A few years back a member of the CESJ board of directors expressed concern over the Economic Democracy Act and the necessity of shifting new capital formation from past savings to future savings. There was also the issue of phasing out governments monetizing deficits by emitting bills of credit (the constitutional form of “creating money” out of nothing).
She was naturally worried people like her, who had saved all their lives for retirement would not live long enough to take real advantage of being able to accumulate dividend-paying equity shares acquired and paid for with future profits on the shares. Further, since the bills of exchange backing the new money created to acquire the shares would be discounted instead of interest-bearing, the market rate of interest would fall. She was afraid the interest rate on the safe and secure government bonds into which she and her friends had put their retirement savings would fall, and their retirement incomes be greatly reduced.
Finally, there are many private equity firms — investment bankers, venture capitalists, that sort of thing — whose whole business consists of moving existing savings around, putting savers and businesses together so savers get a good return on their savings, and businesses can be adequately financed. They are naturally cautious, even suspicious of a proposal that — as presented in a thumbnail sketch or “elevator speech” — has the potential to eliminate their role in the economy.
These are legitimate fears — but unwarranted. Under the Economic Democracy Act, people with existing savings stand to benefit even more than people without savings who would be empowered to purchase newly formed capital. This is because the Economic Democracy Act would be open to everyone, with equal access to the opportunity and means to acquire and possess newly formed, financially feasible capital. Which means everyone, regardless of their current amount of savings or none, will be eligible to participate in the ownership of newly formed financially feasible capital.
. . . and there is the opportunity for people with past savings. The Economic Democracy Act applies ONLY to financially feasible new capital, and that means, essentially, “blue chip” companies with an established and sound financial history. There are a lot of those, but also a lot of others whose shares would not qualify for participation in the Economic Democracy Act. Perhaps the risk is too high, or they do not have a good financial history, or they are start-ups, or any one of several reasons.
Such enterprises could be very good companies with great potential, but not quite what is needed to qualify for shares purchased with one’s capital credit allotment. And that provides the opportunity for people with past savings.
This opportunity is made even more attractive due to the fact the Economic Democracy Act requires that governments’ ability to monetize deficits by emitting bills of credit would be phased out. This might take a very long time, decades or more, but it is essential, both to reestablish fiscal responsibility for governments and return power to the citizen-taxpayers.
It also means that governments are going to have to get money from somewhere other than emitting bills of credit, and that means taxation and borrowing from existing savings. Until the tax base is rebuilt, additional money for government will therefore necessarily come out of past savings. This will decrease the amount of past savings available for anything else, driving up the price . . . which means that people with existing savings will benefit in two ways:
· Governments will have to pay more interest on the money they borrow, benefiting people who purchase government bonds.
· Private sector companies will have to pay more interest on the money they borrow, benefitting savers who invest in the private sector.
There will probably also be companies that do not want to share ownership through the Economic Democracy Act and will also have to go to existing savers for financing. This, too, will drive up market-determined interest rates — and provide an incentive to participate in the Economic Democracy Act, but that is a subject for another day.
Today’s investment banking houses and venture capitalists should therefore be among the biggest champions of the Economic Democracy Act, as it would greatly expand the market for their services and at the same time increase the return on past savings immensely. So, how would you “sell” the Economic Democracy Act to an investment banker or a venture capitalist? We asked AI that question, and this is what we got:
The Economic Democracy Act is not a redistribution plan—it’s a scalable growth strategy that expands the investable consumer base and enhances capital formation across the entire economy. For private equity, it represents a unique opportunity: a policy framework that broadens demand-side capacity without increasing taxes, regulation, or debt burdens.
Here’s the value proposition:
Bigger Consumer Markets: By enabling every citizen to earn capital income through ownership — via insured, self-repaying loans for capital assets — the EDA effectively injects new capital income into the hands of millions. That translates to more stable and diversified consumer demand across sectors — key to driving revenue in portfolio companies.
More Capital Formation = More Deal Flow: The Act monetizes new capital investment through non-inflationary credit using existing tools like the Federal Reserve’s Section 13(2) authority. That creates more funding for business expansion and innovation — fertile ground for PE investments.
Systemic Risk Reduction: As capital ownership and income become more widely distributed, macroeconomic shocks tied to wealth concentration and low consumer liquidity are mitigated. This enhances long-term market stability — good for valuations, exits, and asset preservation.
Ethical Edge, Strategic Advantage: As ESG and stakeholder capitalism continue to shape investment narratives, supporting policies that expand ownership, and opportunity aligns with forward-thinking impact strategies — without sacrificing returns.
Private equity helped build the modern financial system. The Economic Democracy Act is your chance to help upgrade it — by making capitalism more sustainable, more inclusive, and ultimately, more profitable.
So, the next time you’re in an elevator with an investment banker or a venture capitalist, you know exactly what to say. . . .
