Script for Capital Homesteading Cartoon/PowerPoint
(Dave Kelly, Dave Hamill, Michael Greaney, Norman Kurland, Dawn Brohawn)
Set-up notes:
- Objective of the Capital Homestead Act: Empowering citizens through ownership sharing.
- In the U.S., we have the right to vote. But do we have any real power? Power follows property (ownership), just as property follows access to the means to acquire and own productive (income-producing) wealth.
- How do we articulate the message so that the 99 percent GET IT and buy into CHA?
- CHA would change the system at the local, state, national and global levels.
- Kelso: The law of the Urgent and Important (Our basic survival and security needs are more immediate and generally must be satisfied before most persons can be effective reaching their fullest human development and serving our highest and ultimately most important human needs, including working for justice and the dignity and fullest development of others, i.e. Maslow’s hierarchy of human needs).
- A War of Ideas: the Just Third Way vs. capitalism and socialism.
- The three interdependent systemic principles ffor achieving economic justice
- Participative Justice
- Distributive Justice
- Social Justice (encompassing the Kelso-Adler principle of Limitation)
- This presentation starts with the assumption that the Capital Homestead Act has already been passed.
Defining our Terms:
- Private Property: It’s not the natural resources and the things one owns. It’s the bundle of rights, powers, privileges and limitations that an owner possesses against all others with respect to things that one owns personally or jointly with others. This fundamental and universal human right that should be protected by government determines who should control things invented by people as well as land and other natural resources. Private property in a market system determines who has the power to govern one’s contributed human efforts (i.e., labor) and one’s freely contributed non-human inputs (i.e., capital) to the interdependent labor-capital process of creating marketable goods and services Slavery, which means that you have no rights, is the condition where someone else owns your body and all that you and your labor produce. State and collective ownership and slavery violate the fundamental human right of every person to acquire and possess private property rights, especially in the means of production, as recognized in article 17(1) of the Universal Declaration of Human Rights.
- Growth: Sustainable increases in production and private sector jobs depend on growth in customer purchasing power. The last time we had real, sustained growth was during WW II when the customer was the U.S. government and when unemployment went from 17 % to near 0%. Our government supplied maximum customer power for war and weaponry. We can supply the means to achieve maximum customer power to all citizens, but now for peace, prosperity, freedom and fullest human development.
- Money: It’s not just coin, currency and demand deposits (checking accounts); it’s anything based on trust or promises and backed by existing or future assets that can be used to settle a debt or engage in a deal where each party will mutually benefit.
(Note: In the following wherever any underlined word or phrase appears it will be a LINK to a definition. Plus, we are starting here with the scenario that the Capital Homestead Act has been passed.)
SCENE 1: Men and women sit around a large table in a business board room
BD member 1: Our new customers are out there. But how do we fund our expansion?
BD member 2: We don’t have enough savings, or a fat-cat investor.
BD member 3: Well, there is another way, a new way.
BD member 4: Yes, the new Capital Homestead Act, just passed by Congress and signed by the President.
BD member 5: What does that do?
BD member 3: It will provide people with the right to obtain capital credit to buy our new shares. And it doesn’t take away property rights from current owners.
BD member 1: Who’ll be able to get the credit?
BD member 4: All our workers as well as every Capital Homesteader.
BD member 2: What’s a Capital Homesteader?
BD member 3: Every man, woman and child. They’ll all have an equal right to a yearly allotment of capital credit to be authorized by the Federal Government and supplied by local commercial banks. It will be based on the government’s projections of total new capital formation expected to be added each year by the private sector under the Capital Homestead Act.
BD member 2: How does this differ from money available for consumer credit?
BD member 3: In contrast to consumer credit, which provides money to buy things for consumption, not for investment, access to capital credit enables citizens to purchase our newly issued shares or those of other companies. Capital credit makes it possible for people with no accumulated savings to earn a living from producing as owners the things that people want to consume. Capital credit will provide the low-cost investment money needed to create new private sector growth and jobs, more advanced technologies, sustainable energy systems, rentable space and even infrastructure, like highways and power grids, plus many assets that citizen-owned businesses could provide and rent to government.
BD member 2: Why should banks be interested in making interest-free Capital Homesteading loans to people who can’t afford to buy shares?
BD member 3: No interest needs to be charged since the money will not come from the accumulations of the rich and super-rich, nor will it come from savings of low-income and middle-income citizens, foreign investors or loans from any government. The only charges to be added would be service fees of banks and professionals serving Capital Homesteaders, plus insurance premiums charged by competing private sector insurance companies that would evaluate the risk of default on shares offered to workers in the ever-expanding ESOP and new Capital Homesteading marketplace. Banks will greatly expand their customer base and future profits earned by their commercial bank departments, as well improving the public image of the banking profession.
BD member 2: Isn’t the idea of financing out of “future savings” new?
BD member 3: Not really. It was first proposed by Dr. Harold Moulton, who taught economics at the University of Chicago and headed the Brookings Institution, Washington’s first thinktank from 1916 to 1952. He proposed “pure credit” in his 1935 book The Formation of Capital as a strategy for lifting America out of the Great Depression and an alternative to Lord Keynes’ advice to the Roosevelt Administration. Moulton pointed out that financing investment growth out of “past savings” took money that could otherwise be used for increasing consumption spending, thereby reducing market demand and growth rates for future investment and private sector job creation. Not until 1940-1945 when the government became a customer for weaponry producers did the American economy reach levels of near zero unemployment from double-digit unemployment rates of Keynes’ defective economic strategy. Keynes offered a one-sided focus on getting government to stimulate demand artificially if necessary, not full production – a focus that is still be followed by most governments in today’s world. Unlike Keynes, the focus of Capital Homesteading is on lifting barriers to full production and full ownership opportunities for all citizens.
BD member 2: How would “future savings” work under the Capital Homesteading Act?
BD member 3: Citizens can now buy new productive capital assets on credit backed by “future savings” from the future dividends each citizen expects to earn and be used to pay off the shares he or she bought with interest-free capital credit. Those future dividends would, of course, come from the profits when new marketable goods and services are produced and sold when companies like ours invest in growth assets.
BD chair: But remember, these must be full-dividend-payout and voting shares.
BD member 3: Yes, and the expansion in dividends and new jobs will create more customers with more money to spend.
BD member 4: And the money for us to hire new workers.
BD member 3: And further expand our plant.
BD member 4: And it’ll cut the cost of government, balance the budget and lower taxes.
BD member 5: How?
BD member 3: When people have money in their own hands, they don’t need the government to redistribute it.
BD member 4: And the government can keep the promises of the past, like Social Security out of general revenues, while paying down the debt and cutting the deficit.
BD chair: OK, how will we market the shares to the Capital Homesteaders?
BD member 3: Through brokers serving to turn all Americans into Capital Homesteaders.
BD chair: Well, we just need to vote on a resolution to move forward. All in agreement, raise your hand.
ALL HANDS ARE RAISED IN VOTE OF AGREEMENT……………….
SCENE 2: A living room with a husband, wife, college-age son and daughter and their trusted financial advisor
Husband: How will each of us get the money to buy shares?
Advisor: [BREAK THIS INTO SEVERAL SLIDES]
– First you set up your own asset-accumulation trust, a Capital Homestead Account – a tax shelter like an IRA.
– This account will periodically receive a voucher from the government entitling the trust to administer each year’s capital credit allotment to buy newly issued shares.
– When dividends on the shares are paid out, they first pay off the local commercial bank that made the capital credit loan and then all remaining dividends go to you to supplement your labor and all other forms of income.
– It works like a tax-exempt Employee Stock Ownership Trust, which was already in the law. The CHA allows you to borrow to purchase shares that pay back the lender from the full stream of future pre-tax profits earned on the shares from the future sale of marketable goods and services sold by the company. Lenders are more secure in getting paid back before the government in profits that would otherwise be taxed two or three times before getting to a shareholder. Taxes will be paid once under the CHA, when the citizen receives dividends and other distributions from the tax-sheltered CHA trust.
Husband: How will we make our selection of CHA shares?
Advisor: With my advice. Also, the bank and the capital credit insurance company will be rating the shares in which you’re investing.
Wife: Where will we get the money?
Advisor: From your bank.
Husband: But banks only make loans if you have collateral. Besides our house, we don’t have a lot of other investments or savings.
Wife: Yes, as they say, “you need money to make money.”
Advisor: The Capital Homestead Act will provide you and every citizen a new source of money and a substitute for collateral. This will help you invest in capital growth assets that will pay for themselves with the future profits they generate. The Capital Homestead Act will encourage private insurance companies to issue capital credit insurance. Risk premiums will deducted from the full amount borrowed. The insurance company will pool all the risk premiums to cover losses in case a specific loan is not repaid. Capital Homestead loans are “non-recourse” loans — that means the bank can’t seize your home or other personal assets if your capital loan goes bad. The assets behind the new money are in the company that issued the new shares.
Husband: I still don’t understand where the money comes from.
Daughter: Some Tea Party people say this is just one more government program.
Son: My Occupy friends say it’s another Wall Street rip-off and conspiracy with the Federal Reserve.
Advisor: Neither is correct. Under the new Capital Homestead Act the new money starts with a loan you get from your local bank or other qualified lender, once the bank aproves approves your loan application to buy new shares, takes out one-time bank charges and insurance premiums, and, with the balance of bank-supplied, interest-free and asset-backed money, sets up a deposit account from which you can buy your new shares. The bank can also turn your loan paper into another form of money by selling it to the regional Federal Reserve Bank, which has the power to create interest-free, asset-backed currency or a demand deposit to buy new currency, if needed.
To see how this works, it’s very important to understand what money really is. Money is anything that is used to settle a debt. Rather than being top-down, Capital Homesteading is a bottom-up way to finance private sector growth without inflation, and create new jobs and widespread citizen ownership.
Son: Wow! Sounds revolutionary.
Advisor: Yes. We no longer need “old” money – including the past savings of the rich – to pay for new capital.
SCENE 3: Local commercial bank with Loan Officer, Husband and Wife and Financial Advisor
Husband: These are the shares our Capital Homestead Account trustee would like to buy for us and each of our dependents, and here’s our offer in the form of a Bill of Exchange. This represents the present value of projected future profits to be earned from the sale of future goods and services that will be produced by the new assets being added by the company we’re investing in. (He hands the Bill of Exchange, with evidence supporting his projection of future profits, to the loan officer).
Commercial Bank Loan Officer: Okay, the bank and the capital credit insurer will evaluate the feasibility and risk involved in your offer. Also, your advisor and the broker will continue to guide you.
SCENE 4: Same as scene 3 (Later)
Commercial Bank Loan Officer: We have accepted your offer. Our bank will “discount” your loan, meaning it will take a percentage of the $7,000 of the new money your Capital Homestead Account will receive this year created by our bank and with the support of the Fed as a loan to purchase the new shares. Our percentage will cover the “risk premium” on your capital loan, as well as our service charges and profits for setting up and administrating your loan.
Commercial Bank Loan Officer hands a large “Promissory Note” to the Husband
(A big picture with the label “Promissory Note” is shown.)
Husband signs the Promissory Note.
Advisor (to husband and wife): When you signed the promissory note and the bank set up a deposit account for you to buy the shares on credit repayable with the future profits that you and the bank expected would be earned from the productive assets you bought, the bank was creating new money. This is how Capital Homesteading reforms to the banking system creates new asset-backed money backed by “future savings” to build a nation of capital owners, from the bottom-up….
SCENE 5: Commercial Bank Loan Officer puts the Capital Homesteaders’ Promissory Note in the bank’s vault with a caption that reads: “Backing the new Demand Deposit in the name of Capital Homesteaders Capital Homestead Account.”
SCENE 6: Discount window at the Regional Federal Reserve Bank
Commercial Bank Loan Officer hands the Bill of Exchange to the Regional Fed Clerk behind the window.
Commercial Bank Loan Officer: Here is the Bill of Exchange for our new Capital Homesteaders.
SCENE 7: Regional Fed Clerk accepts the Bill of Exchange and hands back new currency issued by the Regional Federal Reserve to the Commercial Bank Loan Officer.
Regional Fed Clerk: The new currency we are issuing to back up your bank’s Demand Deposit — a checking account with the Federal Reserve. Your bank can withdraw new currency to back up the Capital Homesteader’s Capital Homestead Account account at your bank. The CHA trustee will use the new currency to purchase shares from the company selling the shares. The company will then buy new equipment and expand its plant. The added capital will generate future profits first to repay the Capital Homesteaders’ loan, and then provide them with a future stream of dividend income.
Commercial Bank Loan Officer signs the Bank’s Promissory Note and hands it back to the Regional Fed Clerk
The Regional Fed Clerk hands the checkbook for the Federal Reserve Demand Deposit to the Bank’s Loan Officer.
SCENE 8: The Commercial Bank Loan Officer puts the checkbook for the Regional Fed Demand Deposit in the Commercial Bank’s vault.
SCENE 9: (TEXT WITH ILLUSTRATIONS)
When the Regional Fed accepts (“re-discounts”) the local bank’s promissory note (taking a percentage out for its administration costs), the new asset-backed money is issued in the form of currency or a demand deposit (checking account) with the Regional Federal Reserve. The new money is transferred:
From the Regional Fed > to the local bank > to the Capital Homestead Account trustee > to the broker > and finally to the company that sold the new shares to the Capital Homesteader.
With the money (Capital Homesteaders’ investments), the company builds new plant and buys new equipment, creates new jobs, and begins producing goods or services.
Profits generated from the Capital Homestead investments are distributed to the Capital Homesteader’s Account.
Before the dividends can be spent for the consumer needs of the Capital Homesteader, the CHA will first take these dividends and repay the lender (the local bank). The bank then repays the Regional Fed.
At the end of the money creation-and-repayment cycle, the Regional Fed cancels the money or re-issues it for the next round of Capital Homesteading.
SCENE 10: (TEXT AND ILLUSTRATIONS):
Through Capital Homesteading a nation can finance its growth with equal opportunity for every citizen to become an owner of capital. This can be done without taking away income or existing property from today’s owners.
Based on current White House figures for financing all forms of productive capital added each year, at modest rates of growth (2-3%) every citizen would receive – annually – a CHA voucher, giving him or her the right to obtain an equal annual allotment of capital credit ($7,000, at present growth rates) to purchase shares in a lender-approved business venture of his or her choosing.
Under Capital Homesteading, assuming no increase in growth rates, the average child born today would receive by age 65 the following benefits:
- Annual income of about $58,000 in pre-tax dividends.
- A tax-sheltered capital accumulation of $432,000.
- From birth to age 65, a pre-tax dividend income stream of $1.7 million.
This is how Capital Homesteading would create a nation of economically liberated citizen-owners.
THE END
