Simplified Bookkeeping

When we trade, we exchange goods or services for money. The goods or service have a value, and we represent value with money. With simplified bookkeeping, if we receive the money at the same time as the goods or service, we get money with a value X. If we receive the money before delivering the goods or service, we get X+Y in money and if later we get X-Y in money. Alternatively, we could get the same amount of money and less or more goods and services. Y may depend on time and is independent of any other agreement.

Using this approach to bookkeeping simplifies accounting because it removes the time value of money. Removing the time value of money eliminates money markets as we know them today. The value of money tokens is zero as money is a way to exchange value, not a store of value. Money in the bank is savings and the savings have a value, not the money symbol.

Accounts across entities are tightly linked with transactions. Doing this further simplifies accounting because we agree on value, and it remains fixed. The amount of money transferred varies but as money is not a store of value the books are unaffected.

This approach eliminates most interest and money inflation as each agreement contains rules around the calculation of Y to account for them. With modern technology the calculation of Y is a small cost and is much less than the expense of markets, interest, complicated book-keeping and inflation. It will reduce the costs of operating a modern economy by at least 50%.

We can make the change to simplified bookkeeping transaction by transaction as a transaction using simplified bookkeeping is compatible with existing bookkeeping.

The first transaction made using simplified bookkeeping were the fees paid to my bookkeeper Tailored Accounting.

Rent and Buy Mortgages for Public Housing


Using debt financing doubles the cost of owning a home.

By changing the way, we repay loans we can eliminate both interest and inflation, and the buyer of a house does not have to rely on capital appreciation for the investment to hold its value. For public housing, the savings are transferred over time to the occupants of public housing.

Rent and Buy Mortgages eliminate interest, remove the effect of inflation so removing the need for the house to appreciate in value.  Using Rent and Buy for public housing provides a way for people with low incomes and few resources to gain a deposit for their own home.

Rent and Buy Mortgages provide alternative funding so that anyone who can afford to rent can afford to buy their own home.

How they work

The details will vary for each operator of a public housing project.  A typical arrangement follows.

Saver investors purchase Rent and Buy Mortgages at an agreed rate defined at the time of purchase. That determines the amount they will get in return for their capital. Typically this will be an 6% inflation-adjusted annuity.

For example, an investor purchases an annuity for $100,000. They decide to start drawing down the capital after twenty years. At that time the annuity value is twenty times 6% times $100,000 plus $100,000 all adjusted for inflation or $220,000 with no inflation. The investor now draws that down over a period of thirty years at $11,000 per year. Alternatively, they could draw it down at the rate of $22,000 over fifteen years.

If the investor does not start drawing an annuity the rent money collected is invested in mortgages on other properties.

The investor can sell their mortgages on a secondary market. When they sell they get cash and pay tax on any increase in value over the original $100,000.

Occupants of dwellings buy part of the mortgage on their house each time they pay rent. For public housing, the rent paid is determined by the renter’s ability to pay. In return, the tenants look after the dwelling and pay for the utilities and operating costs.

Renters have the option of purchasing all the mortgages at any time. Renters accumulate mortgages, but they cannot sell any mortgage of the dwelling in which they reside until they leave.  When they leave they have access to the mortgages they own to use as a deposit on a new home.

Over time the total amount of rent paid is equal to the total amount of money returned to investors.

What it looks like to Renters and Investors

Renters think of themselves as home buyers as they are accumulating mortgages (ownership) over the property. Investors think of themselves as purchasing a flexible high-value inflation proof property backed annuity.

What does it look like to the government

The government supplies the governance, executive oversight and initial capital as they do now with public housing. They set the rules on how much renters pay and the return on investment. The government is the initial mortgage holder of properties it builds or buys.  It sells those mortgages to renters and investors as the investment moves into private hands. The sales enable it to purchase and build more public housing if it is needed.

As investors and renters all acquire mortgages it is expected governance will move to all the mortgage owners.

What does it look like to the operator

The operator will operate as a bank except it takes no responsibility for the money because it does not create debt. It does what most people think banks and real estate people now do. They take money from savers and use it buy properties on behalf of the savers and rent them out.

The government can be the operator but they are likely to outsource the operations to organisations with expertise in real estate rentals and issuing mortgages.


Setting Electricity Price by Consensus

Ross Gittens in his recent article in Fairfax press outlines four market-based approaches to setting the price of electricity. All assume there is a market, and the market sets the price. There are no markets setting prices. The prices are regulated, and more regulation moves us further from the market ideal. All attempts at market-based reform are expensive and open to gaming and manipulation.

A lower-cost, difficult to game approach is to set prices by consensus and remove interest costs and the cost of inflation. We do this by coming to an agreement on prices. We, the consumers, agree to fund infrastructure and buy electricity from a supplier, if they give us a high discount on the electricity they supply.

A few quick calculations show that using this approach reduces the cost of providing electricity from long-term low-operating cost renewables. It is cheaper than from high-operating-cost existing fossil fuel plants. Discounts provide a return on investment, and the cost of interest and inflation goes away.

The mechanics of changing to this approach are remarkably simple and can be deployed and operating almost immediately. The billing and operations of existing systems remain in place. What will happen is that renewables will replace fossil fuel plants as fast as we can build them.

Pricing by Consensus

Economic theory has the concept of price setting through the use of markets.

Market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. (Wikipedia)

Markets require many buyers and sellers all acting independently to establish a price. In monopoly markets, there is only one seller so it is hard to use markets to set prices. Typically for natural monopoly services, like water, pricing regulators set prices. Regulators often set prices by assuming there is a market and working out the market price. Doing this emphasises price, consumption, opportunities to on-sell water, government need for taxation and profits. Sustainability, demand management, environmental factors, and end customer value have little influence on prices.

Instead of a fictitious market we can establish prices through consensus between buyers and the monopoly seller. The monopoly seller can set the price, as they see fit, to maintain a safe, sustainable supply of water. They know how much it costs to provide the water supply, and they know how much they need to charge to regulate demand.

In most cases, the cost of providing water is lower than the prices required to control usage, and the water monopoly generates profits. In most cases the cost of funds to build infrastructure dominates costs. What tends to happen is the owner of the water authority is a government. They share the profits between the providers of funds by paying interest and themselves through taxes and charges.

A consensus approach between the monopoly supplier and consumers can reduce the total cost by removing the cost of interest and inflation.

Rewarding buyers of water for pre-paying their future invoices with substantial discounts helps achieve consensus. Rewarding small per head consumers of water with the right to buy at lower prices helps reach an agreement by being a fair use of a common resource.

Removing the cost of interest and inflation typically halves the cost to a community of providing water services. It results in sustainable supplies of high-quality water and provides governments with funding for other community projects. It pays for the discounts and rewards.

The Money Monopoly

Most of the savings for using Water Rewards come because of funding without using debt. The supply of money through debt is a regulated monopoly. Money markets are a market mechanism built because of the money monopoly. Without debt and the associated interest, there is no money market because interest makes money a store of value.

With Water Rewards, there is no need to charge interest because investors get a return on investment with discounts on pre-payments. It is the replacement of debt with pre-payments with discounts that reduce costs.

We can replace any debt in any system with pre-payments. Doing this saves the cost of interest and saves the effort of maintaining debt (money) markets. Debt markets and other financial markets cost a lot to operate. Pre-payments remove those costs.

Pre-payments are different to a futures market. A futures market is a market in an unknown value of a commodity. Pre-payments are unrelated to the value of the goods or service at the time of use. Pre-payments retain their value. There are markets in pre-payments, but the pre-payment has a known fixed value. The market does not set the price. It is set by the fixed discount rate and other rules established through political consensus.

Examples of debt replacement

Each system will vary in the best way to operate.  Typically markets are used to establish prices but where there is no market prices are established by consensus on what is “fair”.  What is fair is a political decision to which there is no definitive answer.  What is certain is that the removal of interest by replacing debt reduces the cost of any service.


Instead of medical insurance people buy Health Rewards. Health Rewards entitle the buyer to a discount on future health invoices. The government covers the cost of the discount.

Governments supply the population with an amount of Rewards each year. The amount received each year is a political decision based on the circumstances of the person. Individuals receive Health Rewards if they are involved in accidents or events beyond their control. Health Rewards only expire when used. Health Rewards are only transferable to an immediate family member or back to the government.

MEDISAVE enhances the market in health services. It provides enough funds for citizens to participate and buy services while rewarding those who put few demands on the system. At the same time, it supports those who need the services.


Consumers of energy receive the right to purchase Energy Rewards based on their circumstances. For example, low users of energy receive more rights to Energy Rewards than high users of energy. Energy Rewards holders receive a discount when they use Energy Rewards to pay for energy.  The money raised by the sale of Energy Rewards pays for Energy Infrastructure.  Long-term low operating cost and high capital cost renewable energy systems produce greater profits than high operating costs energy systems with low capital costs.

Energy Rewards are freely transferable.


Citizens can receive the right to purchase Tax Vouchers. The lower the income, the more rights they receive. Purchasers of Tax Vouchers receive a discount when the vouchers are used to pay taxes. Governments invest the money received from vouchers in infrastructure or government services and remove the need for governments to borrow money. The government saves paying interest on the debt. Tax Vouchers remove government debt.

Tax Vouchers are freely transferable.


Savers and buyers purchase Rent and Buy Mortgage Vouchers and use the money to buy a house. The occupant of the house pays rent by buying Vouchers from Savers. Vouchers attract discounts which mean they cost more to purchase the longer they are held. When a person leaves a house, they become a Saver, and the occupying of the house becomes the Buyer. Rent and Buy Mortgage Vouchers are freely transferable.

Rent and Buy Mortgage Vouchers remove the cost of interest and the cost of inflation. They typically reduce the cost of home ownership by 50% while providing Savers with a secure regular income. They can work with a single house but work better when there are many Rent and Buy Houses with the same buyers and sellers.

The existing housing market stays the same.