Re: HOMESTEAD: Rabbit trick or elegant solution?

[John Médaille <john@medaille.com>]

At 10:19 PM 7/27/2005 +0100, Rodney Shakespeare wrote:
>Brief comment interspersed in text in blue.
>----- Original Message -----
>From: "John Médaille" <<mailto:john@medaille.com>john@medaille.com>
>To: <<mailto:homestead@cog.kent.edu>homestead@cog.kent.edu>; 
><<mailto:homestead@cog.kent.edu>homestead@cog.kent.edu>
>Sent: Wednesday, July 27, 2005 9:39 PM
>Subject: Re: HOMESTEAD: Rabbit trick or elegant solution?
>
> > At 08:57 PM 7/27/2005 +0100, Rodney Shakespeare wrote:
> > >John,
> > >  1.   Your email sends a contradictory message -- on the one hand you
> > > refer (with pejorative implicaton) to a "financial rabbit trick" 
> whatever
> > > that means) but, on the other, you say (with positive implication)  "It
> > > was an elegant solution that vaulted  Taiwan from an agrarian, feudal
> > > society to an industrial powerhouse in only one generation."
> > >
> > >     So which is it -- "rabbit trick" or elegant solution?  (I am asking
> > > you separately for your Taiwan paper).
> >
> > Cannot a rabbit trick be elegant? It certainly was in this case. The
> > Kuomintang sold land it didn't own for money it didn't have and used the
> > proceeds to finance industry that didn't exist. That fits my definition of
> > both the rabbit trick AND economic elegance.
> >
>     This is gobbledy- gook.  You can't sell something you don't own -- 
> you can only purport to do so.

True. Nevertheless, they did, and some 430,000+ families ended up with 
their own land.

>You don't sell something for money you don't have, still less you don't 
>receive -- if you do, you haven't sold it.  If you don't have the money 
>you don't have the proceeds.

The nice thing about being the govmint is that you get to print the money.

>  I will read your Taiwan paper when you send it.

Sent under separate email.

> > >
> > >2.    As far as I can ascertain, you are missing the point that binary
> > >economics uses interest-free issuance (ultimately coming from the central
> > >bank) to enable capitalless people to purchase newly-issued shares.
> >
> > But the question is the price of those shares. If (and I keep asking this)
> > the returns to capital should be a lot higher than they are, as your
> > "productiveness" theory asserts, won't prices for those equities also be
> > higher?
> >   The newly-issued shares represent the cost of the expansion expected 
> to pay for itself over usually five to seven years.

That's something between a 14-20% roi.

>   As I keep saying, the shares (with full payout) can be expected to 
> become more valuable

Yes, and therefore more expensive. Why do you not wish to address this 
problem? Although, I don't know too many investments that are making 14-20%.

> > >   A worker's earnings or those of a binary beneficiary, are not used for
> > > the purchase.  Yes, those shares will eventually become very valuable.
> >
> > Right, the earnings are used to pay off the original owners (or the bank),
> > which means that the earnings are not available for expansion of the firm
> > and have to be borrowed. There simply is no way around this.
>     You are not addressing the main binary mechanism which relates to 
> newly-issued shares.  As I keep saying a new stream of interest-free 
> issuance is used.

What does that have to do with pricing?

>   A firm can always get interest-free money for expansion if it promotes 
> wide ownership.

Okay. Free money. For some. Which means that the costs go someplace else.

>  Full pay-out of earnings means that large corporations in practice 
> cannot use retained earnings for investment but must use the wide 
> ownership route..

Yes. Expropriation. If they cannot use their own money for expansion, but 
must surrender ownership, that's expropriation. I have no problem with 
that, I just wonder why you won't call it what it is.

>  Full payout is required to enable the loan to be quickly repaid and to 
> enable beneficiaries to obtain substantial capital income and is also 
> needed by the economy to achieve sustainable growth and dsitributive 
> justice on market principles. >

But it won't do that. It will force more borrowing by the company, at 
zero-interest or not it has to be repaid.

> > >
> > >  3.    You say that the use of interest-free issuance is expropriation
> > > because only one group gets the use of the money.    The present system
> > > is expropriation because it enables the existing holders of capital to
> > > deny others their right to own capital.
> >
> > The fact that the current system is expropriation doesn't mean that your
> > system isn't also expropriation. Mind you, I don't mind it being
> > expropriation, I just think we ought to call that spade by its real name.
> >
> > >  Binary economics stops that expropriation.
> > >
> > >     You either agree with a genuine wide ownership (not least to turn
> > > Say's Theorem into Say's Law) or you do not.
> >
> > That's not the issue. Everybody here agrees with wide ownership, but we 
> all
> > have different ideas on how to achieve that. Because you say a plan will
> > work doesn't mean it will work. I am still baffled as to why an 
> increase in
> > returns would not lead to an increase in price.
> >
> > >
> > >     The use of interest-free issuance has been extended to public sector
> > > capital projects, small/start-up businesses and green capital projects.
> >
> > You mean like the SBA loans? In fact, there has been a lot of corruption
> > and inefficiency in that program, no?
>     The corruption, or absence of it, will be the same as now, except 
> that in the binary economy there is an extra layer of review before 
> investment.

Ah, that will fix everything.

>  Collateral has to be provided, loans repaid.

Then maybe it will lead to loss of ownership. Unless the collateral is bogus.

> >
> > >
> > >     If members of this elist (or of Ownership) are not unequivocably 
> bent
> > > on an extension of capital ownership,  I am wasting my time in engaging
> > > in corrspondence.
> >
> > But everybody *does* want more capital ownership. Disagreement with you is
> > not disagreement on this principle. Why don't Binarians get that?
>
>     So why don't you say precisely how your proposals will, in practice, 
> achieve wide ownership for all individuals in the economy?    And say, if 
> you can,  how they will achieve more wide ownership than the binary ones.

Well, I just sent you something that led to ownership for more than 400,000 
families.

>
>And if your proposals don't mean capital ownership for all people, then 
>you are wasting my time.

And so far, after 30 years, ESOPs have not made a crucial difference in the 
economy.


John C. Médaille

"A dead thing can go with the stream...
but only a living thing can go against it."
         -G. K. Chesterton
http://www.medaille.com/distributivism.htm
john@medaille.com

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