Well, I'm off to Iran on Friday, to make a presentation at a major oil conference in Teheran in relation to the concept of a "PetroTrust". The idea is to enable a new form of "asset-based" financing based upon the "unitisation" of energy, initially in carbon form, through both a new "enterprise model" or legal and financial framework, and a new, simple, generation of financial products within the framework.

My paper and presentation should be available on my site

Open Capital

early next week, for those interested in such things.

By way of preparation I wrote an article which will be published in two Iranian newspapers on Saturday, I understand, and "Asia Times" have been kind enough to publish it today, despite the fact it directly addresses Iran

A New Dawn for Iran

After the conference I have quite a few meetings already lined up, including ministers, leading parliamentarians, financial services practitioners, and - perhaps the one I most looking forward to, believe it or not, a meeting with clerics in the Holy City of Qom, to discuss the values underpinning financial markets and products.

Interesting times, indeed....

Beyond Peak Credit - a New Dawn for Iran?

I have been working for some seven years, with a background in global financial services at the highest level, to assist Iran in developing a coherent financial system fit for the 21st Century.

Throughout this sometimes painful process I have made clear that the Western "market economy" is fundamentally unsustainable and that its collapse would occur sooner rather than later. Unfortunately, those decision-makers in Iran who received my advice took the mistaken - but conventional - view that the Western "Twin Peaks" financial market model based upon "Debt" (credit created as money by credit institutions) and "Equity" (in Corporations) was both sustainable and even desirable.

But, as I have been saying throughout, both privately and in articles published globally, this model never was sustainable. Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth's resources - particularly carbon-based energy.

The Problem - "Peak Credit"

The dollar-based global financial system is continuing a slow, and irreversible, collapse from the point - I call it "Peak Credit" - in August 2007 when the unsustainable US property price "bubble" finally burst.

The problem is not one of liquidity - ie the absence of money - Central Banks can print as much of that as necessary. The problem is a terminal shortage of capital or Equity in the global banking system - a solvency problem. The US government was previously able to resolve such a problem - as they did in the 1930's - by deploying unused domestic resources.

The US has brought forward, through its catastrophic waste of resources in Iraq, its "Suez Moment". This is the realisation forced upon Britain by the US in 1956 that economic realities require an End to Empire. The US cannot resolve the insolvency of the Dollar-based global financial system without the assistance of their international creditors, and this requires a new global settlement - a "Bretton Woods II".

It is ironic that Iran has been protected from being infected by the "Anglo Disease" by the very sanctions which were aimed at damaging her.

What is the Alternative?

We must recognise the distinction between "Money" and "Money's Worth" and ensure that the financial system reflects this.

Over 70% of Dollars created are in fact based upon the value of land use - and came into existence as loans secured by a legal claim or "mortgage" over land. Most of the rest of the Dollars are based upon the value of carbon-based energy (ie oil) much of which originated in Iran.

Firstly, in relation to energy, I advocate the replacement of the literally worthless (because "deficit-based") Dollar created by the US Federal Reserve Bank with an "asset-based" "Energy Dollar" or "Carbon Dollar" value unit based upon the intrinsic energy value of carbon-based fuels.

This currency would be created by "Unitising" energy as "Units" redeemable against energy within the "PetroTrust" framework I am presenting in Teheran at the important International Oil Refining Conference on 11th/12th October. Such Units would then circulate globally, subject to mutual guarantees, within the framework of an "International Clearing Union" similar to that proposed by the great economist John Maynard Keynes at the first Bretton Woods conference in 1944.

Secondly, in relation to the value of land I propose a new "Co-ownership" framework for direct investment - "Unitisation" - in a new type of "Real Estate Investment Trust" ("REIT"). This would replace the conventional financing of land and buildings through secured "mortgage" lending which invariably gives rise to bubbles in land prices.

Such "Capital Partnerships" between Investor and User of Investment are in fact already emerging in the UK and will be immediately recognised by anyone who is familiar with the revenue and production sharing agreements which have been at the heart of Iranian and Middle Eastern commerce for literally thousands of years.

A National Equity?

The alternative to an unsustainable "Deficit-based" system can only be "Asset-based": new forms of "Equity" -beyond the "Corporation" - to replace unsustainable secured Debt. Existing national accounting - based upon a "National Debt" - is fundamentally flawed but is unquestioned, and until recently, unquestionable.

I believe that Iran could be the first to evolve a "National Equity" to replace much of her - conventional "National Debt".

The means to do so is simply to use new alternatives to the legal form Iranians - like everyone else - regard as a fixed constant - the "Limited Company" or Corporation. Once it is realised that alternatives to the Corporation are not only possible, but are emerging because they actually work better, then everything else will fall into place.

I am pointing out that Iran does not need to sell ownership and control of her natural resources to multinationals when she can simply "Unitise" and "sell forward" part of her production to investors, receiving interest-free finance in return.

A New Dawn

The resources of Iran in terms of energy, whether carbon-based or the energy of her immensely talented and young population, are phenomenal. I believe that it is possible for the Iranian people - with wise leadership, which is not lacking - to harness these energies and to "self organise" within agreed frameworks to meet the global challenges we face.

It goes without saying that Iran cannot address these challenges alone. But I believe that the simple, but radical partnership mechanisms now emerging will not only allow Iran to transcend sterile arguments and competition, but to do so in a way that integrates her eternal values with an optimal economic model which will cure the "Anglo Disease".

Finally, to those in Iran who advocate reform, I have this advice: the last thing Iran needs is to reform itself to achieve a "Western" financial market model which has demonstrably failed. Indeed, Iran is fortunate that circumstances have prevented her from going down this road.

Instead, I believe that Iran should examine - from first principles - how a market economy might operate collaboratively to develop Iran's productive economy, rather than being operated as a casino for the benefit of financiers at the expense of the productive economy.

I look forward to working with my Iranian friends to achieve an economy fit for the 21st Century

And a hat tip to Jerome, whose "Anglo Disease" receives an honourable mention....