Economies work well when money circulates freely. Measures of economic activity and of prosperity use the measure of sales. Sales cause money to circulate and so circulation is an indicator of prosperity.
The money system fails us when the money ceases to be a reliable measure of value or when money stagnates and does not circulate freely either through lack of consumers with money or of sellers of goods and services that consumers can purchase
For most everyday goods and services money exchange works remarkably well. However, difficulties arise when there is too much money circulating or there is not enough or the money stagnates or money is concentrated in the hands of a few or in the hands of those who do others harm.
Most of these problems are caused by treating money itself as a product to be brought and sold rather than a means of storing and circulating value. We make money a product by increasing the number of money tokens we possess with the passing of time. We call it debt and we repay debt with more money.
With traditional investing money circulates in an enterprise and investors end up with more money as the money circulates. With the passing of time investors who lend money will end up with most of the money in circulation because they do not wish to give up their capital X but live on the earnings from the money I. Society overcomes this with ways to redistributing money including taxes and increasing money to consumers by increasing wages. These methods work well when they are controlled with benign rules and regulations. However, the rules and regulations breakdown when the investors are able to unduly influence the rule-makers.
There is another way of circulating money that can act as a control on the traditional investing cycle and that does not depend so much on the rule-makers.
Consumers becoming investors.
A complementary approach that works in parallel with traditional investing is to turn consumers into investors when they pay for goods and services. These investors get a return on investment by receiving the value of more goods and services for the same quantity of money by paying in advance. Investor returns are made of two parts. A capital return and a return from the discount. If consumers provide the money to pay the investors then the capital that investors are repaid notionally goes to the consumers as future prepayments.
One way of organising consumers is to form not-for-profit consumer cooperatives where all members are also investors.
Comparing Traditional Investing with Prepayments
Traditional Investing circulates more money of value I than prepayment investing. With traditional investing X+I money is required to exchange goods of value P. With prepayments it requires X. That is the same value of goods and services is exchanged for less money. This is an increase in economic productivity and we can share the value of the economic productivity improvement between members whether in their roles as both investors and consumers. Typically the sharing is to give investors a higher return and consumers lower prices but it could be consumers acquire more capital rather than lower prices.
There will be emergent properties of prepayment investing and some are likely to surprise. We can expect:
- Both investors and consumers can benefit because it costs less money to operate the system.
- Reduced prices will increase economic activity and speed up the transfer of money.
- Prices will tend to stabilise and reduce inflation.
- Production costs will drop because investors and consumer investors both benefit from lower operating costs.
- Consumer cooperatives will tend to stay small as there are few advantages in becoming large.
Ask to join Prepower Cooperative to observe prepayment investing in action where investors with savings get higher returns and consumers with needs but no investment funds get lower prices and become investors through consuming renewable electricity.
This article is published in MindHive Insider.