An Outline of a Business Proposition to a Community Bank, ASIC and the Reserve Bank

The following example shows an alternative economic framework that prioritizes community wealth building, fair housing distribution, and controlled monetary expansion, benefiting citizens, community banks and the economy.

A group of citizens occupying or owning four houses wishes to purchase new money from a community bank to repay existing loans. The citizens are C1, C2, C3, C4, C5. The houses are H1, H2, H3, H4.

The proposal to the Community Bank is for the community to purchase $1,200,000 in new money to pay out existing individual community member loans. The agreement will be with a company owned by the five citizens and with a capital of $4,000,000 in assets. The assets will be the collateral for the payment over 14.29 years of the $1,200,000 purchased from the bank. The money is repaid with yearly repayments of $84,000.

The bank collects a fee of 6% from each repayment, and the rest of the repayments are lent back to the community company and buy back depositor members' money and interest.

The contract will also include trading/savings accounts for each citizen, where the citizens will receive 5% interest on the money in the accounts where the total amount on which interest is paid is less than the amount owed by the community.

The loan and number of citizens are expected to grow as the community-owned company welcomes new members and houses. The company will have arrangements with other similar companies to transfer assets between the groups for zero cost.

Each citizen is expected to pay 25% of their disposable income to the company, which will be used to pay off the loan and purchase shares in the company. Each citizen with shares above the value of the home they occupy will sell 10% of their shares each year and will receive 5% new shares, while each occupier will receive shares of the value of 50% of the money they pay. It is expected that the loan will be paid off within ten years. However, new members will join, new houses will be added, and repairs and improvements will likely keep the loan about the same.

Outcomes

The savings from regular loans and the opportunity to invest are estimated to increase the average citizen member’s wealth by about $40,000 annually from the increased use of capital and the savings from eliminating interest payments.

The system reduces the amount of money in the economy by putting it into housing assets traded internally in the company. In contrast, regular loans increase the money in the economy through the interest paid to banks.

The approach automatically reduces inflationary pressure on the economy compared to regular loans as less money is needed to trade houses. Banks will make higher profits but have no capital gains. Houses will go to those with the most need rather than the most money for a home many can afford.