d
Economic entities use money to exchange goods and services. An efficient money system uses the least money to move the most value. Money itself does not create value but is a store of value. Investment of money creates value, and the money used is called capital.
Unfortunately, the inventors of capital gave it a new property that generated more money with time. It doesn’t create more capital, but owners of capital said it did, so whenever anyone accepts it as capital, it generates more money even though the owner of it did nothing. Capital has become desirable because if you can find someone who accepts it, they have to pay the owner of capital money. The owners of capital have been able to get governments to agree to this outrageous idea and to pass laws to enforce it. In the USA, they even own the method of producing money called the Federal Reserve.
We need to find ways to change the laws that allow money to be called capital, which generates more capital paid for by another who receives nothing in return. Calling money capital is fine, but we should not allow it to generate more money without the owner doing something to earn the money.
Capital can build systems to generate value, which may or may not produce profits. If a system creates more money than it consumes, the surplus is called profit and profit is treated as capital. Profit itself does not create more money, but the success of businesses is measured by the most profit for the least investment.
Today, money is created by governments and banks with loans. Governments and banks also destroy money. Money is neither spontaneously created nor destroyed; profit does not create more money but turns some money into capital; losses create negative profits by reducing capital, not destroying money.
Removing the Need for Capital
We do not need to allow some money to be turned into capital. We can organise our financial system incrementally so that no money ever can create more money without the owner of the money doing anything. The example below changes the ownership of banks from shareholders to depositors and borrowers. This system reduces the cost of loans while increasing the interest to depositors.
Figure 2 Banking Today with Capital
Figure 3 - No Capital ownership. The Depositors and Borrowers users own the Bank
When we turn money into capital, where capital is money that earns more money, we complicate and distort the exchange of goods and services. It starts with the banks, and we can convert banks quickly to depositors and borrower ownership by changing the rules on loans so that capital becomes money again.
A community efficiency measure is the amount of money moved for the value moved. Economic efficiency occurs when less money is transferred or moved faster for the same value transferred. In contrast, business efficiency is the most profit created from the least amount of capital a business uses. This conflicts with economic efficiency, and the government's task is to balance the two and other objectives by regulating money.
The following articles propose using existing open markets with the additional sharing of profit between investors and buyers to double the rate of capital movement by not charging buyers of goods and services two or more times to the owner of capital as permitted by the rules around the use of capital.
This link is a complaint to the Tax Authorities outlining the misuse of the ability of capital to create more money without effort.
Sharing Profits with Buyers
Today, profits are obtained by capital gains, trading shares, charging more than it costs to produce goods and services, increasing prices without increasing value, and producing goods and services at lower cost.
In capital markets, profits increase the cost of goods and services, and losses decrease the cost. Investments aim to lower the cost of goods and services, but investments are the outcome of capital markets, not the result of the market. Reducing the need for capital markets will increase investment and potentially increase the speed of turning money into capital. Sharing profits does that and starts with the capital market for loans.
Loan Markets
The simplest and easiest way to share profits from a Bank or any form of loan market is to stop the double interest payment from the borrower to the lender. The article Stop Paying Interest Twice on Bank Loans shows how to stop double interest payments with a simple bookkeeping change. This increases the investment rate of a typical community by about 30% by speeding up loan repayments.
Permanent Capital Markets
Permanent Home Markets shows how to remove the cost of capital from home markets. The same approach can be used for other capital markets, including the share and insurance markets.
Government and Bank Money Creation
Another way to create money is by government allocation of new money. The government can direct banks to create money for government purposes and supply the money to Communities. Government Incentives for Climate for an Equitable Climate Change describes how this can happen to address climate change.
Loans for Walking shows how governments can fund infrastructure from the use of the infrastructure made by consumers.
Governments can involve communities in funding infrastructure by circulating loan money to fund new infrastructure. The government asks banks to make a loan to a community organisation that has to spend the money on a defined activity, such as fund walking infrastructure within the community.
The loans notionally pay the members for each km walked on the community infrastructure. The members must spend the money on walking infrastructure as agreed by the government body responsible for infrastructure. Infrastructure is built and maintained by circulating money and repaying with new infrastructure. The approach can work for infrastructure paid for by the infrastructure use.
The idea is an implementation of Modern Monetary Theory that prevents the creation of money causing inflation and misused like regular loans.
Icons by Freepic.com