36 Questions
Under the Economic Democracy Act, how often is the government estimated to calculate the amount of productive capital to be added to the economy?
Annually
What is the purpose of dividing the total capital formation increment by the current number of U.S. citizens?
To determine the per-citizen allotment of interest-free capital credit
What is the benefit to an enterprise that decides to finance new capital assets by selling newly issued shares to citizens?
No corporate income taxes on full-dividend payout shares
According to the Federal Reserve Bank of St. Louis, what was the total annual U.S. capital formation increment for 2018?
$3.955 trillion
What is the purpose of the Economic Democracy Act?
To distribute wealth among citizens without taking anything away from current owners
What is the result of dividing the total annual U.S. capital formation increment by the total U.S. population?
The per-citizen allotment of interest-free capital credit
What type of shares can an enterprise sell to citizens to finance new capital assets?
Full-dividend payout shares
What is the assumed annual per-citizen capital credit allotment used in the illustration 'Projected Citizen Wealth Accumulations Under the Economic Democracy Act'?
$10,000
What is the primary purpose of the feasibility analysis in the Capital Ownership Account process?
To evaluate the soundness of the enterprise and its management
What is the outcome of the bank's rediscounting process at the regional Federal Reserve Bank?
The bank creates new asset-backed money
What happens to the dividends received by the citizen after the COA loan is fully paid?
They become a new source of consumption income for the citizen
What is the purpose of the discounting process by the bank?
To deduct the capital credit risk insurance premium and service fees
What is the outcome of the enterprise's profits after the COA loan is fully paid?
The profits are distributed to the citizen as dividends
What is the purpose of the Capital Ownership Account?
To invest in qualified shares of the enterprise
What is the result of the money creation cycle within the Economic Democracy process?
The money is cancelled, preventing inflationary effects
What is the role of the Capital Credit Insurer in the COA loan process?
To guarantee the loan to the bank
What is the outcome of the enterprise's acquisition of new capital assets?
The enterprise increases its production of marketable goods and services
What happens to the Capital Ownership shares if they remain in the tax-sheltered Capital Ownership Account?
They are tax-exempt
What is the primary purpose of the Economic Democracy Act?
To enable every citizen to acquire shares in new productive capital
How does the government determine the annual per-citizen capital credit allotment?
By dividing the total annual capital formation increment by the current number of U.S. citizens
What is the benefit of selling newly issued shares to citizens for an enterprise under the Economic Democracy Act?
It allows the enterprise to avoid paying corporate income taxes
What is the role of the Capital Ownership Account in the Economic Democracy Act?
It acts as a tax shelter for citizens' capital ownership shares
What is the outcome of the money creation cycle within the Economic Democracy process?
Increased economic growth and productivity
What is the primary purpose of the feasibility analysis in the Capital Ownership Account process?
To assess the viability of the enterprise's capital asset project
What is the outcome of the enterprise's acquisition of new capital assets under the Economic Democracy Act?
Increased productivity and competitiveness
What is the role of the Capital Credit Insurer in the COA loan process?
It provides insurance coverage for the COA loan
What is the primary reason for the feasibility analysis in the Capital Ownership Account process?
To judge the soundness of the enterprise that needs to purchase the new capital assets
What happens to the money created in the Economic Democracy process after the COA loan is fully paid?
It is cancelled to prevent inflationary effects
What is the purpose of the bank's discounting process in the Capital Ownership Account?
To deduct a one-time premium for capital credit risk insurance and service fees
What is the outcome of the enterprise's acquisition of new capital assets?
It generates profits for the enterprise
What is the role of the Capital Credit Insurer in the COA loan process?
To add a risk premium to the principal needed to purchase the shares
What is the outcome of the enterprise's profits after the COA loan is fully paid?
The citizen receives additional dividends as consumption income
What is the primary purpose of the Capital Ownership Account?
To purchase qualified shares of the enterprise
What is the outcome of the bank's rediscounting process at the regional Federal Reserve Bank?
The regional Fed deducts an amount to cover its own actual servicing costs
What is the tax treatment of future dividends received by the citizen after the COA loan is fully paid?
They are subject to personal income taxes
What happens to the Capital Ownership shares if they remain in the tax-sheltered Capital Ownership Account?
They are tax-exempt as long as they remain in the Capital Ownership Account
Study Notes
Economic Democracy Act Overview
- The Economic Democracy Act is a national program of monetary and tax reforms that enables every citizen to acquire shares in new productive capital added to the economy each year.
- The act systematically turns non-owners into capital owners without taking anything away from current owners.
Step 1: Estimating Capital Formation
- The government estimates the amount of productive capital to be added to the economy annually.
- The total amount is divided by the current number of U.S. citizens to determine the per-citizen allotment of interest-free capital credit.
Example Calculation
- The 2018 US capital formation increment was $3.955 trillion.
- The 2018 US population was 328.9 million.
- The annual per-citizen capital credit allotment was 12,023(or12,023 (or 12,023(or10,000 in a slow growth economy).
Step 2: Financing New Capital
- An enterprise finances new capital assets by selling newly issued shares to citizens at the current market price.
- The enterprise can escape paying corporate income taxes on full-dividend payout, voting shares.
Step 3: Profits and Dividends
- The enterprise pays annual profits to each citizen's Capital Ownership Account.
- The initial profits are used to pay off the scheduled COA loans.
- Dividends above principal payments are subject to personal income taxes.
Step 4: Loan Approval and Feasibility
- The family presents "bills of exchange" for the bank's approval and acceptance.
- The lender, risk insurance company, and other entities determine the feasibility of each loan.
- Feasibility analysis judges the soundness of the enterprise and its expected profits.
Step 5: Capital Credit Insurance
- The bank guarantees to add a risk premium to the principal needed to purchase the shares.
- The premium and bank service charges are paid out of the COA loan discount.
Steps 8-10: Rediscounting and Money Creation
- The bank bundles COA loans and takes them to the regional Federal Reserve Bank for rediscounting.
- The Fed deducts an amount to cover its servicing costs and issues a promissory note to the local bank.
- The local bank creates new asset-backed money or demand deposits for the citizen's Capital Ownership Account.
Steps 13-15: Enterprise Operations and Dividends
- The enterprise acquires and puts into operation new capital to increase production of marketable goods and services.
- The enterprise makes scheduled payments of dividends to the citizen's Capital Ownership Account.
- These dividends are tax-deductible to the enterprise.
Step 16: Money Creation Cycle
- The money creation cycle ends with the original money being cancelled to prevent inflationary effects.
- The cancelled money is not backed by capital assets or marketable goods and services.
Learn how the Economic Democracy Act enables citizens to acquire shares in new productive capital, financing future capital formation and providing businesses with equity investments.
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