by Rick Osbourne November 22, 2020

Capital (as opposed to consumer) credit is the kind of credit that serious investors are issued in order to purchase wealth-producing capital assets such as stocks, bonds, commercial real estate, machinery, copyrights, and patents, etc. It’s a variety of credit that is issued with a relatively low interest rate that allows the investor to pay off the loan in a relatively predictable amount of time.

And once paid off, these wealth-producing capital assets continue paying out dividends, which in turn create a passive, residual income that requires nothing more from their owners than the time and effort required to endorse and deposit dividend checks.

If you think that sounds like a pretty sweet deal, you’d be 100% right. The problem however is that in order to secure a capital credit loan, investors must be able to prove that they don’t really need the money. This proof comes in the form of COLLATERAL ASSETS which the bank can confiscate if the loan is not repaid in accordance with the terms of the loan agreement. In other words, investment bankers are very conservative old codgers and they tend to minimize their risk by making extremely secure loans.

The bigger problem is that over 90% of Americans currently LACK THE COLLATERAL required to gain access to these low interest, low risk, capital credit loans. That is to say, over 90% of Americans LACK THE OPPORTUNITY to participate in any significant way, on the ownership side of the economy where almost all the new wealth is being generated.

As the result, over the past four decades, the wealth gap between the few at the top and the many at the bottom is wider and more toxic than at any time since the 1929 stock market crash and the great depression that followed in its wake. This dilemma could accurately be called economic COLLATERAL DAMAGE, and it undermines any possibility of a genuine political democracy, a government of the people, by the people, and for the people.

How Can We Rectify This Toxic Situation?

The question at this point becomes, how can we rectify this toxic disparity and make sure that every man, woman and child in the US (regardless of race, gender religion, age, political or sexual orientation) has the realistic opportunity to participate in the ownership side of the American economy where almost all the new wealth is being generated, while creating no government and no consumer debt. In that light consider the following verifiable FACTS.

On average, the American economy grows at the rate of $4,000,000,000,000 (yes that’s 4 trillion dollars) annually. When divided by 330,000 people (our current population) that translates into about $12,000 for every man, woman, and child in America. But generally speaking, the beneficiaries of this annual growth are currently limited to those people who can afford to buy the stocks, bonds, real estate, and technological developments that account for this growth.

To make matters worse, this was the case long before the current pandemic oriented economic crisis raised its ugly head. In response to millions of workers losing their incomes and healthcare due to the virus, the Federal government has increased unemployment benefits for several months, and issued so called “stimulus checks ($1,200)” to millions of people in an effort to artificially jump-start demand and to prevent the ship of state from sinking into oblivion.

Unpalatable But Necessary Steps

In taking these unpalatable but necessary steps the government has significantly increased the already massive debt load, which means it’s a short-term not a long-term solution. The hope of course is to artificially resuscitate demand, which in turn should recreate jobs and get we the people back to work and lead us all back to where we were before the virus struck.

The problem is that, even before the virus struck, we the people were not in a very good place. Even before the virus erupted over half of all Americans were living paycheck to paycheck, unable to afford a $500 bump in the road without having to borrow money in order to pay for it. Things are dramatically worse than they were several months ago before the virus. But the place we were is still not the place to which we the people are longing to return. So, what can we do?

The $4 Trillion Dollar Idea That Creates No Debt!

Now let’s recall that on average, the American economy grows at the rate of $4 trillion dollars annually. Once again, that translates into about $12,000 annually for every man, woman, and child in America. But the beneficiaries of this annual growth are those who can afford to buy stocks, bonds real estate, and new technology. This generally excludes we the people.

The question I want to raise now is, how can we make sure the average American has systematic access to the ownership side of the economy, where MOST OF THE WEALTH IS BEING GENERATED? How can the average Joe gain access to that $4 trillion dollars of predictable growth in order to generate a second stream of investment income, while eliminating the fear and instability that so many Americans suffer from in today’s incredibly imbalanced economy?

Consider the Following Possibility…

• What if the Federal Reserve, through local banks

• issued $12,000 of FULLY INSURED CAPITAL CREDIT LOANS

• to every single American citizen (man, woman, and child regardless of race, gender, religion, sexual orientation, or economic status) annually

• at 0% interest, and…

• allowed the loan to be repaid via FUTURE, PRE TAX EARNINGS/DIVIDENDS – NOT FROM PERSONALSAVINGS

• along with a stipulation that these funds could only be used to purchase shares of new and transferred capital assets that were predicted to generate enough future profits to pay for their purchase and to create predictable, stabilizing, residual incomes for their owners?

This strategy, known as “Capital Homesteading,” would cost American taxpayers NOTHING. It creates NO GOVERNMENT DEBT! It creates NO CONSUMER DEBT! And, rather than government debt-backed currency, the purchase would be backed (collateralized) by real, productive, private-sector assets

And it WOULD NOT BE INFLATIONARY. All money created would be instantly backed (collateralized) by the full value of private sector assets that citizens would receive insured loans in order to purchase. Citizens would actually be purchasing newly issued, full dividend payout, voting shares of companies that need new capital assets in order to grow.

What Capital Homesteading Will Do However Is…

• Give every American systematic access to the ownership side of the American economy, where most of our nations’ wealth is being generated.

• Create a residual stream of income for all Americans thru ownership – not thru labor

• END AMERICAN POVERTY AND HEAL THE RACIAL DIVIDE

• Stabilize family life and eliminate one really big reason for terminating a pregnancy.

• Minimize the mental illness known as GREED that so poisons American culture

• In the long run it will help to democratize the free market,

• Create millions of new taxpayers, thereby DILUTING and REDUCING the TAX BURDEN on those who actually pay taxes

• Minimize the growing threat of artificial intelligence in Americas’ job market

• Balance the national budget,

• And pay off our massive and ever-growing national debt, etc.

One Simple Example

Here’s one simple example of how Capital Homesteading would benefit the next generation of Americans. If implemented, by age10 every child would have had $120,000 (10 times $12,000) invested on their behalf and paying dividends. By age 18 well over $200,000 would have been invested and be generating dividends that would easily pay for a debt-free college education along with all the benefits that would follow in its wake. Absolutely a win/win for everyone!

In this moment of political division and strife Capital Homesteading literally pays all Americans to pull together, at the same time, in the same direction, towards the same goals! It translates mere political talk (such as…we’re all in this together) into real live, results driven action!

It Systematically Counteracts Concentrated Wealth/Greed!

Over time, each American citizen will accumulate more equity, more residual income, and benefit from their investment income in a way that only the wealthy can today. As the result, the need for federally backed social safety net programs (i.e. social security, Medicare, Medicaid, food stamps) will gradually fade into the sunset. More people will be able to pay taxes, which in turn decreases the burden on those among us who still pay taxes. It systematically counteracts concentrated wealth/greed as it gradually democratizes America’s free-market economy!

Yet This Free Market, Trickle-Up, Non-Socialistic Solution is Being Totally Ignored!!!

If the Obama administration (or any of its predecessors) had implemented Capital Homesteading, today’s COVOD 19/Unemployment crisis would not be a crisis. We the people could afford stay at home and still have sufficient income to weather a much less severe storm. Yet we’re less than 70 days from the next Presidential election and Capital Homesteading has been totally ignored by Biden/Harris as well as Trump/Pence. My question is WHY?

Capital Homesteading In Detail

I confess, this commentary has been a generalized portrait in dire need of more detail. So, for a full and detailed explanation of how this strategy could be implemented, go to CESJ.ORG and check out the concept that Dr. Norman Kurland calls the CAPITAL HOMESTEADING ACT. It’s an ingenious idea whose time is long overdue. And it’s one very good thing that could actually come to fruition as the result of this horrific, COVID 19 crisis.

Addendum…

UBI vs. Capital Homesteading Comparison

Stimulus checks are effectively a short-term form of Universal Basic Income (UBI), an idea which has been advocated by among others, former presidential hopeful and serial entrepreneur Andrew Yang, as well as Mark Zuckerberg of Facebook, and Elon Musk of Tesla. Although the suggested annual amount of money issued ($12,000 annually) is the same as Capital Homesteading, that’s where the similarity ends. Check out the differences.

1. Since it issues insured capital credit loans that are paid back via pre-tax future earnings, and can only be used to buy wealth producing capital assets, Capital Homesteading creates NO GOVERNMENT DEBT and NO COMSUMER DEBT! UBI and stimulus checks create government debt that will eventually be paid back by we the people (not the 1% who are spectacular at avoiding taxes) in the form of higher taxes.
2. Capital Homesteading systematically creates universal capital ownership opportunity and access to the means of acquiring wealth producing capital assets. UBI does not.
3. Capital Homesteading systematically finances predictable and sustainable growth of the economy. UBI does not.
4. Capital Homesteading systematically enables individual citizens to become economically empowered and liberated through capital ownership. UBI does not.
5. Capital Homesteading systematically enables citizens to become economically independent of the government. UBI does not.
6. Capital Homesteading systematically generates mass purchasing power through ever-broadening citizen ownership of income producing capital. UBI does not.
7. Capital Homesteading systematically creates new owners of advanced technologies and green growth assets UBI does not.
8. Capital Homesteading systematically creates a growing tax base to pay the costs of government, thereby eliminating deficit spending and eventually paying off the currently massive government debt. UBI does not.
9. UBI/Stimulus checks are simple and immediate. That’s their strength.
10. Capital Homesteading requires some time (usually a number of years) in order for benefits to accumulate. That’s why UBI should start immediately and be phased out over time in favor of Capital Homesteading.

Rick Osbourne is a former public school teacher who has spent the past 20 years of his life writing for a living. His primary interests include politics (he’s an independent), psychology (in particular Dr. Erich Fromm), economics (a Center for Economic and Social Justice/CESJ.ORG board member), and childhood obesity prevention (www.pullyourownweight.org). He’s married and resides in Naperville, IL with his wife of almost 48 years, Pamela. He can be reached via email at osbourne.rick@gmail.com

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