52 Questions
What is the primary goal of the Economic Democracy Act?
To provide access to credit for acquiring productive capital as a fundamental right of citizenship
How would citizens pay off their purchases of newly issued shares under the Economic Democracy Act?
Through tax-deductible dividends of the companies
What is the main advantage of Capital Credit Insurance?
It acts as a substitute for traditional collateral requirements
What is the main obstacle to extending access to meaningful capital ownership among the poor and middle class?
Lack of access to credit due to collateral requirements
What would be the long-term benefit of the Economic Democracy Act for citizens?
They would have a decent and regular income from the earnings of their accumulated capital
How would the risk of bad loans be covered under the Economic Democracy Act?
Through capital credit insurance
What is the purpose of commercial loan default insurance and reinsurance pools?
To reduce the risk of bad loans
What would citizens be able to pass on to their children under the Economic Democracy Act?
Income-producing property
What type of insurance can commercial lenders arrange for to mitigate the risk of loan default?
CCRC loan default insurance
What is the primary benefit of bringing insured loan paper to the discount window of the regional Federal Reserve bank?
To access new currency or increase the bank's reserves
What is the purpose of the discount fee charged by the Federal Reserve?
To cover the Federal Reserve's overhead in administering the 'pure credit' system
What is not involved in the process of bringing insured loan paper to the discount window?
Taxpayer funds
What type of entity would issue new equity to back the loan, guaranteeing high pretax-dividend payouts?
Company issuing new equity
What is the primary purpose of the CCRC loan default insurance?
To reduce the risk of loan default
What is the estimated cost of the discount fee charged by the Federal Reserve?
0.5% or less
What is the name of the system being described in the content?
Pure Credit System
What percentage of a defaulted loan would capital credit insurance cover according to one suggested option?
80% to 90%
What would be the primary function of the Capital Credit Reinsurance Corporation (CCRC)?
To reinsure commercial capital credit insurers of banks and other lenders
What would the Capital Credit Reinsurance Corporation (CCRC) charge participating lending institutions?
An annual premium of 0.5% or higher
How would the soundness of the share-issuing company affect the capital credit insurance premium?
The premium would decrease with the company's earning history
What is the purpose of the portfolio reinsurance issued by the CCRC?
To offset the lack of diversification in most ESOPs
What is the purpose of commercial portfolio insurance?
To protect worker-shareholders against the loss of all their retirement assets
What determines the premium costs for commercial portfolio insurance?
The company's age and profitability
What is the purpose of the Capital Ownership Account?
To accumulate assets that can be diversified
Why would the premium costs to cover shares in high-risk, start-up companies be high?
Because they have a high risk of default
What would happen to the capital credit insurance premium if the company issuing the shares did not earn enough profits?
The premium would increase
What is the primary purpose of the Capital Credit Reinsurance Corporation (CCRC)?
To reinsure commercial capital credit insurance companies
How would the soundness of the share-issuing company affect the capital credit insurance premium?
The premium would decrease for companies with a solid earnings history
What type of insurance can the CCRC offer to participating lending institutions?
Portfolio reinsurance for commercial insurers
Why would the premium costs to cover shares in high-risk, start-up companies be high?
Because start-up companies have a higher chance of defaulting
What determines the premium costs for commercial portfolio insurance?
The company's earnings history and industry
What is the purpose of portfolio reinsurance issued by the CCRC?
To insure assets accumulating in capital homesteading accounts
What is the estimated percentage of a defaulted loan that capital credit insurance might cover according to one suggested option?
80%
What is the primary benefit of having capital credit insurance?
It protects worker-shareholders against the loss of retirement assets
How would the CCRC's operational costs be covered?
Through premiums on insurance programs offered to commercial lenders
What is the primary benefit of having commercial lenders arrange for CCRC loan default insurance?
To mitigate the risk of loan default and bring the loan paper to the discount window
What is the purpose of the Capital Ownership Account?
To accumulate assets for retirement
What is the purpose of the discount fee charged by the Federal Reserve?
To cover the Federal Reserve's overhead in administering the 'pure credit' system
What would happen to the loan paper after it is insured by the CCRC?
It would be brought to the discount window of the regional Federal Reserve bank
What is the primary function of the CCRC?
To manage the risk of loan default through reinsurance
What is the estimated cost of the discount fee charged by the Federal Reserve?
0.5% or less
What is the purpose of bringing insured loan paper to the discount window of the regional Federal Reserve bank?
To access new currency or increased liquidity
What is not involved in the process of bringing insured loan paper to the discount window?
All of the above
Who would issue new equity to back the loan, guaranteeing high pretax-dividend payouts?
The company issuing the new equity
What is the primary objective of enshrining access to credit for acquiring productive capital as a fundamental right of citizenship?
To enable citizens to acquire income-producing property
How would the establishment of commercial loan default insurance and reinsurance pools address the 'Catch-22' situation faced by the poor and middle class?
By allowing citizens to purchase newly issued shares without using their own assets as collateral
What is the primary benefit of allowing citizens to purchase newly issued shares with interest-free capital credit?
It would enable citizens to receive a decent and regular income from the earnings of their accumulated capital
What is the primary role of the central banking system in the Economic Democracy Act?
To regulate the commercial loan default insurance and reinsurance pools
What is the primary advantage of the Capital Credit Insurance over traditional collateral requirements?
It enables citizens to access credit without using their own assets as collateral
How would the Economic Democracy Act address the issue of wealth concentration among the rich?
By enabling citizens to become owners of income-producing property
What is the primary objective of the tax-deductible dividends paid by companies to citizens who purchase newly issued shares?
To enable citizens to pay off their purchases of newly issued shares
What is the primary benefit of the Economic Democracy Act for the economy?
It would create new opportunities for economic growth and job creation
Study Notes
Overcoming the Collateral Barrier to Capital Ownership
- The Economic Democracy Act aims to make access to credit for acquiring productive capital a fundamental right of citizenship, like the right to vote.
- This act would enable all citizens to purchase newly issued shares representing newly added technology and structures using interest-free capital credit.
- These purchases would be paid off with tax-deductible dividends of these companies, without reducing the income of citizens or workers.
Capital Credit Insurance: A Substitute for Traditional Collateral
- The collateral required by lenders from borrowers creates a "Catch-22" situation, where "you need money to make money" and access to capital is limited to those who already have assets.
- The Economic Democracy Act proposes the establishment of commercial loan default insurance and reinsurance pools, funded by risk premium portion of service charges, as a substitute for traditional collateral.
- The full faith and credit of the Federal Government would not stand behind these bank loans or insurers of capital credit in the event of default.
The Capital Credit Reinsurance Corporation and Commercial Capital Credit Insurance Companies
- A Capital Credit Reinsurance Corporation (CCRC) would be established as a backup insurer of last resort, self-financed with no taxpayer funds or government underwriting involved.
- The CCRC would offer capital credit loan default insurance to commercial capital credit insurers of banks and other lenders to ESOPs and other pure credit vehicles.
- The CCRC would charge participating lending institutions an annual voluntary premium (0.5% or higher) to insure against losses on loans offered to borrowers through Capital Ownership Accounts (COAs) and other vehicles.
Capital Credit Insurance Components
- Differential risk categories, with adjustable premium rates, would be set up for grouping participating corporations, based on factors such as maturity, earnings history, and industry.
- The CCRC could also offer portfolio reinsurance issued by private insurers, similar to the pension insurance offered by the Pension Guarantee Insurance Corporation.
- Commercial insurers would insure assets accumulating in capital homesteading accounts against the "downside risk" for an additional premium, guaranteeing a high percentage of the initial values of shares purchased.
Discount Window and Loan Default Insurance
- Commercial lenders making loans to COAs, ESOPs, and other vehicles would have the option to arrange for CCRC loan default insurance on the loan paper.
- Once insured, the loan paper could be brought to the discount window of the regional Federal Reserve bank for a discount fee, with no taxpayer funds, interest subsidies, or Treasury borrowings involved.
Overcoming the Collateral Barrier to Capital Ownership
- The Economic Democracy Act aims to make access to credit for acquiring productive capital a fundamental right of citizenship, like the right to vote.
- This act would enable all citizens to purchase newly issued shares representing newly added technology and structures using interest-free capital credit.
- These purchases would be paid off with tax-deductible dividends of these companies, without reducing the income of citizens or workers.
Capital Credit Insurance: A Substitute for Traditional Collateral
- The collateral required by lenders from borrowers creates a "Catch-22" situation, where "you need money to make money" and access to capital is limited to those who already have assets.
- The Economic Democracy Act proposes the establishment of commercial loan default insurance and reinsurance pools, funded by risk premium portion of service charges, as a substitute for traditional collateral.
- The full faith and credit of the Federal Government would not stand behind these bank loans or insurers of capital credit in the event of default.
The Capital Credit Reinsurance Corporation and Commercial Capital Credit Insurance Companies
- A Capital Credit Reinsurance Corporation (CCRC) would be established as a backup insurer of last resort, self-financed with no taxpayer funds or government underwriting involved.
- The CCRC would offer capital credit loan default insurance to commercial capital credit insurers of banks and other lenders to ESOPs and other pure credit vehicles.
- The CCRC would charge participating lending institutions an annual voluntary premium (0.5% or higher) to insure against losses on loans offered to borrowers through Capital Ownership Accounts (COAs) and other vehicles.
Capital Credit Insurance Components
- Differential risk categories, with adjustable premium rates, would be set up for grouping participating corporations, based on factors such as maturity, earnings history, and industry.
- The CCRC could also offer portfolio reinsurance issued by private insurers, similar to the pension insurance offered by the Pension Guarantee Insurance Corporation.
- Commercial insurers would insure assets accumulating in capital homesteading accounts against the "downside risk" for an additional premium, guaranteeing a high percentage of the initial values of shares purchased.
Discount Window and Loan Default Insurance
- Commercial lenders making loans to COAs, ESOPs, and other vehicles would have the option to arrange for CCRC loan default insurance on the loan paper.
- Once insured, the loan paper could be brought to the discount window of the regional Federal Reserve bank for a discount fee, with no taxpayer funds, interest subsidies, or Treasury borrowings involved.
This quiz is about the Economic Democracy Act, which aims to make access to credit for acquiring productive capital a fundamental right of citizenship. It enables citizens to purchase newly issued shares using interest-free capital credit.
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