3. Economy 3.0
Economy 1.0 – decentralised but disconnected; physical
market presence; Money 1.0 a physical object
Economy 2.0 – centralised but connected; market
presence by middlemen; Money 2.0 is a credit object
Economy 3.0 - decentralised but connected; network
market presence; Money 3.0 is a relationship
4. October 2008 - R.I.P. Market 2.0
Peak Credit
Collapse of Lehman Brothers
QE necessary to prevent debt deflation
Systemic and persistent solvency problem
Systemic imbalance in purchasing power
Credit intermediary banks systemically short of capital
5. Adjacent Possible
Exchange Traded Funds and Index Funds
'Creditary' ownership claim not debt claim
Passive 'inflation hedger' risk averse investors aim to
avoid loss rather than make transaction profit
Market risk is dis-intermediated – 'capital lite'
Intermediaries retain credit risk
Profit from service provision eg HFT, asymmetric info
6. Financialisation
QE and 0% $ interest rates – 'buy anything but dollars'
Correlated bubbles caused by 'inflation hedgers'
Price curves cease to reflect market price expectations
and reflect $ price expectations ie $ yield curve
Commodity prices lose touch with production,
consumption & inventories
Equity prices lose touch with underlying flows of
dividends and retained profits
Market 'cardiac arrest'
9. Absolute Property Rights
Maths - Plus One; Minus One; Zero
Physics - Positive; Negative; Neutral
Economics? Conflicting absolute property rights
Equity vs Debt; Freehold vs Leasehold
Public=State vs Private
No Zero
10. The US has as many sumo wrestlers as Japan
has attorneys”
20th
century agreements: Law/Statute and Equity
One way imposed agreements - “Rule of Law”
21st
century agreements neutral; interactive and
consensual
Scotland: Guilty; Not Guilty; Not Proven
East of Suez - consensus is normal, trust is assumed
Consensual agreements are an order of magnitude
simpler than adversarial agreements
11. “Law is Code” - Lessig
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
12. 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 funding credit on the inside
13. Nondominium
Nondominium simply integrates two agreements
A Joint/Collective agreement between the
stakeholders collectively – Clearing Union
An Individual/Several agreement between the
stakeholders individually – Capital Partnership
14. 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
15. Clearing Union
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
17. Outcomes
Community owned credit clearing system
'Not for Loss' operation with no payments to rent-
seeking shareholders or fat-cat managers
Value stays within the community
19. 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 – no new organisations: agreements
between existing organisations
Neutral – agnostic as to legal forms
21. 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.
22. 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
23. Stock 2.0 – Enron & Prepay
Prepay - Enron opaquely sold commodities at a
discount for dollars now and delivery later
Enron creditors and investors were unaware of these
'commodity loans' by banks eg J P Morgan
Similar Prepay deals have been used since at least
2005 to manipulate oil markets in particular
If producers can support prices they will
From late 2008 onwards Saudi Arabia's prepay deals
with J P Morgan have been funded by muppets
Prepay is almost identical to stock
24. Asset-based credit - 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
25. Asset-based credit - 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 !
26. Asset-based credit - Intellect
Intellect – objective data patterns and representations
– Software, video, music art, books, knowledge,
design etc etc
27. People-based credit
Energy – Manpower/Unqualified Labour
Intellect - subjective
– Knowhow
– Knowledge
– Experience
– Common sense
– Intuition etc etc
28. Value Basis
Location – immaterial 3D space
Energy – material and immaterial embedded in or
passing through location
Intellect – data patterns and representations in material
and immaterial form
Each has a use value over time
Credits returnable in payment for use value of each is
valuable in exchange and is acceptable as currency
29. Value Exchange
Value 'money's worth' such as currency is exchanged
on credit terms – time to pay
Credit backed by capacity to provide goods and
services
Value exchange by reference to a unit of account
The only absolute is a unit of energy
Units of different types of currency exchanged for value
by reference to a standard energy unit of account
There can be no scarcity of units of measure
Energy Standard > Energy Economics
30. Ethical is Optimal
Clearing Union and Capital Partnership share risk and
reward equitably
Both are immediately recognised by Muslims as
Sharia'h compliant
Perhaps Ethical is in fact Optimal?
