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  • Posted December 20th, 2020

    Storing value in a mutual credit world: Chris Cook

    Storing value in a mutual credit world: Chris Cook

    This is the third in a series of interviews that will accompany a book I’m writing, that will be published by Chelsea Green – an employee-owned company, and part of the new economy that the book is describing, built around a mutual credit core. Today I’m talking with Chris Cook. He was the designer of the Iran Oil Bourse, and I interviewed him before about the history of the oil markets. He’s now part of a group called Mutual Credit Services (MCS), formed to build mutual credit clubs.

    Hi Chris. We’ve been talking about mutual credit on Lowimpact for a while now – and how we change the money system. I’d like to ask you some questions about saving and investment in a credit commons – in a world where the ‘money’ is mutual credit. I get asked a lot of questions about this – about saving and buying houses especially. But first, why are you doing this? why are you part of MCS?

    Part of it is part of my work for the Institute for Strategy Resilience and Security at UCL. I’m working on action research to come up with a more resilient financial system. I was asked to do this in the aftermath of the 2008 financial crash, when we came 2 hours away from the cash machines being turned off – which isn’t a particularly resilient system.

    Probably the most common question I’m asked (including by my brother) is – in a mutual credit world, how do I buy a house? I talked with Dil, who talked about rent credits. Can you go into more detail on this? People who ask me how do they buy a house in this new world want to buy a house, not rent it.

    The way I see it is that we’ll be looking at what’s called co-ownership, and in a sense it’s co-ownership between people who invest in the property and the people who live in the property. We’re dividing the property rights – the fruits of use and the rights of management – we’re dividing them up in a different way, a simpler (and more radical) way. But in fact, the idea has deep roots, that go back thousands of years.

    Are you talking about something like housing associations or housing co-ops?

    It is essentially a co-operative model. I’ll give you an example. I was a member of a housing co-op in London for ten years. I didn’t have a freehold, or a leasehold, or a tenancy agreement. I was a member of a beast called a friendly society and through membership participation in the friendly society, I had the right to be there, and I had complete security of tenure, for as long as I paid my rent, and was in line with the rules of the co-op. That’s called a fully mutual housing co-op, and the model still exists. There’s a big one in the south of Glasgow called West Whitlawburn Housing Co-op, with 350 members, and people queueing up to join it.

    To answer my brother’s question – would he be able to buy a house outright, so that he owns it?

    He could say he co-owns it. I mean, if he has a mortgage now, does he own it, or does the bank own it? If he’s acquired all of the rights of investment in the property, then yes, he’d own it 100%. He’d have the right to occupy it and he would be the owner of all the future rental value. The economic interest in it, he would own.

    And the right to pass it on to his children?

    Yes. He could give the occupancy rights to one of them, and the investment rights to four of them (if he had four). The methods we’ve developed offer the potential for new forms of equity release and for new forms of passing wealth down the generations.

    Is it possible to talk about the methods you’ve developed?

    Yes. What I’ve done is designed a new agreement for occupation, investment, management and what we call custody of land. There’s nothing new about creating new agreements. There’s a smart lawyer in the US who designed a new agreement for co-ownership, called condominium. I’m sure people will have heard of a ‘condo’. This was an agreement, dreamt up by a smart lawyer that people started to use, and it went viral, because it was a good agreement. It’s now an established form of tenure over there – of ownership. Developers will come along, borrow money, build a condo – you and I will come along, buy a condo.

    Rather than have a bank – outside the condo – we can bring an investor inside the condo, simply by (and this is the main idea) pre-payment, of rent, at a discount. That’s the financial innovation here. Nobody pre-pays rent, if there isn’t a discount.

    So there would be new institutions set up? Where would my brother go? Who would he speak to? How would it work?

    There isn’t one of these yet. So it’s a bit like a dating agency with no-one to date. It’s potentially a new asset class, and I genuinely believe it will become a very important form of tenure in the future. But it’s purely optional. This is a mutual agreement, and anybody who consents to join it, can join it, and if it works, like with the condominium in the States, that’s why I coined the name for it: ‘Nondominium’ – because nobody has dominant rights over anybody else. The investors have certain rights, the people who live there have rights, you might employ a manager or not, depending on the size of the building. And there’s always a custodian – somebody who has the right – you could call it the final veto, like a golden share. These are the different stakeholders in a nondominium – a word I invented because it didn’t exist – that describes the agreement quite well. But the key element is pre-payment of rents at discount. Or it could be production – a production-sharing agreement for farmland, for instance. This used to be called a tithe. There’s nothing new here. Tithing arrangements have been around for thousands of years. Pre-payment of rent was how kings of England raised money for 500 years. That’s where the expression ‘rate of return’ comes from, and where ‘tax return’ comes from and where ‘stock’ comes from – from the wooden tally sticks.

    Currently, because of interest, if someone buys a house worth 200k, over 25 years, they end up paying 400k, because of interest. More people understand this now – but when banks loan money for mortgages, they don’t actually have that money – they create it from nothing, and charge interest on it. If that’s the case, why do they have to charge 200k interest on a 200k house? What’s the risk for them – especially as they have the house for collateral? Is it a scam?

    It’s not a scam, but it’s greed on the part of the investors. The depositors expect something for nothing – money for the use of money. Nobody objects to paying money for the use of land, but money for the use of money is something that’s been proscribed. All the great religions forbid it. They have rules against usury. But now we’ve come to believe that we deserve a return, in money, for the use of money. In fact, what I’m saying is that what you are entitled to a return for is the use of an asset – like land, or energy, or intellectual property, or your time. So I believe that the basis of money is utility – something useful over time. There’s a major misconception at the root of the system that confuses utility – use value – use over time, with exchange value, and we’ve all got bound up in confusing the two types of value. If I give you a token that you can use to pay your rent or mortgage with, you’d accept it. If I give you a token that you can use to pay your energy bill with, you’ll accept it. And if I give you a token to use for communications, online services etc., you’d probably accept it. The question then is what is that worth, in exchange. This is where the store of value comes in. Pre-payment for something valuable IS a store of value.

    And would you get a discount on those?

    For rent, definitely. It becomes interesting when you talk about energy, It’s negotiable, but if the energy is base on finite resources like oil or gas, then you might think that it will go up in value, and therefore a discount isn’t warranted.

    Just staying with the house for one more question. What do you think the fees might be for buying a house in this system – I guess they won’t double the price of the house as they do now?

    With this new system, land is never bought or sold again. Land is essentially held by a custodian – a bit like a community land trust holds land in trust. And a co-op essentially holds land outside the market similarly. It’s not dissimilar to that. The land isn’t sold. The investor may change, the occupier may change, and the manager may change. But the land is not sold. So estate agents have a function – introducing people who want to live somewhere to somewhere they might want to live. That’s adding value, and estate agents bring tenants in, as well as buyers in. The estate agency profession is going to continue. You’re also going to need what’s now known as banking services – people who bring investors in productive assets together with productive assets they want to invest in. And don’t forget that 17 trillion dollars is current getting negative returns – sometimes going out to 30 years. What I’m proposing is that land value, use value is always positive.

    Because it’s something real.

    Yes, and it has a use. And people will always be prepared to pay something for the use of it. And like a tithe, that something might be something from the production. In my view, this is potentially a massive, massive asset class. We’ll see the transition of debt to this form of – whatever you call it – quasi-equity, pre-payment, rental credits? I think it will be a huge asset class I’ve been saying this for 15 years.

    I’ll think about it some more and maybe ask questions in the comments. I’ll tell my brother too. And saving for a rainy day, or for a holiday – anything? How would that happen?

    What you’re doing is investing in pre-paid rental value. So for example here in Linlithgow, it’s not just the custodian of one property. People start putting lots of properties together, within a common framework, so you soon start finding that you’ve got a rental pool – and what that means is that if you actually pre-pay rentals because you have some spare cash, and you’ve got a nice big fat balance, you can find someone to buy that from you for sterling, or swaps it for something that you need at any time, because the beauty of rental credits is that by definition, they’re accepted locally.

    And there will be new institutions that deal with this? People don’t want to go round searching for partners to do deals with.

    Just as now, you’ll have people who make markets, in a sense. People who take a risk – but probably quite a minimal risk – and that’s a value-adding profession actually. There have always been people who have been prepared to come in and buy and sell – like merchants, or brokers.

    So there would be a relationship with people or organisations, in the same way that people have a relationship with a bank or a building society today?

    I think what you’d see is something rather like a local stock market – literally – where people put their needs and wants – for example, I want to sell 5000 rental credits, what am I bid? The beauty of a rental credit is that people will always buy it at any price below face value, because that means they can cash it in at the full value. If I’m the occupier of a property, and there’s somebody out there selling £1 rental credits for 95p, I’m going to buy them, because I can then cash them in for £1 worth of rent. This is the beauty of having a returnable credit as an asset.

    I guess that people are going to say ‘that sounds really complicated. I just want something simple to save for my old age’. Is it going to be as complicated as it sounds. Is it going to be useful for ordinary people?

    You asked a complicated question – ‘how’s it going to work?’, which is like asking ‘how does the market work?’ There is a simple solution – that yes, you will have people who will enable you to cash out – very easily. And that can be explained in as much detail as you’d like.

    So we’ll have to see what emerges, and what kind of institutions develop as time goes on?

    When you say institutions, it makes me think of organisations. What I’m saying is PEOPLE – will be there who will do that.

    Are you also saying that you see the opportunities for profitable investments in capitalism shrinking?

    Very simply put, I think we’ve reached a point – I call it ‘peak rent’. When you consider that only 18% of retail rents are being paid on time, you realise that there’s a crisis. I don’t think most people realise how big a crisis it is. All of these shops – Arcadia, Debenhams, shopping malls everywhere – they’re not paying the rent. Why? Because they can’t. As Michael Hudson says, ‘if debt cannot be paid, it won’t be paid’ – that was in 2008. Now, if rent cannot be paid, it will not be paid. And the thing with rent is that it’s demanded, whether you can pay it or not. Now we’ve reached a point where systemically, there’s too much rent in the system. So the question for landlords is ‘would you rather have 100% of nothing or a smaller percentage of something?’ The new thinking that’s emerging is about production sharing leases, about shops that are sharing the rent with the landlord. That’s been happening with British Airways at the airports for a considerable time. The richest landowner in Norway got to that position because he charges an affordable rent and shares the revenues above that. It’s both ethical, because of the risk sharing; and it works. It’s not a new concept – in fact it’s a form of Islamic finance.

    So you see these use-credits as a way to bring investors over to this new economy, this new mutual credit / use credit system, as a way of being able to invest at all in future?

    Well if you’re getting negative returns, and there’s something safe that will give you a positive return, yes. But there’s another important point here – and that’s the question of affordability. Now, with debt, the poorer the person is, the less creditworthy they are, and therefore the less likely that they can pay. It’s a vicious circle. Whereas with affordability – if the rental stream is genuinely affordable – maybe it’s limited to a certain percentage of someone’s income – then by definition, it’s more likely to be paid. And if that’s the case, it lowers the risk, so an affordable rental stream, being more likely to be repaid, is an extremely attractive asset class, for pension investors – all these people who are currently getting negative returns will be queueing up to invest in genuinely affordable rent, because that gives them a security of investment that they’re looking for – it’s a positive return. I’m sure you’ll be saying that a zero rent is infinitely affordable. So there’s a limit to this. But even a zero rent, if you get your capital back, is still better than a lot of people are getting now.

    So it sounds as though there’s going to be much less scope for wealth accumulation and concentration?

    Yes, because there’s less ‘something for nothing’. That leads to the accumulation of wealth. But this model goes from a zero sum, or a negative sum game, to a positive sum game. That’s why I’m so optimistic about the future, because I think that capitalism, in its current form, will eat iself, disappear up its own posterior. You hear a lot of neoliberal rhetoric about cost-cutting – but what’s the biggest cost of all? It’s the cost of something for nothing being paid to rent-seekers. So if we can start to say that high rents are not going to be paid, so let’s come up with a new settlement, on a more sustainable basis – I think we’ll see, not a redistribution, because that will be resisted.

    A pre-distribution?

    Pre-distribution is the word I was looking for.

    What’s the order of things? What needs to happen first? Do we need to build mutual credit clubs and start to federate them before thinking about store of value?

    Mutual credit is what I call people-based credit. There are no assets involved – it’s just you and me dealing. In accounting terms, it’s what we call double-entry. Plus and minus. I get a positive balance, you get a negative balance. But my point is that when assets are involved, you get a third entry, which is always positive. It may be a positive of pre-paid rentals or pre-paid energy or pre-paid IP use, but it’s always positive. These credits are always based on promises. Mutual credit is based on my promise, which you accept. That’s how the system of banking came along. Someone gave a promise, who passed it on to somebody else, who passed it on to somebody else, etc. Then it could come back to the issuer. That’s what a cheque is. It’s just that the bank that issues the cheque doesn’t provide any value when it does so. What the bank essentially does is guaranteeing the credit of its customer. But we don’t think of banking in those terms any more. Banks used to add value. Now they extract value. I believe we’re going to go back to what I call ‘banking as a service’, where they provide a value-added function.

    So you’re saying it all happens at the same time?

    Yes. In parallel.

    Mutual credit clubs are not for individuals who aren’t sole traders – at least initially. how can we bring them in to this new world?

    That’s actually quite simple. I think everybody is capable of providing value. If I look after somebody, I’m providing care. If I do something creative, if I write something, draw something, take photographs etc. – that’s something that has a value – not a commercial value, but it’s still valuable. We’re getting here into the world of Local Exchange Trading Schemes.

    They didn’t really change much, did they?

    No, they didn’t provide value that’s universally acceptable. But they were a very good way of building trust in a small group. So you’ll find many LETS schemes that cease operation, but not because they’ve failed, but that people have stopped keeping score. They’ve built trust, and now they just swap services, but they don’t bother keeping score any more – they just trust each other. What the monetary system comes down to is trust. I trust the bank and the credit card company, and they trust me. But we pay them to provide that guarantee. What I’m suggesting is that we can deal directly, and have a form of mutual assurance (this is where the mutuality comes into it) – call it a club. It’s existed in the shipping industry for 150 years (Protection and Indemnity Clubs – P&I). Ship owners club together to mutually assure risks that middle men like Lloyds of London won’t take. And that form of risk sharing is completely achievable – we could do it tomorrow – because we don’t need a middle man to do it, we can just club together and do it. These are additional tools. You’ll be familiar with the first credit card?

    Diner’s Club?

    Yes. Essentially a club of local restaurants started giving time to pay to local diners. That was interest-free credit, but it had to be paid at the end of the month. It was what I call a charge card. Banks got involved when people wanted to roll over from one month to the next. And that led us to Visa and to Mastercard and the rest. But it’s completely possible to create that kind of architecture in a local town. And the mutual credit system we’re building will be able to account for this. It would need a service provider, which is what Diner’s Club had, and the P&I Shipping Club has. I think that’s the way it’s going to pan out – we’ll have clubs with a common interest – risk sharing, cost sharing, surplus sharing, but with a service provider actually managing and operating the system. That’s the role MCS is playing – providing certain services to get the system up and running, and then marketing it and running it in the future.

    Dil talks a lot about transferring over the resources of capitalism into the new economy, in the same way that the resources of feudalism were brought over to capitalism. Peasants were turfed off the land to graze sheep, and make money from the wool trade. Land was rented and the landlords were paid in money not labour any more. Before they knew it, everything was for sale in the new capitalist system, including land and labour – things that weren’t for sale before. Do you think we’re at a point where that kind of transition could happen again?

    I think it will be reversed. I think we’re already seeing, with empty office blocks. People are working from home – just like that. I think we’ll see a form of re-ruralisation, into smart smallholdings. I saw a very interesting talk by Simon Fairlie. You may have come across him.

    I know Simon, yes.

    He put forward an interesting insight. Historically, 2000 acres might have contained 500 families with 4 acres each, and it was self-sustaining. A lot of people lived decently on the land, but there was nothing left over for the landlord. As you just said, the landlords threw them off the land, they went to the cities, and the landlords made some money for a time. But now the landlords can’t compete with big farms elsewhere, so landlords are losing money on their 2000 acres. But as Simon says, if you had 500 smart, eco-smallholdings, that self-organise and become infinitely more productive, so that any surplus they have is sold locally – which is what used to happen in local markets. But the reason Simon says this works out for the landlord is that you’ve got 500 residential footprints on the land. But we have to get the planning right. Here in West Lothian they had the idea of ‘lowland crofts’, so you’d have the right to put a croft building and 6 acres – but they didn’t tighten it well enough, so what you got was an executive home and 6 acres for Fiona’s pony. So if we get the planning right, what we can and will see is a re-ruralisation in a smart, permaculture, intelligent use of land, and of production and consumption. The sort of things that the MCS is working on in the SW of England will be very apt for this. It seems to me that many things that we do, the UK could easily become self-sufficient for most of them, with intelligent planning and local mutual credit. So much can be done – we haven’t started to scratch the surface.

    Anything else you want to say in the book? Any articles you’ve written that people can read to go a bit deeper?

    I’ve got three pieces from Bella Caledonia. One is on the energy front, one is about what I call a ‘care for equity swap’ – it’s called ‘Caring for Scotland’. My generation has made out like bandits. We’ve benefitted from the massive increase in land values in the last 40 years. But my kids are on the other end of it – they’re care rich but land poor. My generation are land rich but care poor. I think what we can do is make a swap between the generations using care credits and land use credits. Switzerland – in St.Gallen, it’s possible for citizens to earn care credits, that are then credited to them for when they get old. The reason people do it is that they trust the St.Gallen local government to be around in 50 years time – whereas you wouldn’t trust G4S with that, or others like them.

    Thanks Chris. I think the mutual credits clubs and credit commons ideas are relatively easy to explain compared to store of value ideas. Any questions you have for Chris – please post them on the blog, or on YouTube – but they’ll have a better chance of being answered on the blog.

    Just to wrap up – pre-payment for use value is what I’m talking about, and I think that most people do understand pre-payment. Pre-payment meters are routine – and the poor pay more. They lend money to the utility companies, and get charged more to do it. That’s not right. But pre-payment is obviously a store of value when it’s for something useful. That’s all I’m saying.

    This is the third of a series of interviews accompanying the book, so if you want to follow them, subscribe to the blog and / or the YouTube channel. And in the mean time I’ll watch this again, read those articles and come back with more questions. Thanks Chris

    Cheers – I’ll send you the links.

    NB: here are 3 articles by Chris to go deeper into the subject.

    Energising Scotland: introducing the Eco

    The community is the currency

    Caring for Scotland

    The views expressed in our blog are those of the author and not necessarily lowimpact.org's


    • 1Jeffrey December 20th, 2020

      In the linked article ‘The Community is the Currency’ In the comment section Chris responds to a question and says:

      ‘At the end of the day, if we have land, resources & people necessary to build housing, why do we need money at all? We need agreements, prepay credit (promissory) instruments based on land use, accountancy and the will to build and operate.’

      I understand this, and of course the revolutionary implications, but I am hung up on tax liability to the state and local authorities. How is the tax paid, which must be paid in the token issued by the sovereign state? The pound in your case and the dollar in mine.

    • 2weavingtheseisles January 26th, 2021

      Hi Chris (and Dave),

      Thanks for this interesting discussion.

      A reflection: I nearly bought a house in Scotland on a shared equity scheme (the Scottish ministers would have owned up to 30% of my house as silent partners, with the only constraint being that, rightly, I did not sublet); you don’t use that term here, and I wonder how the concept differs?

      A question: have I understood correctly that rent pre-payment means that I pay, say, £30k of rent at the outset where otherwise I might be laying down a deposit on a freehold purchase? I’m concerned that a pre-pay discount results in, in effect, a poverty tax, i.e. the less able one is to pre-pay, the less able one is to benefit from pre-pay discounts as one struggles to pay rent at the last minute on the just in time basis that out mainstream monetary system tends to compel because of its growth/extraction/scarcity dynamic…?

      A thank you: ‘Pre-distribution’ sums up a concept I regularly describe but for which I have no term, thanks! (E.g. ‘there’s less need for welfare in a mutual credit monetary system because unaffordable ‘surplus’ is not extracted in the first place to cripple people, i.e. we’ve levelled the playing field better to start with…’)

      Glad to hear Fairlie in the discussion. Cheers guys.


    • 3Dave Darby February 2nd, 2021

      Jeffrey and Eloise

      Chris has been having some problems with posting. But I’ll post his responses here if he doesn’t fix it.

    • 4Chris Cook February 3rd, 2021

      Jeffrey, Thanks for your email. Asset-based credits eg land rental credits & energy credits will be easily convertible into £ bank/Treasury credits (aka modern money) to pay for government goods & services.

    • 5Chris Cook February 3rd, 2021

      Hi Eloise, The concept is essentially a form of co-ownership, whereby the land is held in common (like a community land trust, or a fully mutual housing Coop). Occupiers may change, Investors may change, and a Steward/factor/Manager (if any) may change, but the land is held in common by a custodian and never sold again. A payment (in money, or money’s worth of production cf tithes) is made for the use of land/location and shared as a land dividend among the membership. The buildings or improvements on the land require to be maintained and/or further developed and here we see costs shared, again either in £ or in £’s worth (payment in kind). Co-occupiers may accept payment ‘in kind’ by way of care for the land or even care for co-occupiers. Note here that 15% of new Danish housing is co-housing. Note here that organising principles of Permaculture are: “Care for Land; Care for People & Fair Shares’.

    • 6Chris Cook February 3rd, 2021

      Hi Eloise. Posted too soon. Pre-payment would not be a requirement: it represents a new form of savings, and as above it is open to those with no money to be credited with £ rental credits in exchange for caring for the land/buildings; caring for each other and for creativity such as art-works or events among other things. You’ll see that land/location rental credits are a form of currency which is local by definition.

      Moreover, since the land rentals may be based on a % of land use or production, they are “affordable” by definition, and that being so are the perfect basis for a secure low risk POSITIVE return to investors in discounted future land use. (the attraction of this to long term investors may be gauged from the fact that over $17 trillion is currently receiving NEGATIVE real returns).

      Conventional compounding mortgage debt suffers from a vicious circle: the poorer the borrower > the higher the risk > the greater the risk premium//interest demanded > the less affordable the mortgage> the more likely the default> the higher the risk etc etc

      (Undated/Redeemable) Rental credits based on affordable rents create a virtuous spiral: the more affordable the rent>the more likely to be paid>the lower the risk of non-performance>the lower the premium required>the lower the cost of funding> the more affordable the rent > the lower the risk etc etc Hope this clarifies things. Must have a chat re your craft enterprise: I’ve done quite a bit of thinking on a “Dot Knit” crafts digital platform/enterprise model which cuts out rent-seekers. Regards, Chris

    • 7Dave Darby March 2nd, 2021


      I’ve been talking more with Chris. Here is my interpretation of the kinds of (non-extractive) ways to save and invest in a mutual credit world. I’ll add something about home ownership later.

      Chris – am I on the right track?

      Savings & investments:

      The store of value function in the new economy is performed by real things in communities, rather than by the exchange medium. Real things in communities can’t be extracted and concentrated. Individuals can hold some of this real value in the form of something called ‘use credits’, and they can help build the infrastructure of their local economy at the same time. Here’s an example. A local community energy scheme want to build a new solar array on the roof of a large building. It will cost £50,000, that they don’t have. So they issue energy credits – tokens for use of the electricity that will be generated by the solar array when it’s built. The tokens are offered at a discount – so local people can buy £1000 of future energy credits for £900, say, until the £50k is raised. When the energy is being generated, you can then either use the credits to purchase electricity at a discount, or sell them at the full price for a profit. Here’s another example: a local restaurant wants to spend £5k on a new stainless steel kitchen, and does so by issuing future meal credits at a discount. Or a local smallholder needs £10k for a barn and a new tractor, and so issues future farm produce credits at a discount. I’m sure you can think of many more ideas. So, let’s think of some of the ‘wins’ with this scenario:

      1. People with a bit of extra money can get a return on their investment.

      2. It’s risk-free; if the group don’t get enough investments to build the array, you get your money back, and if it gets built, you get electricity or profit.

      3. It’s a nice little store of value, because the electricity is real and useful, and so people will want your tokens – that is if you don’t use them yourself.

      4. The community energy group doesn’t have to give away part of their company, or get into debt, so wealth stays in the community, rather than being leached out with shareholder dividends or interest payments.

      5. The community energy group builds renewable infrastructure and creates jobs, which is good for the community.

      6. More electricity is generated from more environmentally-friendly sources.

      7. The community has more real assets, so local people don’t have to pay extractive corporations for their electricity.

      8. People can use their mutual credit units to but use-credit tokens, as long as the issuers have a mutual credit account – which of course they should, as community organisations; so it’s a way to store value for those who find it easy to sell, but difficult to find things to buy.

      9. Savings become inflation-proof: savings in money might fall in value, but a unit of electricity is always a unit of electricity.

      10. It provides security for people. If you can invest in future rent-credits, energy-credits or food credits, you’re guaranteed a home, electricity and food – the kinds of things that humans are always going to need. That’s real security, rather than bits of paper or numbers that are not guaranteed to be worth anything in future.

      We need to move quickly, and we need to make the new economy attractive to those with money to invest, and to make sure that they’re rewarded in new economy assets. That way, we’ll be attracting investments in pounds and dollars, and using them to build the new economy, paying returns in the currency of the new economy – mutual credit units and use-credit obligations. Then when investors realise those returns, they’ll automatically become participants in the new economy, and they’ll be helping to build it. So prepayment at a discount is not about shares, it’s not debt, and it’s not derivatives. It’s a community-based method of providing risk-free profits for investors and getting things done in communities without sucking wealth out of them.

      You might think that this all sounds a lot more complicated than getting money and putting it in a deposit account, but people probably thought that when deposit accounts were introduced. Individuals and organisations will rise to the occasion and step up to provide easy, seamless platforms for you to become involved in this new kind of saving and investment. Mutual credit will start to level the playing field first, preventing extraction from communities. And all these new ideas and instruments will be convertible with conventional money for a while yet, as conventional money is required to pay taxes. This is a slow burn – but you can get involved with existing new economy institutions and mutual / trade credit immediately. Investors will become more interested in these kinds of investments as capitalist investment opportunities shrink, which will mean that the rewards for the production of essential commodities like property, energy and food remain in communities and don’t accrue to extractive individuals and institutions, including banks.

    • 8Dave Darby March 2nd, 2021

      Home ownership:

      Value can be stored in housing too, of course. The ideal scenario is for everyone to be housed, but (as with trade and investments) without money being extracted from the community. In conventional property development a landowner sells to a developer, who sells to a property owner who can then sell to another property owner who can occupy the property or rent to tenants, and so on. Each transaction apart from rental is done using money borrowed from the banking system. At the moment, if you buy a house for £200k, you might get a mortgage, and end up paying over £400k over the 25 years that it might take to pay back. £200k of value is sitting in your house, which is still in your community (houses don’t move), but £200k has left your community, to contribute to increasingly-concentrated wealth. Private landlords, many of whom own multiple properties and don’t live locally, represent another route for wealth out of your community.

      Alternatively, in the mutual model, landowners, developers, local authorities (providing planning permission), investors and occupiers can set up local, multi-stakeholder, ‘custodian’ groups that could be co-ops, community land trusts, cohousing projects, partnerships or completely new kinds of institution. These multi-stakeholder groups offer future rent credits, at a discount, to investors who fund the development, and are able to occupy the property or receive an income, including a profit, from the rents that come in from the housing or office space that’s built. No banks are required in this model, and no interest is payable. Once property is mutualised in this way, occupiers, investors, developers and managers may change, but the land is held in common by the custodian group, and never sold again. This system delivers housing security to greater numbers. At the moment, the system isn’t working for most people, and especially young people, who can’t get on the property ladder at all. In places like London, the only truly affordable housing available is via fully-mutual housing co-ops. If you are a member of this kind of custodian group, you’re therefore a part-owner, who can pass on occupancy rights to your children.

      To obtain full ownership of your home, instead of obtaining a mortgage and paying interest that leaves your community for 25 years, you can work with the custodian group in the same way that you would work with an Islamic mortgage institution (for which interest is not allowed). Instead of lending you money, and dumping all the risk on you (which means losing the property to the lending institution if you’re unable to keep up payments for any reason), an Islamic institution will buy the house with you, and rent it to you at an agreed rate that allows the institution to make a fair profit. If you put up 10% of the house price as a deposit, say, then 10% of the rent goes to you, and 90% to the institution. You can make occasional large payments, or pay a bit extra on the rent each month, so that a larger proportion of the rent goes to you, until eventually, 100% of the rent goes to you, which means that you’d be paying all the rent to yourself, and therefore you own it. You can leave the property at any point, and you’ll still get the proportion of the rent that’s due to you, from the next occupier. With the mutual set-up, the custodian organisation is community-based, and so all moneys paid remain local. Other interesting things can happen in this kind of system too – for example, if you’re cash-poor, you could earn rent credits by maintaining the property yourself, or even by providing other useful services to the custodian group. The custodian organisation will of course be part of the local mutual credit club, and therefore payments can be made in mutual credit units, cash, or a mixture of both.

      This purchasing method confers the same privileges and exclusive home ownership as now – that is, once paid for, you’re then rent and mortgage-free and can pass on the property in your will – but it’s more affordable, and without the extractive nature, and interest involved in the current system. The only difference is that the property can’t be bought and sold through the banking system any more. Properties can change hands using the same kinds of community-based mechanisms as outlined above. Again, you won’t have to understand all the nuts and bolts of these new mechanisms, any more than you have to understand the inner workings of banks or credit card companies now. People will rise to the occasion, including community-based estate agents, to make all these functions easily understandable and accessible.

    • 96degrees May 25th, 2021

      Does this mean that everyone has relatively equal assets. it sounds a little bit like everyone owns everything. I’m a little confused. Could I move “upwards” and get more money? or do I have to stay in a community economy where (from what I understand) it is the full value of the community divided by it’s members? My current goal is to become (mostly) self sufficient in a pretty urban area as well as contribute to the various community gardens and even sell some produce as a neighborhood (very small-scale, tiny profit).

    • 10Dave Darby May 31st, 2021

      6degrees – no, it depends on how hard you work. you just don’t become wealthy on someone else’s work (rent, profit, interest). You don’t have to do anything – anyone can do what they like. But in a mutual credit / credit obligation world, there’s more opportunity to work for yourself or in a community-based / co-operative organisation. But you don’t have to. (i.e. you can still be an Uber driver or work in an Amazon warehouse if you like – we just want to help provide more opportunities so that people who don’t want to do that don’t have to).

    • 116degrees May 31st, 2021

      If I understand correctly that means that the businesses are owned/managed individually or by a community instead of non-human corporations. is that right? what does credit obligation mean?

    • 12Dave Darby June 1st, 2021

      6degrees – sorry, use credit obligations weren’t mentioned as such in the article – but it’s the kind of thing I talk about in comment 7 above.

      In a mutualist economy, businesses owned individually or by a co-op / group of people using some sort of agreement. It’s not about banning anything though – just providing better alternatives.

    • 13Jason October 7th, 2021

      Chris, our prepaid discount credit models are converging very nicely. Much of these ideas have been worked on in tenancyOS. I’ll add a link to this post there too. Let’s collaborate ?


    • 14Dave Darby August 2nd, 2022

      Jason – that’s really interesting.

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