Ethical is Optimal

Simply does it

Chris Cook

Just Banking Conference 20th April 2012

“21st Century problems cannot be solved with 20th Century solutions”

Money 3.0

Market 1.0 – decentralised but disconnected; physical market presence; Money 1.0 was a physical object

Market 2.0 – centralised but connected; market presence by middlemen; Money 2.0 is a credit object

Market 3.0 - decentralised but connected; network market presence; Money 3.0 will be a relationship

“The Internet interprets censorship as damage and routes around it” - John Gilmore

Direct connection - 'Peer to Peer' and 'Peer to Asset'

New instruments are needed for people-based (P2P) credit and asset-based (P2A) credit

New generation of consensual agreements are needed as a trust framework for such direct credit creation

“Law is Code” - Lessig

Getting to Zero

Maths - Plus One; Minus One; Zero

Physics - Positive; Negative; Neutral

Economics? Conflicting Absolutes. No Zero

Scotland shows the way: Guilty; Not Guilty; Not Proven

21st century agreements will be neutral; interactive and consensual

East of Suez - consensus is normal and trust is assumed eg Sharia'h

“US has as many sumo wrestlers as Japan has attorneys”

Financing and Funding

Financing – people-based credit; short term; high risk

Neutral framework agreement – Guarantee Society

Funding – asset-based credit; long term; low risk

Neutral framework agreement - Nondominium

Guarantee Society

Mutual guarantee of Peer to Peer credit between buyer and seller

Buyers and sellers cover system costs and make provisions into a pool in common ownership

Credit allocation and management by a service-provider-formerly-known-as-a-bank

Outcomes

Community owned VISA credit clearing system

'Not for Loss' operation with no payments to rent-seeking shareholders or fat-cat managers

Value stays within the community

Nondominium

A smart US lawyer wrote a new co-ownership agreement and called it a 'Condominium'

The 'Condo' went viral in the US

Debt funded Condo's are now a US standard, codified with state by state quality control

Classic reality-based, bottom up policy – 'what works' (except for the debt funding!)

A Nondominium agreement is a Condo with financing and financing credit on the inside

Nondominium

Nondominium simply integrates two complementary associative agreements

A 'Joint' agreement between the stakeholders collectively

A 'Several' agreement between the stakeholders individually

Custodian

Rental

Investor Manager

%

User

Stock

Nondominium - Outcomes

Neutral – removes ego and politics

Collaborative - stakeholder interests aligned – no principal/agent problem

Social – shared surplus/ 'not for loss' - relationship-based not transaction-based

Sustainable - everyone has an interest in minimising cost of use over time

Stock 1.0

Stock 1.0 – Sovereign Credit

Stock – part of a tally stick, used either as a receipt (memorandum tally) or as an IOU/ credit token

Issued by the Exchequer to creditors at an agreed price in exchange for value received by the sovereign

Returnable in payment of taxes

By 1694 some £17m of tally stock was in issue when cost of government was £2m to £3m a year

In 1694 the (private) Bank of England started to create credit – partly backed by gold - and buy stock

The rest is history: the public credit has been privatised.

Stock 2.0 – Asset-based Credit

Stock - undated credit returnable in payment for use value of productive asset

Sold at a discount – eg £1.00 of Rental Stock sold for 80p gives an absolute return of 25%

Rate of Return is literally the rate at which Stock may be returned to the issuer

Rate is not fixed, but depends on the quality and quantity of the flow of value

Outcomes

Collaborative – all stakeholder interests aligned

Co-operative Advantage – absence of economic rent & compound interest out-competes conventional model

Reality-based – may be introduced by consensual agreement with no change in any law

Complementary – not new organisations but agreements between existing organisations

Neutral – agnostic as to legal forms

Applications - Land

Financing– Sustainable Development – energy efficiency

and good quality are in everyone's interests

Funding– Resolution of unsustainable housing debt– Release of a pool of development credit– Affordable Housing – absence of debt

Applications - Energy

Renewables - MegaWatts– Energy loans – funding through selling future

energy production

Energy Savings – NegaWatts and NegaBarrels– Energy loans repaid from energy savings– A Green Deal that will actually work !

Ethical is Optimal

Guarantee Society and Nondominium share risk and reward equitably

Both are immediately recognised by Muslims as Sharia'h compliant

Perhaps Ethical is in fact Optimal?