Stock Markets and Community Capital Markets (CCMs) are two ways to transfer Capital. Stock Markets are independent of goods and services markets, while CCMs use them. They are the minimum-cost way to transfer Capital, increasing the wealth of any community that adopts them. This article outlines how they achieve it.
The article Community Capital Markets describes them. A shorthand description is that whenever a person purchases a product, they also buy, from an existing investor, 50% of the profit, or new Capital, created from the sale.
The first part of Figure 1 shows the investments made using a Stock Market. The second part shows the investments with a Community Capital Market. The transfer increases investment within the community, whereas, with share trading, the profit sits “idle” in the asset base.
Money has value when it is transferred. Money, when it is stationary, does not. When stationary in an asset, it has the potential to move and create value, but until it does, it does not. An investor's return is the same as a stock market without the unearned income of the profit on a profit. The buyer receives an investment and the return on investment of 50% of the profit from each purchase.
The community has increased the total invested Capital by 50% of the profit. The increase occurs with a simple accounting change to allow the profit to be invested earlier than with a Stock Market.
Other Cost Savings with Community Capital Markets
The financial system uses debt to allow the profit to remain in an organisation and be invested. Banks will lend the investor money secured against the increased Capital Value of the shares. Banks charge interest, and this is an extra cost to the community. CCMs remove the need for debt.
Stock Markets set the price of shares through the operation of the market. Stock Markets and Foreign Exchange Markets have many more trades to set the price of Capital than the actual transfers of Capital. These trades are unnecessary with CCMs as the company anticipated profit sets the price. If the actual profit is different from the anticipated profit, the value of the Capital adjusts as soon as it is known.
The cost of debt is extraordinary and made unnecessary with CCMs. The cost of operating Stock Markets and Real Estate Markets is high and is not needed with CCMs.
However, the most benefit comes from a change in the mindset of investors, who will increasingly be buyers and investors. Buyers want prices to decrease, while investors want prices to increase. The way to achieve both objectives is to reduce the production cost, which is best done by decreasing the physical resources, or natural Capital, required to produce the goods and services.
CCMs will remove inflation and generate profits from cost savings with the need for fewer natural resources. In turn, this will lead to a circular economy.
CCMs are the most efficient way to transfer Capital. This means the criteria for project selection is no longer cost/benefit because we know the financial cost/benefit must be a maximum. It means project selection can use measures such as the planet's and people's well-being.
Modelling CCMs
Spreadsheets can model CCMs. Diagram 1 can be modelled with different parameters, including the cost of production, profit rates, and changes in profits. Stock Markets are hard to model because the market sets the value of shares, and prices appear to follow a random walk.
