to Peer Credit - mutual risk sharing leading to interest free but not cost free credit used for the circulation of value and the creation of productive assets; (b) Peer to Peer investment - mutual revenue sharing leading to reasonable and secure returns from productive assets in common ownership but with private use.
We are used to thinking that it is a question of "either" Public = State or "Private" = "proprietary to an individual or the particular legal protocol known as the 'For Profit' Corporation".
There is in fact another way of doing it which is for people to agree among themselves - consensually - to the terms of an LLC agreement, or in the UK, to an LLP agreement. If we do this, it really doesn't matter much what the conventional statutory routes are - we may just go ahead and do it.
The outcome is something which is both "open" and "closed" or Public and Private. It is closed because only members may use it, but open, because anyone who consents to the agreement may be a member.
Within such an LLC or LLP there is no profit and loss - merely mutual creation and exchange of value in all its many forms.
These presentations may give you an idea.
Within a partnership framework it is possible for communities to achieve what Tom Greco refers to as Credit Clearing - and this is of course where Ripple comes in as a methodology/tool, through its capability to settle one obligation with another.
The partnership-based "Guarantee Society" (and provisions into a default pool) provides the framework of trust which banks are no longer able to provide, because of the shortage of capital on the one hand and the absence of credit worthy people and projects on the other.
On which note you might find this of interest
The taxation of land rental value can be the basis of a domestic currency based upon issuing Units redeemable against payment of such a tax.
But it's not - as Henry George suggested it is - enough. ie there is IMHO no "Single Tax".
The taxation of the use value of the energy commons can be the basis of a currency redeemable in energy.
And the taxation of limitation of liability essentially enables a a currency redeemable against the use value of intellectual property, and of labour employed by corporations.
In order to create a monetary system, all that is needed is an accounting system; a Unit of measure (or Value Standard); and a framework of trust - which is simply a mutual guarantee agreement between members, backed by provisions into a pool in mutual ownership.
It comes down to definitions at the end of the day, and to protocols.
The principle of taxing economic rent - which is extracted by "For Profit" intermediaries and "owners" and based upon privileged property rights - is something I agree with.
But, while Georgist Taxes are absolutely sensible, and IMHO irrefutably fair and logical, they stand zero chance of implementation within the existing paradigm for the simple reason that Turkeys do not vote for Christmas.
But as we have seen beginning with the music industry, the Internet regards privilege as damage and routes around it.
I observe that the Peer to Peer logic of the Internet is that intermediaries are both unnecessary and inefficient, and the work I have been doing relates to the use of organically networked and consensual (ie Partnership-based and "two way") protocols/agreements between individuals rather than conventional statutory and judge-made protocols imposed "one way" upon an unwilling or complaisant/fooled population.
I can see a path to implementation of such a Peer to Peer Finance system, and as a result of this and other recent conversations, I intend to blog a few thoughts on my new blog
in relation to the Factors of Production, which have for a long time been more about ideology - and justifying the unjustifiable - than an accurate representation of reality.
Public/Private is an artificial "either/or" distinction of absolutes.
What we mean by them is either
(a) "owned by the State" - the State being a set of linked protocols eg constitutions, whether national or local, and a heap of statutes; or
(b) "owned by a legal person" - being either an individual or - more to the point - that sociopathic (in its public "absentee landlord" form,at least) legal protocol known as the "Corporation".
The legal frameworks within which the property rights of ownership and use take place are "one way" contracts imposed either through statute or through judge-made trust law.
I am observing the emergence of new consensual (ie two way) protocols using entities owing their origins to partnership law such as the US LLC and the UK LLP.
These entities may be used not just as organizations but as pure "Open Corporate" frameworks for self organization. An open corporate (an LLC is not technically a corporate in that it has a sell by date, but it will do) need not do anything, own anything, employ anyone or contract with anyone. Instead it may serve as a framework for the various stakeholders to come together to achieve the common purpose set out in the LLP/LLC agreement, whether it is to write a piece of software, or build and manage houses and wind turbines.
I believe that there is an alternative enterprise model to the unsatisfactory absolutes of Copyright/Copyleft and the bastardized hybrids of Creative Commons as currently written.
This is a "Master Partnership" framework agreement whereby the IP is held by a "Custodian", and the User member pays an agreed amount (which may be zero) for the use of the IP, and whatever platform is used to disseminate it.
This amount is shared in agreed proportions between the loose networked cooperative of individuals - whether as individuals or collective "enterprises" in whatever legal form - who operate the platform (which operation includes managing development, and things like dispute resolution, and valuation) - and the cooperative of individuals and enterprises who invest either money, or more likely "money's worth" of IP.
I believe that such a Partnership of Partnerships or Cooperative of Cooperatives is actually optimal. It is emerging because it enables productive assets to be created and operated without paying returns to rentier financiers interested only in making money from money.
As a side comment, this means that conventional shareholder value Capital is simply INEFFICIENT. The Internet will route around it.
Such "Master Partnerships" will be an order of magnitude simpler (this is my experience) because they are consensually arrived at, rather than being adversarial negotiated and therefore prescriptive.
In summary, therefore, I see the spread of networked "Virtual LLC's" and Virtual LLPs as the future, as I said here
Law is Code.
And the requirement IMHO is for a form of legal XML which links together disparate jurisdictions and enterprises in the same way that XML links disparate hardware and software.
Fractional reserve banking achieves the purpose of creating the new DYNAMIC credit = money which is necessary for goods and services to circulate, and to replace the credit continually draining out of the system as it essentially comes to rest and becomes what may be thought of as STATIC credit immobilized within the protocols of financial capital - equity and secured debt - which constitute conflicting legal claims over productive assets.
If all we had were 100% reserve banking then there would be only circulation of existing money, and development could be funded only out of this existing stock. Economies would rapidly come to rest as liquidity drained out of the system.
In a sense that is what is happening now, because there is now - as the Mother of All Bubbles collapses - massively negative net credit creation. Defaults are destroying cosmic amounts of existing static credit, and new credit (quantitative easing of the rich) is being poured into the Black Hole. Our financial system is completely and permanently fucked within the current paradigm.
While there is IMHO no way of putting Humpty Dumpty together again, fortunately, there's no need, because there is no reason why credit creation should not be re-architected rapidly into a new Peer to Peer credit architecture.
In this model credit is created P2P between sellers and buyers within a networked framework of trust (ie Master Partnership agreements I call "Guarantee Societies") . Banks are disinter-mediated, and become service providers managing the bilateral creation of credit, through setting "guarantee limits", managing the accounting system, handling defaults, managing risk etc pursuant to policies set out in the master partnership agreement.
Such a P2P credit system is how the dynamic credit necessary for the circulation of goods and services etc may be created.
Once productive assets such as houses, power stations or the software I am using, have been created, they have a value in use. This value in use may be monetised through what I call "unitisation" - ie the issue of Units redeemable in use value.
The generally acceptable currencies of the future I see as being based upon the commons of land, energy and knowledge, and the use of taxes or levies made by society generally for the exclusive use by individuals of these commons.
Moreover, it is not necessary for an intermediary State to levy these taxes - indeed there is no way that the State ever would make the changes necessary to implement such taxes, thereby abolishing itself - but the general population may do so simply by consensually adopting the networked partnership protocols and software that people like us are already building.
You might be interested in my new blog by the way