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

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

What is Value? Value can be defined only in relative terms Value is the Relativity of Desire Value is Moneys 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

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

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

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

Trusts –Common Law basis– judge made –Examples Canadian Income/ Royalty Trusts Macquarie Bank business model –Issues Risk Aversion Management Taxation Legal complexity and cost

Limited Liability Partnerships Q. When is a partnership not a partnership? A. When its a UK Limited Liability Partnership (LLP) Q. What is it if its not a partnership? A. A corporate body: with limited liability: and………er, thats it! Not to be confused with a US LLP Nearest relation US LLC

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

The Capital Partnership Capital User Member Capital Provider Investor Member Jointly acquire a productive asset

Return on Capital Capital Rental User pays Investor a revenue share in Money (or Moneys Worth) for as long as Capital is used Rental paid before due date is Investment Outcome Co-ownership

Return of Capital Capital may be returned over time in the form of output (eg energy) Capital Provider/ Investor purchases production forward at todays price Capital User gets interest-free loan

Community Partnership LLP Investors Community Capital Rental Managers % Trustee Ownership

Community Partnership Trustee Member Investor Member Developer/ Manager Member Occupier Member

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 andInvestor

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

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

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 todays price for 25 years –allocates 10% of production to Developer/Operator –receives Balance of 50% as energy dividend Investor Co-owners –buy energy at todays price valid 20 years: beats gold!

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)

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

Guarantee Society Sellers Buyers Subscription/ Service Charge Manager $ $ Pool Trading and Clearing in $ and $s worth $ Provision Subscription/ Service Charge $ Default Rebate Repayment $

How it Works A sells item to B for $ 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

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

Conclusion Community Assets give rise to streams of Debt- free Moneys Worth available for Exchange Individuals Time constitutes Moneys Worth available for Exchange Moneys 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.

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 butSynarchy