Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
I joined ET after that discussion, but you are absolutely spot on.

No disrespect to Jerome, but for an environment conscious Banker, deficit-based money is the Elephant in the Room.

It's why I am spreading the word on:
(a) "asset-based" alternatives to secured debt, involving revenue-sharing through "Co-ownership"; and
(b) mutual guarantees of bilateral credit through the Guarantee Society/Clearing Union concept.

The former essentially allows "Money's worth" in property rentals, energy and so on to be created free of debt: the latter gets rid of interest for credit and replaces it with a provision which covers shared system admin costs and defaults.

These partnership-based mechanisms are I believe, optimal through the way they share risk and reward. If I am right, then they are capable of spreading "virally" and will eventually extinguish the ludicrous Bank-centric National Debts at the heart of our problem by replacing them for the most part with a "National Equity".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jan 19th, 2007 at 04:38:07 AM EST
[ Parent ]
the fractional reserve system is already asset based.

I've yet to understand any major difference between our current system where governments guarantee our money (via the power to tax) and where banks issue debt secured by assets to your new paradigm.  

Lots of fancy words but no hard examples.  

by HiD on Fri Jan 19th, 2007 at 07:25:50 AM EST
[ Parent ]
It is "asset-based" to as minute a degree as Banks can get away with.

My thesis is that any Interest charged by Banks over and above their operating costs and default costs is de facto inflationary: and if it is not inflationary, then I would be interested to know why it is not.

But that is a side issue: IMHO Banks as credit intermdiaries are simply no longer necessary.

There are two elements to the financial system I advocate: not one.

The first is the "Capital Partnership" - and this is capable of replacing all secured loans.

A hard example? I point to a £350m property development deal about three years ago involving Hilton Group and a consortium of financier and developers. No debt, no rental from a sale and leaseback, but instead, a 27 year revenue-sharing agreement.

The difference - and it is a colossal difference - is that instead of a fixed return on capital, we are looking at one which varies with the performance of the asset.

I believe that introduction of the Capital Partnership will come about through its capability of providing a better Equity Release mousetrap than anything else out there.

The second element is the "Clearing Union" / Guarantee Society, and this essentially is capable of replacing un-secured Bank credit.

Businesses and individuals operating within a Guarantee Society extend each other interest-free credit.

But it is not COST free. A provision is made into a Default Fund and this covers the system admin costs and the costs of defaults.

In the paradigm I am describing Banks are no longer intermediaries but service providers:
(a) as investment banks - bringing together investors in "Capital Partnerships" with investments;
(b) as managers of the bilateral creation of trade credit (with settlement in "Money" or "Money's Worth of barter) within the Clearing Union/ Guarantee Society.

Credit intermediaries - like Central Counterparty Clearing Houses - are obsolete, as are all intermediaries in the age of the Internet.

Central Banks aren't necessary either - they never were - as Hong Kong demonstrates by doing without one, and having a Monetary Authority instead.

www.zopa.com is merely an early illustration of what's coming. There, lenders connect peer to peer with borrowers and Zopa takes a commission as service provider.

With "Open" Corporate legal protocols like the LLP or LLC we simply take that process of "Napsterisation" to its ultimate conclusion.

And by the way, Governments need have nothing whatever to do with it, since the "Clearing Union" I see coming (unlike the one proposed by Keynes at Bretton Woods) may evolve simply through linking local initiatives together in a network.

Which is what I'm out there doing,on a small scale, starting locally to bring in local investment in local productive assets on the one hand, and local mutualised interest-free credit on the other.  

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jan 19th, 2007 at 09:53:55 AM EST
[ Parent ]
first, if banking profit is inflationary isn't all profit inflationary?  If I sell a widget for anything beyond my cost of goods and labor aren't I in the same position?  Isn't the fee charged by ZOPA also inflationary?

Secondly, I have no problem with your thesis that banks are no longer necessary.  I suspect you are wrong, but that is not important.  However, "not necessary" is very different from "dangerous and leading to the collapse of the world as we know it" (to risk putting words in your mouth".

Third, thanks for the Hilton example.  However, I question how that structure really differs from setting up a corporation or trust, issuing shares and then divvying up the proceeds based on performance like any other REIT or corporation.  I don't have any problem with the structures you describe.  I just don't see any substantial difference (other than the eruv style  window dressing to please religious types).  

As for Hong Kong and central banking.  They have taken a candy ass approach and just linked themselves to the US Dollar like a limpet.  No real need for monetary policy when you use someone else's.  

The rest of your description all sounds very nice.  But I can't pierce the marketing to detect anything beyond a trust based network with no powerful regulator or risk guarantor that would protect my investment.  no bid.  I don't have time to vet every loan in the syndicate to decide if I wish to participate.  That's what I pay a bank to do by accepting a lower return.

by HiD on Fri Jan 19th, 2007 at 06:04:17 PM EST
[ Parent ]


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