Economic Democracy Act: Money Creation and Investment

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Questions and Answers

What is the primary goal of the Economic Democracy Act?

To increase corporate income taxes

To provide loans to small businesses

To enable every citizen to acquire shares in new productive capital (correct)

To create a socialist economy

How often does the government estimate the amount of productive capital added to the economy?

Quarterly, bi-annually, or annually (correct)

Only once a decade

Monthly

Every five years

What is the purpose of dividing the total capital formation increment by the total number of U.S. citizens?

To determine the per-citizen capital credit allotment (correct)

To calculate the national debt

To set the federal budget

To determine the number of new jobs created

What is the benefit to an enterprise that finances new capital assets by selling newly issued shares to citizens?

The ability to escape paying corporate income taxes on full-dividend payout, voting shares Signup and view all the answers

What is the purpose of the Economic Democracy Act?

To enable every citizen to acquire shares in new productive capital Signup and view all the answers

What is the result of dividing the total annual US capital formation increment by the total US population?

The per-citizen capital credit allotment Signup and view all the answers

What is the approximate per-citizen capital credit allotment according to the illustration?

$10,000 Signup and view all the answers

What type of shares are issued by an enterprise to finance new capital assets?

Full-dividend payout, voting shares Signup and view all the answers

What happens to future dividends not used to repay a Capital Ownership loan?

They are taxable at the personal level Signup and view all the answers

What is the purpose of the feasibility analysis in the Economic Democracy Act?

To judge the soundness of the enterprise and its management Signup and view all the answers

What happens to the capital credit allotment when it is used to purchase qualified shares of the enterprise?

It is used to cover the one-time cost of capital loan insurance and bank service charges Signup and view all the answers

What is the purpose of the discounting process in the Economic Democracy Act?

To deduct from the total loan principal a one-time premium for capital credit risk insurance and service fees Signup and view all the answers

What happens to the enterprise's profits under the Economic Democracy Act?

They are used to pay off the scheduled COA loans Signup and view all the answers

What is the purpose of the Capital Ownership Account?

To purchase qualified shares of the enterprise Signup and view all the answers

What happens to the citizen's COA loan once the principal payments are fully paid?

It is converted into a consumption income Signup and view all the answers

What is the purpose of the regional Federal Reserve Bank in the Economic Democracy Act?

To take the bundled COA loans for rediscounting Signup and view all the answers

What is the result of the money creation cycle within the Economic Democracy process?

The cancellation of the original money Signup and view all the answers

What is the purpose of the Capital Credit Insurer in the Economic Democracy Act?

To add a risk premium to the principal needed to purchase the shares Signup and view all the answers

Study Notes

The Economic Democracy Act (EDA)

A national program for monetary and tax reforms aimed at enabling every citizen to acquire shares in new productive capital added to the economy each year
Systematically turns non-owners into capital owners without taking away from current owners

Capital Formation and Allotment

Government estimates annual productive capital added to the economy in private and public sectors
Dividing the total amount by the number of citizens determines the per-citizen allotment of interest-free capital credit
Example: 2018 annual US capital formation increment was $3.955 trillion, divided by 328.9 million citizens equals $12,023 per citizen

Financing Capital Assets

Enterprises sell newly issued shares to citizens to finance new capital assets
Enterprises can escape corporate income taxes on full-dividend payout, voting shares
Citizens purchase shares through tax-sheltered Capital Ownership Accounts (COAs)

Capital Ownership Accounts (COAs)

Citizens set up individual COAs with banks to invest in qualified shares
COAs are tax-exempt as long as shares remain in the account
Dividends above loan principal payments are subject to personal income taxes

Loan Process

Citizens present "bills of exchange" to obtain shares for each COA loan
Feasibility analysis determines loan soundness based on enterprise quality and markets
Bank sets up checking accounts and issues promissory notes for each loan
Bank deducts premiums for capital credit risk insurance and service fees from the loan principal

Risk Insurance and Guarantee

Bank guarantees repayment to Capital Credit Insurer and adds risk premium to principal
Premium and service fees are paid from the COA loan discount

Federal Reserve Involvement

Bank takes bundled COA loans to the regional Federal Reserve Bank for rediscounting
Federal Reserve issues a promissory note and creates new asset-backed money for the local bank

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Description

Learn about the Economic Democracy Act, a national program of monetary and tax reforms that enables citizens to acquire shares in new productive capital. Understand how money is created, invested, and repaid in this system.