The Road Ahead from a Grass Roots Viewpoint

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Part five; Savings.

First of all I need to take you right back to the beginning of this thread where the Times, London, asked the question, (about the availability of capital for small businesses), “where?” Indeed, where does a small business find the capital it needs to create jobs?

Before we can answer that, we need to return the rhetorical question on its head and ask another question; how do we turn savings deposited into a feudal mercantile banking system into capital; particularly, capital for small businesses?

You deposit your spare income into a bank account and the bank pays you some small interest, as income, on your “savings”, in your deposit account with the bank. The entire modus operandi of any bank is to LEND that deposited money, your savings, back out to a borrower. Either as, say, a mortgage so you may purchase a house, or a car, where the capital cost is beyond your ability to pay the full capital cost immediately. You effectively get to use the house or car while you pay that capital cost over the longer term. Lending gives you access, not to capital, but the use of a capital purchase beyond your short term ability to pay. But lending to you is not capital, nor is the use of the capital item either.

An interesting paradox, I am sure you will agree.

So savings deposited into a bank cannot be used as capital. Borrowings are not capital. If we wanted to get pedantic about this we need to remember that, when the bank lends money, it ALWAYS needs some form of capital as security to set against that loan. In the case of the house or car, the security is the house or car. In the case of a car, the loan is short term and the car depreciates as fast, or even faster as the loan diminishes so you also need further capital security to secure that loan. Further, as we can now see, if the house depreciates in value too, the bank needs more security to permit it to continue to allow you to borrow the money for the house.

We need to remember that it is precisely this aspect of these transactions that has systematically collapsed the banking system.

But most importantly, there is no capital underpinning the transactions of the bank. “Where” is the capital? It is not there!

As I commented right at the beginning; I started this thread, not to continue to debate the problems, but instead to find answers. So I ask you all to look at this from an entirely different angle.

I am going to deposit some of my savings into a completely new form of “savings Institution” called, interestingly, Capitalism.

I am going to purchase some shares in a job creator. No, I am not defining any product, or process, or any source of profit. Remember, we do not expect the job creator to make any profit at the outset. I get the share certificate, the job creator gets capital. What does the job creator do with their capital? Well, they certainly do not stuff it into their mattress, or take a long holiday on a sunny isle; they deposit the capital into their bank.

I am sure I can see a faint smile appearing on the face of the reader.

Interesting thought isn’t it? My “savings” are still deposited in the bank and instead, earn the job creator a small income. Why would I do that? What are the benefits of such an arrangement?

As a local individual in my local community, I have agreed to make my savings available to the local job creator so that they can pay all those long term costs to create jobs in my local community. And, no, this is not some altruistic gesture, it is capitalism. So how do I benefit? And, for that matter, how does the bank benefit too?

The benefit to me is a long term possibility that, if the job creator succeeds, they will pay me dividends on those shares that will be more than any bank can afford to pay me as a deposit. Historically, (certainly when I first started investing into shares), the norm was always seen as being in the range of 8% per annum. At the same time, that capital is used by the job creator as capital security.

Capital invested into a job creator is spent, yes, but the value of those "shares" provided by me the investor is also used to provide security against which the bank then lends working capital. Now, when we return to the rules I have previously set out, the job creator takes their deposit of capital, the shares and uses that to secure working capital in the form of a loan of twice that capital. For every 25,000 capital deposit, they get 50,000 of working capital. The bank has the original capital as a deposit and they also have the greater security of the value invested into the business through those shares securing the lending.

My investment is automatically tripled yet there is more security than if I deposited the money into the bank instead of investing it into the job creator. (In which case my savings, lent to the bank, is then lent to the job creator, the job creator has no capital. The banks risk is thus much greater, even though we are talking about the same money, my savings).

Banks, normally, use their customers deposits to make additional loans and a bank usually keeps about 8 -10% of their own capital as a base against which to stabilise their business too. But just as importantly, that customer deposit is not capital invested into the bank. The bank needs its own capital too.

So now, we have a bank that has security, my savings, turned into shares in the job creator. The local community has a job creator creating jobs and more jobs bring in more savings into that savings institution called capitalism. More capital invested means more stability to the banks.

The watch word is stability. There are distinct benefits. The job creator has every incentive to keep their costs as low as possible. The better they achieve that, the more time they have to accomplish their aiming point of creating long term secure employment in their local community.

If, now, the bank wants to lend to fund the purchase of that house or car, they can still do so with the additional funds, the job creators deposit which is now available to them. The bank lending is much more secure.

Yes, many of these job creators will fail. But the money is still in circulation in the local community so it is not, in any sense, lost!

What everyone has missed is that what makes capitalism so successful is precisely that the savings are retained in circulation in the local community regardless of whether or not the job creator succeeds. My savings, invested as capital create a platform, just like any railway station platform; the larger the platform, the more people you can stand upon it.

Capitalism creates a capital base upon which a nation creates jobs. The more you invest, as capital, the more jobs created.

Now we need to look at the two cases, failure and success in more detail.

Failure.

We overcome the failure by a very simple mechanism; I do not invest, the local community invests. We share the responsibility.

Now I turn to an even more important aspect of this debate by asking another question; what actually happens to the money invested?

I have often been intrigued by people saying things like, as a nation we cannot afford to do this or that, or, the classic, we are pouring money down the drain. Remember the words I quoted to you earlier; “Research and Development old boy, bottomless pit - never touch it with a barge pole”. Bankers are always afraid to lose the money. If we listen to the so called expert in the city, the feudal mercantile banker, we would never bother to do anything with our savings for fear of losing the money. But we are not lending, we are investing.

The fact is; the answer to the question of what happens to the money invested is astonishingly simple. The less we fear the loss, the more successful a capitalist nation becomes.

When I purchase, anything, my money does not “stick” to the purchase; it passes into circulation throughout my local community. Money is simply a means to lubricate what we call a transaction. When we pay for someone to carry out, for example, research and development, the money is not thrown down the proverbial drain, it is not lost; it circulates. Go back to the job creator; it helps to pay all those job creation costs, moreover, throughout the local community.

So now the job creator has made a sale and their sales income starts to replace the invested capital. Indeed, that is the primary aiming point from the outset. The job creator is simply setting out to create a stable mechanism whereby whatever they are eventually going to sell; a product or a service - creates an income. They find sufficient market for what they sell so that the income they create from selling their wares, covers all those job creation costs…… first.

So in that case, even a partial success is already starting to replace job creation cost with new sales income.

So job creation is simply a continuous exercise to try and find a stable market for a product or service. The more people try and create jobs, the greater the amount of capital invested, the greater the capital underpinning the bank lending, the greater the stability.

Now we can turn to success.

Success is even simpler. The job creator succeeds and for every pound or dollar or Euro they need to create their service or manufacture and distribute their product, they manage to create a business that brings in slightly more income than what they pay out.

It really is as simple as that.

Moreover, the market they address is stable and they continue, month on month, year on year to repeat that success. They succeed, first by not running out of capital before they reach that point of success, and then by generating even more income and thus retaining a profit that they use to pay for even more job creation. From that point of success, they pay for the new jobs themselves. They increase their income beyond their costs. They prosper!

Now, where does that new prosperity come from? - The platform!

The capital base of their local community is directly relative to the prosperity of the local economy; the amount invested! Moreover, the stronger that capital base, the more chance they have to succeed.

In a true capitalist society, you need as many as possible working, saving and investing those savings back into job creation into the local community. So there is every benefit to savings used as capital placed into the hands of the job creator. The more you invest, the greater the prosperity.

Capitalism is a very simple mechanism that brings great rewards; if you invest.

The more you invest, the greater amount of money invested into new employment. More employment brings greater income, both to the local community as wages and salaries to the employees and in direct proportion; taxation to pay for the community support services provided by government.

As you start to run out of potential employees, their income has to increase as job creators via for their services. Again, the use of employees must also become more efficient, so their relative efficiency increases. In every case the capital platform for the local economy increases which in turn increases prosperity.

The invested capital NEVER disappears. It is worth pointing out that the Marshall Plan capital invested into Germany is still identifiable today. Oh! Yes! If you go and look, it is still there.

Further, if you take my advice and create a mechanism whereby the less successful job creator, (who creates stable employment but not profit), is encouraged to repay the original capital to buy themselves out of the system, (so that they may, if they wish, pay themselves a better income); the capital returns back into the system to be used again.

In part 6, I will talk about the wider implications for the use of capitalism as the savings institution for a whole nation.

[petertribo]

Re: The Road Ahead from a Grass Roots Viewpoint

But I'm switching to growing potatoes and just being a regular salaryman. You just can't win. Anybody know of some cheap agricultural land?

I live in a rural area having moved from the City fifteen years ago. There's lots of unused agricultural land around here. Rather it is used as Lawn and people, many of whom need exercise, sit on ride'em mowers consuming fossil fuels and mowing their lawns. I never see anyone playing badminton or baseball or anything else on these lawns. They just mow'em. And, underneath these Lawns, is good agricultural land. The folks who settled here one hundred years ago or more would be shocked at such sacrilege. But such is our Culture today, mow your Lawn and truck in your industrialized food from thousands of miles away.

A great commentator on the household economy and I think one of America's greatest economists is Henry Thoreau, author of WALDEN, and a fellow who also knew how to grow taters.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Part six: Resolving the issues of responsibility.

Now we can see very clearly why it is fair to say that by far the majority of savers, certainly in the United States and United Kingdom, have not been closely integrated into a capitalist society - certainly not for some five or six decades and perhaps, for many, never. Their savings have instead been directed towards a small number of “institutions”, primarily banks and funds that have not had any mandate to re-invest those savings into their local communities as capital. Instead, what we have seen is that these institutions have seen it as in their interest to take the collective savings and pass them on to a variety of mechanisms that trade with the funds made available to them. An excellent example being Hedge Funds that use very complex mathematics to trade vast volumes of trades, every day with computers, that make a trade upon the tiniest movement of any particular market. Which trade, in turn, has sparked great turbulence within those markets to the extent that, collectively, they are well known to now trade more than the gross national product of a nation per hour.

Another egregious aspect of using central institutional structures is that they have made a decision, collectively, to drive their investment into local communities other than in the nation of origin of the savings. They call this “Globalisation”. The quite natural consequence is that the local communities whose savings have been taken but not reinvested into become moribund. Their expectation of natural prosperity from the investment of their savings into capitalism simply disappears into another nation entirely.

Yes, on the one hand, when trade is to their advantage, in their eyes they succeed. But if they get their decisions out of kilter with events, they can lose the majority of the full value of those savings quite literally overnight.

Never in human history has the old adage of the dangers of placing all your eggs into one basket been better illustrated by recent events. But most importantly, none of these actions can be seen as capitalist as they naturally create a feudal mercantile structure to the use of the savings by placing all the investment decisions into the hands of a small minority of individuals. The net result is, in my humble opinion, neither the United States, nor the United Kingdom is a capitalist nation.

Moreover, if they now employ more than half the nation in jobs created by the expenditure of taxation, they are not free enterprise nations, but classically socialist.

And, no, I did not make up these rules of engagement, those trying to continue the illusion did so. Now you can see why I stated at the beginning of Part one that I believe the word “Capitalism” has been high jacked to camouflage the feudal mercantile economy. So if EJs recent comment that the United States government employs 52% of the nation is true, then the United States is a feudal socialist nation with a feudal mercantile economy..

What will make a difference? How do we change direction? For a start, I am not going to suggest any form of revolution. The changes needed are in fact quite minor and if the necessary steps are taken in a determined manner the whole ship can be turned around very quickly without difficulty.

First of all we need to establish some principles. If we go back to the origins of the Magna Carta here in the United Kingdom, we can see that the long term principle was to make men free. No, we did not achieve that as the United Kingdom remains a feudal nation to this day, but we did set into motion the debate. The Founding Fathers of the United States certainly made a much better fist of the job and if we use their basic principles, we can finally finish the job.

The basic principle is very simple indeed, you spread the decisions of the nation across as many of the population as is humanly possible, you make everybody, man or woman, free to make their own decisions. In my view, the words “We the people” should open every constitution on the planet. Yes, many would argue they are indeed free. But what everybody lost sight of is that, if you restrict access to the decision to create a job, by restricting access to the savings of the local community as investment of capital, by placing the decision whether or not to invest into the hands of a small minority; instead of creating an enterprising, free community; you instead create a feudal nation.

And that is why I have set out in great detail a set of rules for the investment of the savings of a local community as capital and why I set a base rule that only gives the investment fund 20% of the resulting equity of the new found business.

A 20% holding does not provide any mechanism, outside of total bankruptcy, to take control over either the business or the founding job creator.

The job creator remains free.

The fundamental principle is that instead of trying to restrict access to capital by placing the decision to invest into the hands of a tiny, naturally feudal minority, you place that decision into the hands of the job creator. The decision to create a job over rides the natural tendency to restrict the competition of the new job.

In that case, anyone, from any background, wishing to be totally free to stand on their own two feet and make their own way forward in life; may do so without restriction. All they have to do is create a job for someone in their local community and to do that, they alone make the decision as to what that job may entail. What market they will address.

The job creator is left free to make those decisions and yes, even free to fail. That in failing, (if that is the result), there is no loss to the local community in letting them try. That instead, the attempt improves the overall prosperity of the community by continuing the process of spreading the capital investment throughout the local community and the competition will, as a consequence suppress the creation of any monopoly.

The job creator takes the responsibility for the success of their local community. By their success, for there will, inevitably, be successful job creators; they will demonstrate to everyone surrounding them the power to make their own success as free individuals within a free society.

In part seven I will set out how we can create a new form of financial institution.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Part Seven: The fulcrum for change.

Before we can define what must be altered to bring about the changes needed, we have to look back to where the FIRE economy began and learn a classic lesson from history. I believe that we can define that beginning precisely, both in time and location. It was at a meeting in London in 1964 between two individuals, Jim Slater and Peter Walker and a London based savings institution. The conversation went something like this:

Slater Walker; we have identified a company that we believe has hidden value and we have come to you because we need funding to enable us to purchase a block of their shares sufficient to be able to take control of that company and break it up to “unlock” that hidden value.

(Up to that point in time, a public company was considered to be sound and well run if it had, over time, built up internal prosperity, some in the form of a cash surplus, some in fully depreciated property with an understated “book value” are two examples sufficient to give you an idea of the picture Slater Walker presented).

They got the funding and they proceeded to do precisely what they had set out to do, they broke up the company and released substantial hidden value to the shareholders, the original savings institutions. Once this single event became visible, an unstoppable new paradigm slowly emerged which we now describe as the FIRE economy. Looking back, at the time, it was so easy to see the short, even medium term benefits.

But no one saw that they had also changed the fundamental direction of the responsibilities of the savings institution; from external, arms length investment, to internal investment with the primary aim of generating additional prosperity for the savings institution at the expense of the overall prosperity of the external community.

That the underlying philosophy of the savings institution changed direction and where in the past they had invested the savings of the nation – at arms length and thus without an expectation of control over the external community of savers; they now invested to bring increased prosperity to the savings institution.

The balance between the prosperity of the external community and the internal savings institutions changed. From that moment onwards, all investment became centred upon the need to maximise the prosperity of the savings institutions, what we now describe as the FIRE economy. If you need a simile, take a look at the history of Privateers:

The costs of commissioning privateers was borne by investors hoping to gain a significant return from prize money earned from enemy merchants.

It has been argued that privateering was a less destructive and wasteful form of warfare, because the goal was to capture ships rather than to sink them.[1] From a 21st century point of view, privateering was a form of state-sanctioned piracy. http://en.wikipedia.org/wiki/Privateer

From that moment onwards, Savings institutions lost sight of their underlying responsibility to invest equity capital to create long term prosperity at arms length and instead concentrated upon investment into “privateers” who would bring that prosperity back into the savings institutions.

What should have happened was the savings institution should have told Slater Walker that they could have all the funding they needed to compete with the existing company and through competition, force the existing company into using its hidden value to in turn compete against them.

What happened instead is that from that moment, the savings were not invested as equity capital into new industry, but were instead, invested back into the institutions themselves.

At first sight, that simple statement seems innocuous but in fact, it underpins the complete destruction of the industrial society. Instead of investment of savings into industry created by the industrious of the savers community, all future investment had to compete with the returns available internally to the FIRE economy. Savings were from then onwards used internally, within the institutional economy to change the value of the paper assets held by the institutions. Investment between the institutions from that moment became the dominant producer of the income of the institutions.

Let me give you an example, a parallel if you like. If a savings institution buys 10 million new issued shares, say of a base issue value of say, $0.10, ten cents, then the issued capital of the company will be $1 million. So the value of the investment into job creation for the savers of the local community is $1 million.

But the stock market value might now be, say, $60 and the savings institution now buys those same 10 million shares for $600 million from another similar savings institution, that money, the $600 million, is not invested as new job creation equity capital back into the savers local community; but instead, the money stays within the savings institutions internal economy.

The savings are not invested into the local community, but instead drained off and used by the institutions for their own benefit.

Once you change the emphasis from investment of equity capital (into the industrious of the community of savers); to investment BETWEEN the savings institutions, you automatically lock out the savers who now cannot benefit directly from local investment. And that is exactly what has happened. The prosperity of the community has been surrendered and instead used as the base investment between institutions.

By far the majority of that prosperity has now been transferred from the local communities into the holdings of the savings institutions as investment between the institutions..

And that brings in another consequence of the way this new intra institutional investment has developed. If you invest savings as equity capital to create new employment into the local community, the money has to be used to pay all those job creation costs I have described earlier. So no matter if the business that was invested into fails, that investment retains a value as the money circulates within the local community.

But if you instead take those savings and allow the savings institution to pay another savings institution a NOTIONAL value, (for a $0.10 share certificate), of, say, $60 this morning and the value later that day reduces to say, $50; that reduced value is totally lost; evaporated. There is no value other than the notional value anyone will place upon the share based upon what the stock market places as a market on the value.

While values go up everyone can pretend that this is the way to make more money than by investment into the local community; but the moment the trend turns down, all those savings can completely disappear with no benefit to anyone. Exactly what is happening today.

Much more importantly, now we can see from history where we, the savers, the people of the external communities, have to drive the debate. We have to address the fundamental philosophy of the savings institutions.

A hat tip to EJ for finding this from Henry Kissinger.

The financial collapse exposed the mirage. It made evident the absence of global institutions to cushion the shock and to reverse the trend.

International order will not come about either in the political or economic field until there emerge general rules toward which countries can orient themselves.

Henry Kissinger: The world must forge a new order or retreat to chaos

http://www.independent.co.uk/opinion...s-1451416.html

We must forge a new order.

Savings institutions have to recognise they have a duty to invest the majority of the savings of their local communities back as equity capital, via free marketplaces, under free market rules into a fully competitive free society.

Investment into vapourware must stop.

Savings must be reinvested back into local communities as equity capital.

There is no other road towards a prosperous free enterprise community.

Every other road perpetuates the mistakes of past history with a feudal mercantile economy dominated by the intra institutional investment policies of the FIRE economy that very effectively destroy value in a downturn.

In Part eight, I will show you how capitalism creates prosperity.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Part eight: Change your perspective, believe in prosperity.

The leaders of the Western world’s savings institutions and the law makers who are charged with regulating them have to understand that it is they that have to now completely change the direction of their thinking. So, in particular, today, I am talking to you as a group.

Part Seven showed how savings institutions have been systematically removing hidden prosperity from the external savers community. It also showed that, in a declining market, the value of the savings held by the savings institutions automatically evaporates.

Now you need to change your perspective and learn to understand the true function of all that “hidden” prosperity; for hidden prosperity is absolutely vital to sustain a functioning free enterprise capitalist community of savers; a nation. You are presently embedded within a feudal mercantile economy where trading is the primary function.

One of the reasons why you trade is the very real simplicity of your business model. Very low overhead and once set up, needing very little of any other input to continue to trade. A bit like a roulette wheel player; from the first successful trade, you have an income, and can place that income immediately into a new trade. If you can keep the trades mostly positive, every day is a success.

But if you wish to design and manufacture a physical product you have to abide with different but still very simple rules. I call them the 1, 2, 3 rule. If it costs you a unit of money, (£UK or a $US for example), to manufacture, it will cost you another unit to cover the above the line overhead costs and you must generate a minimum of another unit to cover below the line costs and leave a profit. If anything costs a $1 to manufacture, you must be able to find a customer for at least $3, preferably at least five or even ten.

To be able to successfully manufacture – anything, requires an onward sale for more than three times what you have already invested. Thus creating new prosperity requires you not only need investment, you also must have a prosperous customer. But, for decades now, you have been systematically removing hidden prosperity from the savers community, the surrounding nation and taking that money to use entirely for trading within your own intra institutional economy. There have been two major consequences:

1. The reduction of external, surplus, “hidden” prosperity to pay for the purchase of the finished product.

2. The drive to replace prosperity with credit to pay for the cheaper products. Ergo, the rise in the influence of credit in society.

These in turn led to the drive to further lower costs by creating new production, (in nations with ever lower employment costs), to keep the overall purchase cost to a minimum to cover up the reality. Your external savers community, year in, year out, became ever less prosperous.

I do not have the facilities to be able to, but I challenge an iTulip member to quantify the difference between the issued share capital base of the Western world and the total claimed financial holdings for the savings institutions.

That difference is the amount of hidden prosperity that has been drained from the external savers community into intra institutional trading and represents the loss of overall prosperity in the Western world.

One of the first things that must happen is the need for all the savings institutions to recognise they cannot stand back and continue to pretend that job creation is the governments’ problem. THAT is the greatest illusion of our time. The savings institutions have to recognise that they must put that hidden prosperity back into circulation; outside of their intra institutional trading systems and back into the external savers community.

How do they do that?

The answer is very simple; not only do they have to fund the re-capitalisation of the western economies, they have to place orders, buy product. Become, for the short term, customers.

Why would they do that? What possible reason can I give to encourage them? I ask them to take a look at past history. Every other time we have had a severe decline in the prosperity of the ordinary people, we have had a world war. War is the easy route to the creation of orders.

War is the last thing we need right now.

But there is a way forward that uses the simile of the use of a war footing to bring what can be done into focus. To quote an Englishman, Sir Geoffrey Chandler, that I had the honour to meet a couple of times in the late 1980’s here in the UK when he was the Industry Advisor to the Royal Society for the Encouragement of the Arts Science and Technologies, commonly known as the Royal Society for the Arts, the RSA. Geoffrey Chandler had had letters published in the Times, London,

“Urging the creation of new manufacturing industry with the same urgency as though the nation were at war”.

We need to create jobs as though we were at war.

The savings institutions, not the government, the savings institutions; have to place their efforts onto a war footing, but without a war in mind.

The United States, after 1941, completely changed the direction of their economy by direct investment into war production. What I am suggesting is that you do not need a war; you only need to invest in capitalism and act as a customer for a short period to stimulate the economy as though you were at war.

At the moment, it is the Western governments that are trying to do exactly that. But the fact is; they do not have anything like sufficient funds available as they have to use tax income from a declining economy and they do not have access to the savings of the nation. You do!

The way forward is in the hands of you, the leaders of the savings institutions. You hold the savings, vast quantities of money. As long as it remains in your hands, in a declining “traders” market, that value is fast evaporating, day by day.

Moreover, as things stand, if you are totally honest with yourselves, there is nothing you can do to stop the decline – is there?

You have already seen the loss of something like a half of that value over the last year or so; evaporated right in front of your eyes. Hundreds of billions, gone!

If you do nothing, you are doing exactly what the Captain of the Titanic did; you are paralysed without a plan of action and you are simply going to watch the ship go down around you.

How do you move from paralysis to a vibrant new economy?

You simply invest, into the grass roots of a classic capital based society, that money which you will in any case lose if you stand still and do nothing.

You get that money out of the trading intra institutional economy and get it back, as fast as possible, into circulation, as equity capital investment within the external savers community.

Time is of the essence.

You need an example of what I mean when I say we have all we need close to hand to very rapidly create a new vibrant economy from the ashes of the present difficulties.

I warn you, this is going to stretch your imaginations to the limit. You are going to have to put all those “I must not take a risk” instincts into a dark corner and open your minds to new thinking.

You must remember my previous point; that equity capital placed right at grass roots cannot evaporate. That in the worst case even failure allows all that “prosperity” to continue to circulate as a potential to create orders; the money to buy a new product from someone who follows with a better idea for a long term profit.

You are going to, for want of a better simile; re-charge the hidden prosperity battery of the Western savers communities with capital.

Even a piece of junk can open the door to community prosperity.

I am, very deliberately, going to take as an example, a piece of junk, a very old aircraft engine.

It is in fact an old sleeve valve radial engine; a Bristol Siddley Hercules 14 cylinder radial aircraft engine. (I must add immediately, I do not own it, nor do I know precisely who owns it, but I do know it needs working on).

At the time of its production it was at the leading edge of technology, both as an internal combustion engine and also as an example of the use of high technology materials, in this case, Nitride Steel. (It is Nitride Steel that makes the sleeve valves thin enough to enable the engine to work efficiently and with less weight than with more conventional valve mechanisms).

You could break it up and sell it for scrap in which case I would expect it would bring in, say, £200. ($300).

You could try and restore it by simply taking it to pieces, clean up the components, reassemble it and try and start it. As a single individual, you might put in a couple of man years work, unpaid, and have nothing much to show for the effort when the exercise is finished. No real economic benefit at all.

But instead, you create a business plan. You say you will employ yourself, plus one aircraft engineer, one machinist, two engineering apprentices, a couple of computer design technicians plus a girl as a secretary for three years while you create a new engineering workshop, disassemble the engine, manufacture all required replacement parts from scratch using the original for templates and at one and the same time, you teach the apprentices and the computer design technicians every aspect of using all those soon to be completely lost skills and knowledge such as how to design, manufacture and rebuild aircraft engines. In turn you teach a wider audience how to design and manufacture components made from various exotic materials and you use that knowledge gained to open up new markets for new products that, from the outset, you cannot define.

You take the scrap engine and you build a new business around it.

Using the rules I have already set out earlier, you are given equity investment to cover the creation of 8 new tax paying jobs, 8 X £25,000, £200K plus working capital of £400K. Total investment back into the local community £600,000.

You will have:

• Turned your pile of scrap into a new workshop equipped to carry out the design, manufacture and major overhaul of aircraft engines.
• Opened up new markets for all that equipment and software.
• Created new opportunities for computer design technicians.
• Trained two apprentices.
• Opened up the potential for forays into a host of new opportunities.
• New design for internal combustion engines.
• Use of Nitride Steel in new mechanical designs
• Opened a new market for the local heat treatment facility
• Turned to looking at Heat Engine design for refrigeration systems.
• Created a local facility that can carry out sub contract engineering work for other local companies…..

I could go on and on.

(And no, I am not considering the engine as a business venture; I simply use it as an example).

But any existing business person can see the underlying problem, the missing customers. With all that lost, “hidden prosperity”, you do not have anything like enough capacity, prosperity, within that local community, to purchase the finished engine.

That is the second, and perhaps as important a responsibility. The savings institutions have to, certainly for the short term, become customers and buy whatever is produced.

A crazy idea? - Not at all! The next time you buy a newspaper, give some thought to what you are doing. You buy it in the morning and I will bet my bottom dollar, you will have discarded it as waste before the day is over. The “product” has a very finite life span. Your economy manufactures, uses and throws away.

It is not the profit that makes for prosperity it is the investment of the capital right down at the grass roots that spreads prosperity from the use of the capital.

THAT is the lost lesson, the forgotten truth that underpins the success of classic capitalism.

Yes, you need profit, but that is the long term aiming point and thus comes much later and acts to stabilise the economy.

Right now you have a collapsing economy desperate for investment.

Yes, you are going to fill your foyers with re-built aircraft engines and the like. So what?

But now multiply my single idea by several hundred thousand others with new ideas that might or might not work, but are legitimate, honest ideas for potential job creation and spread them right across the Western world.

24 million new jobs, 1.8 Trillion of replaced prosperity all within your own local communities. Yes, producing everything imaginable, from high value furniture, ceramics, art, electronics, software, even new forms of energy.

The fact is there are inventors and original thinkers all over the planet with their heads brim full of new products but who cannot find a single penny of investment. One of the interesting side effects of your running a feudal investment strategy entirely focused upon M&A.

If you believe that investment has only the one purpose, to bring in a quick profit, you have lost sight of exactly why equity capital investment is so successful at creating prosperity; at why capitalism succeeds.

Prosperity comes from getting up off your butt and doing – anything! Backed up with the equity capital you will need to pay for the employment you must create to enable the chance that you might just succeed to make a profit.

Profit is the expectation that in the long term, you are able to create an income from what you have set out to achieve. Profit comes much later.

Until you lose your inhibitions to investment, you will not see the long term success that lies just beyond your perceptions. You just have to believe that it is possible to invest into the local community without any idea of if, in the end; the investment will succeed in creating a stable long term income.

If the investment fails, all the money is now in circulation, allowing others to try. The money has not evaporated but serves to permit others to buy the goods and services of anyone that is trying to create new employment in their local community.

When the investment succeeds, under the rules I have already set out; the savings institution gets its money, its original investment capital back to permit the whole to continue forward.

PLUS all the new employees’ savings and improved transactions adding to the overall prosperity of the local community by the very same mechanism:

CAPITALISM.

Take a look inside a poor family’s home. Yes, you will see the ubiquitous TV, Play station, home computer, cooker and refrigerator some cheap furniture and clothes. But look again at the successful family home. It is full of high value objects, every one of which can be manufactured by local companies, employing local people. High value, hand made furniture, hand made prints, art, ceramics you name it - the house will be full of prosperity.

The only way to make that poor family prosperous is through investment so that they can find better value work to pay for their own success. If all you do is lend them money and pay them tax income handouts, they have no mechanism to work their way up that ladder of opportunity.

Now take that simile and use it to look at the local business community. In the past, your imperative was to keep them grossly undercapitalised and loaded to the maximum with credit. But now, if you return that hidden prosperity, allow it to return, you will discover all those companies will be instead using that prosperity to buy the products of those new companies creating them. Prosperous companies will themselves spawn even more success.

You will create a rainforest of successful capitalism, not a feudal mercantile desert as today.

------------

The FIRE economy has failed. It has failed to create a prosperous community. Has no means to create new employment in a downturn. Automatically destroys notional value as the economy contracts.

The quicker you all accept those simple facts, the faster we can make a new start with a free enterprise based free market capitalist successful economy.

--------------

I will finish with a series of annexes. A copy of my draft petition to the United States Supreme Court asking the question: Is the United States Government Ultra Vires, (outside of the law), if it does not act to highest ethical standards? Plus the supporting documents.

I am placing that part of the debate within this thread as I believe that there is a good reason to believe that a major part of the development of the FIRE economy has been driven by a feudal attitude to small business job creators from both the Department of Justice and the Commerce Department. By opening up the debate in the direction of government, I believe there are further and substantial gains to prosperity for the long term.

[c1ue]

Re: The Road Ahead from a Grass Roots Viewpoint

Chris,

I'm not sure I agree with your use of war as an example of orders for material goods restarting an economy.

I'd argue instead that war helps 'reset' an economy by:

1) massive inflation - governments maximize spending towards production of military equipment and support of armed forces in order to win. In fact historically (with the exception of debts owed to the US in WW I and WW II), nations usually cancelled out wartime debts between allies.

2) consumer savings - during a patriotic war, citizens' personal consumption drops to extremely low levels. This amplifies the debt deflationary impact of wartime inflation - as opposed to peacetime inflation where consumption may actually increase in nominal terms

3) infrastructure buildup - while the tanks, guns, ammunition, and uniforms being made for a war don't have much value once the war ends, the new and repurposed factories which created them are often reconfigurable into consumer production: cars, tractors, sewing machines, etc.

4) trade re-orientation - nations directly involved in the fighting inevitably lose massive manpower and significant, if not major, industry losses. This opens an opportunity for relatively unscathed nations to take over previous trade opportunities as well as open up short term opportunities for rebuilding 'involved' nations' infrastructure.

1) and 2) deal with debt reduction/cancellation.

3) is exactly opposite to your aircraft engine example: in this case production without a (peacetime) purpose exactly benefits postwar activities

In addition, while I applaud your enthusiasm for trying to propagate a different paradigm, I would urge you to consider what to do about existing obligations.

The idea of grassroots sensible production investment as opposed to financial intermediation is a fine sentiment, but such a movement cannot succeed when both the existing order has such massive negative legacy, nor can it succeed when the huge institutions comprising the present order can employ all manner of political, societal, financial, and other tools to preserve its own existence.

My own view is that only a truly terrible conflagration can remove this 'financial status quo' from the board due to the strength of the present masters of status quo.

Only a conflagration is strong and emotional enough uprising to accomplish this reset, and at the same time presents sensible, slow, and calm rebuilding of a new order.

The only way I see such a utopian view prevailing is the exceedingly unlikely event of a tyrant taking hold, clearing off the present order, changing to the utopian mode, then resigning. Not holding my breath.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

I would urge you to consider what to do about existing obligations.

The idea of grassroots sensible production investment as opposed to financial intermediation is a fine sentiment, but such a movement cannot succeed when both the existing order has such massive negative legacy, nor can it succeed when the huge institutions comprising the present order can employ all manner of political, societal, financial, and other tools to preserve its own existence.

My own view is that only a truly terrible conflagration can remove this 'financial status quo' from the board due to the strength of the present masters of status quo.

Only a conflagration is strong and emotional enough uprising to accomplish this reset, and at the same time presents sensible, slow, and calm rebuilding of a new order.

The only way I see such a utopian view prevailing is the exceedingly unlikely event of a tyrant taking hold, clearing off the present order, changing to the utopian mode, then resigning. Not holding my breath.

Thanks for the thoughts C1ue.

One of the great misconceptions today is the idea that somehow, we are trammelled by the size of the existing problems embedded within the present system. We are not. We can, and I believe will, walk away.

The best way forward is to simply get on with our own business and concentrate upon our own solutions.

In any other context, no one in business takes that much notice of another going bust. Yes, we check that we are doing the right things to avoid following, but the others problems are theirs, not ours.

I used war as a simple argument against the idea that does prevail, that a despot is the way out, or, inevitable. I agree that someone such as yourself, who clearly has a more detailed knowledge of the subject, can argue that the simile is flawed. Nevertheless, the general view is that a war will have a positive effect upon the economy.

I am dead set against a conflagration. It is totally unnecessary and counter productive.

My main point was not intended to be Utopian. Indeed, what I was trying to get across is exactly how Capitalism should work. What has happened over the last half century is, (as I suggested right at the start), everyone has operated under the misconception that the FIRE economy is itself capitalism. It most certainly is not.

If all I can achieve here is open the debate and have my views accepted as a valid entry, then I have succeeded. I hold no illusions that anyone within the present power structures will find what I say of the slightest interest.

But I am, through my own ability to push my views forward, having my day in court. And, yes, there is always the tiny chance that someone, somewhere, will step forward to help. But I promise, I will not hold my breath.

Chris.

[c1ue]

Re: The Road Ahead from a Grass Roots Viewpoint

Chris,

I agree 100% with you that war is not a good way out.

However, if a conflagration is the only way to 'reset', then war may be the least unpalatable of the alternatives - to our various governments at least.

Because the other alternatives are a 1917 style revolution.

My best wishes on your efforts.

My deepest darkest hopes that a better model - including your own - will prevail.

My pragmatism and experience of the world - preparing for the most likely bad outcome.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Appendix A: Draft Petition to the Supreme Court of the United States.

Docket Number:

In The Supreme Court of the United States

In Re: Christopher Francis Coles,

A Petition for an Extraordinary Writ

Requesting counsel to be appointed to represent me

In my contention that

The government of the United States is Ultra Vires.

Christopher Francis Coles
(In deference to iTulip I have removed my address details)

QUESTIONS PRESENTED

If I were a criminal and came before a Court of law, and could not afford an attorney, The Court would appoint someone to represent me. I am a foreign Inventor holding United States patents which are being blatantly infringed by The United States Government. I have found that no attorney will represent me against the full might of The United States Government and I therefore ask:

1. The Court please appoint Counsel to represent me in forma pauperis?

2. The Court please define that an inventor with no money; has the right to representation before a Court of Law within the United States of America?

3. That where a government department or other agency of the United States infringes United States patents and fails to act with the highest ethical standards towards the inventor; is that government department Ultra Vires?

4. That the Solicitor General for the government of the United States; is in such circumstances thus also Ultra Vires?

5. The Court please create a framework of appropriate rules; to ensure that in future, at all times, government attorneys always act to the highest ethical standards in their dealings with inventors granted United States patents?

PARTIES TO THE PROCEEDINGS:

Christopher Francis Coles

A Citizen of the United Kingdom currently residing at:

2 The United States Government

3 Department of Justice

4 The Office of the Assistant Secretary for Research Development and Acquisition for The American Army, The Pentagon, Washington, District of Columbia,

5 The Federal Communications Commission

Parties 2 – 5 inclusive have been served at the following address as one party: The Solicitor General of the United States, Room 5614, Department of Justice, 950 Pennsylvania Ave., N.W., Washington, DC 20530-0001, USA

Contents

Page

Questions Raised 2

Parties to the proceedings 3

The Petition 5 – 29

Statement of ownership: Chris Coles Holdings Inc. 30

Statement of use of royalty income from the patents 30

Appendix 31 - 44

The Petition to

The Justices of the SUPREME COURT

Of The United States of America

My name is Christopher Francis Coles. I am a British Inventor. I hereby apply for a number of changes to be made to The Constitution of The United States that will permit me, not being a citizen of The United States, to take advantage of the rights engendered in the Fifth Amendment of the Constitution whereby I would have recourse to compensation for property taken by the United States from myself; In this case, substantial royalty income from the ownership of United States patents.

In so doing I believe that I will highlight a grievous wrong being done to individual inventors, not just myself; who find, as I have, that on the one hand the United States government attorneys refuse to act with the highest ethical standards and on the other hand no other attorney will stand up and fight unfunded against the full might of The United States government when various government departments willfully ignore United States Law in a variety of ways, to avoid paying due compensation for the use of the intellectual property.

My first aiming point is to see laid down in statute the right of an inventor to be represented in a court of law for an action of infringement by the government of the United States as though I were a common criminal, for as such, I would be so represented. As an inventor, I am not. I also ask that where an issue is complex adequate funding is made available. In this way I wish to see that what has happened to me is never repeated again.

The Government of The United States has granted me patents that, because they refuse to recognize those patents, they have made the perception of their value; valueless. That today, for the individual inventor, the piece of paper described as a United States Patent is not worth the paper it is written upon - Worthless!

Because of this refusal to recognise those patent rights I show that great damage is being done to the fabric of the nation and the national interest.

Between 1998 and 2002 I was granted three United States Patents; 5,712,679, 6,181,373 and 6,469,735, (plus one Japanese patent, Number: 2896930). I quote from the cover letter sent to me by my patent attorney, at the delivery of the third US patent:

"I am very pleased with the scope of the claims that have been obtained in this patent. Your attention is drawn particularly to Claim 13. This claim recites a method of identifying the position of a first location to security personnel at a remote location. The method comprises only the three essential steps of. (a) receiving global positioning signals at the first location; (b) obtaining an image of the first location; and (c) transmitting the received global positioning signals and the obtained image from the first location to the remote location. This claim is particularly broad because it does not include any limitations related to the nature of the device that carries out the method. Accordingly, the claim covers any device that practices the method including analogue, digital, and/or computer-controlled devices. It also includes portable or self-contained devices, as well as component systems. Of all the claims of all of your U.S. patents, this is perhaps the most broadly written."

The patents apply to any radio transmitter, (such as a cellular telephone, or a battlefield radio), that has a camera and a navigation system described above. They are not simply for a device, but describe a full system and include the software, operating system, the device itself, the transmission of signals from the device to a base station and all the operations downstream of the base station.

Since the grant of the patents to me, on the advice of my Japanese patent attorney, to reflect that, in Japan, patents owned by an individual are not taken seriously, I assigned the patents to Chris Coles Holdings Inc., (CCHI), a corporation I wholly own myself and which is based in Washington DC.

In 1997 a friend and mentor, Leonard R. Sugerman, a Past President of The Institute of Navigation, introduced me to Dr Oscar, the Assistant Secretary for Research Development and Acquisition for the American Army. I was invited to a meeting September 22nd, 1997 in his office in the Pentagon where Dr Oscar advised me that, yes, they were infringing but that they would ignore me. I was already aware of the development of a variety of military systems that may infringe. Not least because details of a paper submitted to the Department of Defence, describing my further thinking about battlefield Information systems, (published 1991 in the proceedings at a US military conference); were illustrated and published in The
Sunday Times, London March 16, 1997 under the headline, Anoraks’ apocalypse – How Computers will Rule the Battlefield.

Dr Oscar, (and the Pentagon), thus already knew of my thinking and my patent application as also that my IP could be central to the defence of the nation. One of the primary uses having been publicized by the Pentagon earlier that year. So I ask you to consider that I was invited to that meeting because they believed the IP was valuable?

Having previously spoken and then written a letter dated August 7th, 1997, on that same day, September 22nd, 1997, I also had a meeting with Mr. John Cimko, Divisional Chief, Policy Division, Wireless Telecommunications Bureau, Federal Communications Commission, 2025 M Street NW, Room 7002, Washington DC 20554 at the offices of The Federal Communications Commission. The meeting was also attended by Mr. Bill Caton, Mr. Daniel Grosh and Won Kim all from the Federal Communication Commission, (FCC) and thus I ask you to consider that it was immediately clear that my patent rights were of great interest to the FCC.

Sub sequentially the FCC auctioned radio spectrum as mandated by Congress. However, the value placed upon this spectrum was enhanced by implying the allocation of spectrum also grants a right of transmission when the FCC knew full well that that is not so where there is infringement of my rights as granted to me by my United States patents.

I believe that research of the record will show that the FCC recognized those rights but decided instead to snub me by refusing to communicate. I was however verbally challenged to find myself an expensive attorney while knowing full well that no attorney will take on a department of government. The basic argument follows the line: "The government has unlimited resources and thus the cost and time factors treat against us". I cannot fault that argument as it is perfectly reasonable and widely known and understood by all parties. But I believe that the United States government has acted unlawfully and placed itself Ultra Vires. Thus my application is not frivolous. The questions I raise strike right at the fulcrum of the rule of the law. I believe that the United States Government, by refusing to uphold the rights of individual holders of intellectual property, granted to the individual by that same government itself, where they themselves are the infringers, has left those rights in a limbo that strikes at the heart of the function of such intellectual property.

I have applied to the Department of Immigration and Naturalization, (INS), for citizenship to be able to work towards the development of my patents inside the United States, but that application has been refused. The INS, a part of the Department of Justice, treats the ownership of United States patents by a foreign national with utter contempt. I wonder why? I have even tried to open a conversation with the United States Department of Justice itself, but again, to no avail. No one will enter into correspondence, presumably to avoid any question of a perception of rights.

The FCC is mandated by Congress to dispense spectrum, but the FCC does not own essential US Patent rights to transmit, (if the transmitter has in combination a camera and a navigation system as described above). Thus for those spectrum license auctions nvolving the proposed use of a transmitter combined with a camera and a navigation system, (described as 3G, third generation wireless), the FCC must pay a royalty to the US patent owner for the sale by auction of the license (giving an implied license to transmit).

I believe that the record will show that, in attempting to avoid the payment of royalty, the FCC deliberately set out to suppress the further competitive development of what we had described as Video 911; Essentially adding the image from the camera phone to the E911 service. That they set out to prevent competition - both against their E911 proposals and against existing United States industry - That they saw Video 911 as a competitor to be suppressed.

E911 (Enhanced 911) and now well behind the original schedule for delivery, was only ever designed to permit the location of a wireless telephone user to be known by a public service answering point, (PSAP), so that the service would match the standards already long in place for emergency calls from fixed lines where the location could be easily passed on to the PSAP so that appropriate response could be directed to any emergency.

Today, as I had long ago foreseen, the electronic camera in a wireless telephone has become ubiquitous and freely available. The navigation system needed is also a ubiquitous part of these wireless telephones, particularly in Japan. Japan and China recently announced the intent to develop between themselves a 4G wireless telephone.

The FCC deliberately left E911 merely providing location to the PSAP when a wireless user is in difficulties when the provision of the image from the camera telephone would have greatly enhanced the service. The consequence is that the United States of America has arguably lost the lead in what is now a major new marketplace; the use of wireless camera phones with a navigation system.

By doing everything in their power to prevent my full exploitation of the patents, and thus with the further development of camera telephone location based services; the technological lead in the long term development of the wireless camera phone industry has been handed to other nations who have instead invested eagerly in furthering the technology.

With regard to the Department of Defence, their act of blatantly, (the act of publishing the knowledge in the Sunday Times in 1997 was surely blatant?), disregarding the rights embodied in the intellectual property engendered in my original proposals presented to them in 1991 was in complete disregard for the rules requiring procurement to the highest ethical standards.

I believe that their sub sequent statement to me admitting their infringement and yet of intent to ignore my rights was also unlawful.

I now hear that the Department of Commerce has announced a global intellectual property plan whereby the United States government sets out its plans for the protection of intellectual property world wide. That intellectual property is vital to your growth and global competitiveness as a nation.

I say that you cannot on the one hand claim to be a leader in such matters and on the other, when it comes to your own infringement, turn your back as a government and say, (to the poor inventor that has been granted patents by yourselves), you will ignore them; particularly, while the United States Government Department of Justice creates such as List 31 to force other countries to shut down dodgy CD manufacturers. I call that hypocrisy!

The government surely cannot ignore their own complicity in their total disregard for the IP rights of a small entity and as such the United States Government should recognise just how far down the road to a lawless state it has slid. It has no regard for the law, particularly competition law, when it chooses and as such, makes anarchy and bedlam the rule, rather than ethical honest dealings with intellectual property right owners and thus opens itself to a charge of being Ultra Vires.

Patents were devised as the way to permit someone with a new idea to be able to protect that idea for long enough to be able to establish a stable long term business. The patent was thus able to carry the idea from the inventor into general use through the mechanism of investment of capital to pay for the development of the new process or product. By issuing the patent, the government’s intention was to provide enough protection to an inventor so that the new idea had a firm footing from which to grow into a strong business. I must emphasise the bit about growing into a strong business, for this is a long term process that can take decades to achieve. By this mechanism, the inventor creates a new competitive business, sometimes even, a completely new industry; that in large part serves to control the existing large companies or groups by making it impossible for them to interfere with these developments.

This is fundamental to the competitive marketplace. It is this point which begins to bring this debate into focus. For, without the full support of the issuing government, the patent will be useless and the competitive process breaks down. Intellectual Property, (IP), such as patents, drives the creation of new jobs and new competitive industry. I argue that the patent law underpinning the creation of new competitive industry is the absolute foundation stone upon which a free society stands; for competition is the fundamental driver for the creation of free markets and greater prosperity. Over the years, as such prosperity took hold, then that success became the driver for governments’ world wide setting out many years ago to create new law for the purpose of protecting any such intellectual property.

Intellectual property is protected by governments, who produce law. That is the role of a government; to produce law. We, the citizens of those countries, agree to abide by the law and accept that our actions have a pay back that permits us to live our lives within the framework of the law in peace and without disruption from anyone, including our respective governments. That abiding with the laws enacted by government, is a very simple and basic requirement of citizenship.

That simple statement carries us into our relationship with any government; for to be the font of the law requires that a government must abide with any and all law itself. This is not a negotiable; this is fact, for if any government ever turns away from the rule of the law it enacts, its very legitimacy is destroyed. Governments must abide by the law they enact for the whole concept to work. What I have found myself through my dealings with government, particularly the government of the United States, is that in fact, that relationship has broken down; That the government of the United States is quite prepared to ignore their own law, if that will suite their own purposes.

I believe that we have to face the truth of this breakdown and seek a way forward back to re-establishing the full rule of the law by government itself.

A great part of the problem is that attorneys employed by government today, have lost contact with their ethics. By that, I mean that the high principle engendered by the concept of the rule of law has been usurped. Rather than abide by the rule of the law to the highest ethical standards and accept that sometimes even a great government can have duties engendered by the law it enacts; the principle of unjust, unethical actions designed to usurp the true meaning of the law, rather than strictly abide has gained credence and today, the rule of the law is as a result moot. That governments, by the action of their attorneys, have placed themselves into the position of both being the font of all law while at the same time, refusing to accept the responsibilities engendered by the rule of law. I believe that makes such governments lawless, Ultra Vires; Law beyond one's legal power and authority. That if a government makes itself Ultra Vires in one area of the law; it undermines all the law of that government. A Lawless Government as with any other criminal becomes illegitimate and throws away its standing in all areas of the law. You cannot have government making law on the one hand that it expects all others to abide by when, on the other hand, that same government blatantly refuses to accept the same laws apply to themselves. Yet this is exactly what is happening today and continues.

I thus charge that the United States government has systematically usurped the rule of the law to deny full access to rights granted by patents issued to myself.

Considering that the greater part of the wealth of such nations is now the result of the protection effect of IP law against infringement; I ask: Is an Ultra Vires government, (in refusing to accept its own responsibilities to an individual who owns IP, granted by that same government but that that same government are openly infringing), far from gaining a financial advantage against the individual; is, in fact, instead placing the entire foundation for the prosperity of that nation of citizens into dire jeopardy?

The answer must be resoundingly yes! Competition begets further development of technology. Suppressing competition begets loss of jobs and technology to countries where the benefit of competition is better recognised.

I believe that when the record is properly investigated, it will be found that again and again the United States government attorneys decided to ignore the rights engendered in the United States Patents granted to me by the government of the United States. That they knowingly refused to act with the highest ethical standards and were complicit amongst themselves to collectively prevent access to the proper value engendered in the grant of the patents.

Contempt for individual rights comes from a refusal to recognise the rule of law. There are no ethics in lawlessness, for ethics cannot apply to a lawless action. By the same token, you cannot claim sovereignty, (under law), and at one and the same time act without ethics and in any way infringe the law. To be able to claim sovereignty you must also act to the highest ethical standards. The General Services Administration, (GSA), of the United States of America claims that all procurement for the government is at all times “to the highest ethical standards”. In that case then, procurement must always be to the highest ethical standards and turning your back and saying “sue us” or, “we will ignore you” cannot ever be seen as being “to the highest ethical standards”.

I am told that the government may claim State Secrets privilege. I ask; why would I need to know anything about the secret use put to the intellectual property being used by the government, to obtain my right to royalties? There are a number of points here. Purchasing any article never gives the seller the right to know what use the article is put to. An inventor does not need to know anything about the use. All he needs is the financials, the basis for the royalty charge. The matter can be dealt with very easily without any disclosure of any security kind. One only needs to be told that the truthful facts have been looked at by a court of law. I do not need to attend and hear the facts, unless that is, the truth has not been told, or because one of the parties disputes fact. In that case, we have to place ourselves in front of an independent individual with no ties to anyone whom we believe to be totally honest; a judge in a court of law, to get at the truth. I argue that simple act alone is all we need to be able to resolve the debate with regard to what is simply a monetary matter of value.

I can see a large number of independent attorneys suggesting that, without the relevant documents being available, there will be doubt that the truth has been placed before the court. I argue that that matter can be addressed by the court itself. What are we talking about? In my case, that would imply that we cannot trust the government attorneys to tell the truth. But I argue that, if we set out from the outset to create a Department of Justice that stands as a beacon to the entire world of honesty and at all times dealings of the highest ethical standards; then it is an easy matter to devise suitable punishment to suit an attorney that does not hold those high standards.

The Department of Justice must at all times be seen as totally honest and always acting with the highest ethical standards; it is surely in the interest of the government that that be so? Thus we will be able, standing on the steps of government, to feel totally at ease with our government.

Where any act of provision of fact has been made by a government or any part of that government, that information must be provided to the highest ethical standards. The facts must be the truth, the whole truth and nothing but the truth. To do otherwise is to commit an unlawful act. If a government attorney has acted unlawfully; they should be disbarred and, if the relevant department has encouraged that act of unlawful behavior, it must be seen as damaging the reputation of the whole government and the other individuals involved should be brought to justice, charged and tried in a court of law. Either government sets out to be a font of law and at all times lawful, or, it is not lawful. For a government to be seen as a lawful government, the government attorneys must, absolutely must, act at all times to the highest ethical standards and at all times exercise absolute total honesty. You cannot be untruthful and, arguably, unlawful and act to the highest ethical standards at one and the same time.

Again, the government may claim Eminent Domain. But the word domain implies some form of property and to own property implies ownership and ownership requires a consideration to pass between the parties for ownership to take place. No one, not even a government can own anything, call it what you will including intellectual property; an intellectual domain, without consideration passing between the two parties; on the one hand the present owner or owners and on the other the purchaser.

Taking without consideration being agreed between the two parties, is theft, stealing. A government has no mandate to steal anything. Indeed, for the government to remain beyond doubt lawful, it must at all times do everything in its power to see that it and especially its attorneys NEVER act unlawfully.

And this brings me to the core of this debate. A citizen, believing the government was lawful and acting with the highest ethical standards, (after all, that is what the government publicly claims), approaches a department of the government with their intellectual property, perhaps, as I have in the past, via the hands of another employee of that government who will vouch for me.

They hand over information. Why do they do that? They seek support for the further development of the intellectual property. The cynic will say all fool them. I say that the requirement of acting to the highest ethical standards requires that the information is not owned by the government department as no consideration has been agreed or paid. Thus it is incumbent upon the attorneys of that government department to treat with the individual and to the highest ethical standards, and to see that the matter of the treatment of the ownership is correctly and properly managed.

And again, how much more can such an individual contribute? Saying that the individual is not employed by same department and thus has no standing is equally vacuous. If you like the idea so much, what is wrong with the individual? I believe that much is lost by casting the individual out of the system. (We have their idea, get rid of them). Rather than; have they any more?

I am left to wonder - how many government servants have claimed intellectual property that they never ever thought of in the first place? Ruling highest ethical standards also requires that the individual is treated with properly. They may be much more valuable to the nation than any you have at hand. Throwing the thinker out is wasteful and not in any way logical. You only have a very finite number of good thinkers, you need every one of them you can find and harness. And how many other new ideas have they got still unseen? To say, he passed to us the information, he thus gave it, is not sufficient. If I give you an object I own for you to look at, I do not pass ownership to you in any manner. If you pocket it and walk away, I say you steal it. How say you?

You say I have to take the deal like it or not. I say that the right not to accept the deal, any deal, is central to the operation of a free society. Whether it is a bond between two individuals; to work together, hunt together, marry each other, or between organizations, even whole countries – each in turn submits to the simple process of one side saying what they believe is in the interest of the other party; and the other agrees to agree or not. Each is free to make any offer, the other is free to accept or reject that offer. The rules are very clear; Caveat Emptor, let the buyer beware.

The moment you accept the deal you have to submit to it. On the other hand, no matter what the deal on offer, no matter how good the price may appear to be, the other party is totally free to refuse the deal.

In the free world, that ends the matter. If the offering party wishes to try again, they are free to make a new offer, but what they cannot do is force the issue. Any attempt to force the issue is against the law in any free country. We seem to have forgotten why all these aspects of our free society are there in the first place.

They are there to protect the weaker party from an imposed deal.

I believe that there is a clear perception today, held by the attorneys of the government, that a government department may do as it wishes with an individual’s property that comes its way. I believe that that is theft and there is no other way to look at it. Consideration was not agreed or paid, no transaction has taken place. No deal agreed. Ownership remains with the individual.

I believe that the Supreme Court must recognise that there is this perception at large and that it is causing great damage to the reputation of the law in the United States. I further believe that it is the responsibility of the Supreme Court to look again at this matter and create a set of clear, unambiguous rules of engagement, a framework of ethical rules to the highest standard that we on the outside can see in place and that those on the inside can see they must abide by.

Without that structure, a level playing field if you like, the actions taking place today stain the reputation of what many of us do sincerely believe to be the finest country on the planet.

I was led to believe that the United States of America wanted individuals like me; but I now believe that the government attorneys will do anything in their power to prevent someone like me prosper. That, ladies and gentlemen; is feudalism. It has always been my understanding that the United States was founded upon the realisation that feudalism is a failed concept. That the efforts of the free individual and their intellectual property coupled to capital has made your nation wealthy, powerful and strong. I believe that within the government, that lesson has been lost. Think about that? Why has this come about?

The answer has to be that the practice of law has become totally adversarial. Everyone is the enemy. In corporate law, yes, the attorney is there to protect the interests of the corporation; but it must be seen that in government, particularly where competition law comes into play, the primary responsibility has to be to encourage – competition. The government attorney has a much wider responsibility – the encouragement of a successful nation.

If the government attorney has only a view that their responsibility is to protect the government, then everyone outside the government is an enemy. That the citizen is to be held at bay and controlled; that success is to be trammeled by the idea that they must not interfere with the aiming point of the government. I would argue instead that it is the governments responsibility to do everything it can to encourage the success of any citizen, (or in my case anyone wanting to join your nation as a citizen), in their lawful pursuit of making the most of their particular talents and aspirations. It is a very real aspect of a feudal society, that those with power will do everything in their power to prevent the success of the ordinary citizen. Why? Easy to answer, merit always shines so brightly. The great embarrassment of an “old school tie” without merit is to see themselves outshone by a bright shining upstart. In those circumstances, they have every vested interest in the failure of the more successful. As his grace The Earl of Clanwilliam once said to me: “Everyone has a vested interest in your failure”.

I argue that it must be recognised that the greatest responsibility of the government attorney is to see that, in the pursuit of lawful gain, those with merit are encouraged to succeed; that by so encouraging, they prevent the establishment of a feudal society and encourage a free and prosperous nation.

The government of the United States of America has granted me patents. Those patents give me rights. I have not sold the ownership of those rights back to the government. No consideration has been offered. I have been told to my face that the government departments will ignore me.

I believe that the actions of the government have been unlawful. That the record will show that the government of the United States of America has, in its dealings with me, disregarded the rule of the law of the United States of America, disregarded the ethical standards naturally engendered by the rule of the law and in so doing has placed the government of the United States of America Ultra Vires. I also therefore respectfully request that the Justices of the Supreme Court rule that the Solicitor General for the government of the United States is thus also Ultra Vires.

I do not have the available resources for a more detailed application to the Supreme Court as I am denied access to the value of the exploitation of the patents by the United States Government. Neither do I see anywhere upon the patents granted a requirement under law that, if I am poor, I must sell my patent rights to fund access to the law.

I request that the Supreme Court of the United States of America put these matters to right at the earliest opportunity; that until it does so, expeditiously, it should recognise that the very legitimacy of the government of the United States of America is called into question.

With the greatest of respects,

Christopher Francis Coles.

I never quit, don’t know how, not in my nature.

Chris Coles
President and Founder
Chris Coles Holdings Inc.

I dedicate this Petition:
To the memory of my great friend and legal mentor, the late Ronald B. Margolin

Statement of Ownership

Chris Coles Holdings Inc.
Chris Coles Holdings Inc. is entirely and wholly owned 100%
by Christopher Francis Coles, the Petitioner.

Statement of use of royalty income from the patents

Any royalty income from the patents will be largely invested in new small businesses and research into the need for the establishment of a free enterprise based free marketplace for equity investment into new small businesses along the lines set out in detail in my proposals for A Capital Spillway Trust, a copy of which may be downloaded from www.chriscolesholdings.com.

Appendix

Letters to: Page

Department of Defence - Dated September 8th, 1997. 32-33

Federal Communications Commission - Dated August 7th, 1997 34-36

Federal Communications Commission - Dated October 26th, 2001 37-40

The White House – Dated December 14th, 2001 41-43

Press Cutting:

Sunday Times, London, March 16, 1997.

Headline: “Anoraks’ apocalypse” “How computers will rule the battlefield”

The central illustration at the top of the page is an exact illustration of one of the main uses of my IP described in the paper presented to the Department of Defense conference in 1991. The caption reads: “Sensors dropped from planes in their thousands can act as eyes and ears on the ground”. There was also a reference to the IP in the text of the news item.

I will follow this with two more posts as Annex B and Annex C.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Annex B: A clear set of rules for the ongoing engagement of government departments when dealing with the issues of the individual inventor

The Inventor

I am an inventor. Not an artist, sculptor, writer, singer or composer. My thoughts confined to paper are not something I can sell by the thousand to an admiring audience. The thrills of discovery are ethereal and ephemeral and not something to hang on a wall, or listen to of a quiet night at home with some friends. My thoughts are; however, the bedrock of a free society that thrives upon the countless goods and services stemming from those dust swirls of momentary idealistic creativity called inventions.

We look into the future, not the past. Have no need for the instant gratification of a wet canvas. We rely on many others for the sublimation of the initial idea into reality. Try imagining creating… anything and not being able to talk to anyone about it. Have an idea that you know in your heart is good and reliable and worthwhile and that you must bounce off another thinker and risk having that idea stolen, without a single thought. Not even a thank you. New, fresh, inventive thought; is extremely fragile.

Copyright does not protect us; is not designed to. The slightest slip between the thought forming in our heads and the office of the government patent office and the idea is gone, lost, forever not your own. Now, realise that, every idea we get costs money. To file for; to pay the attorney to delineate; to travel for sometimes decades with all the costs of a small business yet never finding anyone that will pay that extra mile to see the idea into production. Never any income, regarded by any banker as a nuisance at best and a malingerer most of the time. Remember, it can be years before we are granted the patent itself. Up to that moment, we have nothing but an idea that “might” be worthwhile developing.

When we at last arrive at the grant of that paper contract called a patent and when all our troubles should be behind us; instead, we now inhabit another even more demanding and dangerous world. Government makes us a part of the industrial might of a nation by granting that patent. And follow that grant by ensuring that we become their slave to a process that demands a regularly increasing payment of maintenance fees, (remember we have no income without exploitation), over its twenty year lifetime.

In that case, surely, government should have a mind to see that these initial seeds of the nation’s future prosperity are protected from the frosts of monopoly and overbearing competition. Instead, we find that government is, on the one hand, completely indifferent to our reality or, on the other, only prepared to sustain us, on a whim, to the smallest extent unless we break our vow, (implicit in the grant of that patent to sustain competition); by walking through the door of an existing competitor.

And just to add insult to injury, they toss their heads in complete indifference to the fact that there is no fully free, free enterprise based, financial marketplace; wherein we should be able to capitalise our new ideas, competitively, against the incumbent industry.

Instead encouraging the short term capitalisation regime of the venture capitalist that only serves to reinforce monopoly through the refusal to entertain investment in the small local business that has an aiming point of long term independence; The utter stupidity that we cannot be permitted to be both free and successful.

The final indignity is to discover the governments’ complicity in keeping the monopoly supplier of yesterday in place rather than accept that thinking has moved on and there is a new game in town. How dare I suggest that I have a better idea? Who is this idiot that thinks beyond their station? We are a Department of Government, how dare they state we are in the wrong?

They are talking about an inventor; arguably, the strongest competitor in a competitive society.

Today, I place myself at the feet of the highest court in what many still believe, (regardless…), is the finest nation on this planet; to seek justice, not just for myself, but for inventors everywhere.

It is a travesty that we are both trammelled by government rules for our own actions and at one and the same time distained by that same institution. No one seems to have given any thought to the long term implications of a refusal on the part of government to protect that inventor. We need protecting, have no other financial means of sustaining a normal family life, raising children, building homes, all the things you take for granted.

Imagine please, take a moment to think about this; you will be expected, yes, expected; to work for decades without any income from your efforts. And no, I am not talking about the hardship everyone goes through to gain an education. That phase lasts until our early twenties. No, I am talking about the rest of your working lives.

No one will sustain you. No banker will lend you money for your efforts to secure that piece of paper called a patent. Look back along your career and think what your life would have been like with no income from your primary work? Dig a trench for the foundations of your new home and a lender sees immediately the onward worth of your efforts. Not so the inventor. Worse still, everyone imagines we will immediately become a millionaire. Surely, there are many examples of such success? The truth is that by far the majority of inventions never see the light of day; are never prototyped, capitalised, or exploited; a veritable wasteland of lost effort, lost lives.

It is an interesting dichotomy that a nation will perceive an inventor sits at the pinnacle of their industrial society, supposedly values their efforts, yet does not recognise any duty to support them. Try imagining being a Supreme Court Judge, performing all the duties, reading all the papers, transcribing all the thoughts related to that occupation while at the same time, on top of your duties; working for 12 hours a day for a pittance and coming home exhausted to your “proper” work. Have you ever regularly worked a 24 hour day? I have had to do just that, at least once a week, every week for years at a time.

Look around you and think how much your life would change without that income you have received every month without fail since you first qualified. Imagine all those years of work without any financial reward for your efforts. Scorned for being poor by every bank manager you have ever met. No money for golf or flying, often not even for a simple home of your own.

Constantly scrounging help from friends to keep going forward with your ideas. Importantly, the individual inventor cannot go bankrupt to alleviate their finances as any other entrepreneur can and start again. They would lose the rights to their intellectual property the moment they do that. So that option is totally closed off from them. They are thus often forced into the direst financial circumstances with no way out other than to abandon their chosen profession.

That is the life of the individual inventor today.

I have identified in my petition to the Supreme Court that the indifference of various government departments highlights the need for new thinking. Inventors need to be able to see for themselves that government has in place detailed rules of engagement; that place the creation of competition by invention as the primary aiming point of the legal framework of the government. Inventors need to see the government as their ally not their enemy and by the same token, government needs to recognise that, if they want to promote invention, they cannot be themselves competitors to that process.

You cannot sustain inventive thinking by individuals on the one hand and on the other, imagine that you can own the thoughts that create that inventive thinking. The people are surely free to think and the government’s responsibility, nay, duty; is surely to support that essential freedom?

The Draft Rules

Before we look at the draft rules I am proposing it is important to point out that there is an assumption that anyone that has created a patent has, at their respective fingertips, a full knowledge of their legal rights engendered in that patent; a total knowledge of patent law. I believe that is a wrong assumption. Particularly in the case of the individual inventor, the process of grant of a patent in fact leaves the individual essentially unprotected. The individual inventor is not under any “built in” protection of their rights engendered in the granted patent. The inventor must therefore be able to purchase protection from an attorney. However, as I have already shown, with no income, no funding and no support from the granting government the individual inventor has no means of protection in law.

The government granting the patent does not contract with the inventor to in any way protect. It simply issues a document that the inventor can use as a defence elsewhere; commonly described as a licence to sue. In that case, if the funds to pay an attorney are not immediately available to defend, the patent has no legal value.

Moreover, the patent has no monetary value either. This is confirmed by the fact that there is no formally agreed international structure, rules or method available in any country to my knowledge that permits such worth to be clearly established. No bank anywhere will place any value on any individually owned industrial patent. No poor inventor can borrow a dime from any bank against the grant of a United States Patent. By itself, the patent is worthless.

If any other department of any government issued a contract for the supply of any goods or services, and that contract was subsequentially broken, the full force of that government’s legal team is immediately brought to bear and the matter is resolved. No attorney takes on a government lawyer for that very reason. The government has unlimited resources and, not to be diminished in thought, owns the whole process of law. Makes and dispenses law; builds the courts, pays the lawyers, commands the complete presence of the law.

What lawyer will invoke the wrath of a government that ultimately pays the bills and can, if needs be, destroy the reputation? Taking any government to law is thus a very risky undertaking for anyone.

These absolutely primary issues are well known but normally dismissed as irrelevant to the normal business of governments only dealing with the largest corporations; the most successful in a nation. I believe that these primary issues must now be addressed as a matter of urgency. Not to so do is to refuse to accept the responsibilities of the primary duty of any government which is surely to use all its energies to foster a fully competitive industrial society.

I have asked The Supreme Court of the United States to address these issues as a matter of urgency. My request is in two parts;

1. To address the issue of the use of ethics to the highest standards.

2. To create a clear set of rules for the ongoing engagement of government departments when dealing with the issues of the individual inventor.

I believe that almost all our difficulties revolve around the grant of the contract called an industrial patent. That a quite small change in emphasis that addresses the need to be able to properly control that contract will bring immense benefits in the form of large competitive gains.

The United States Patent Office needs to return to the basic reasoning for the creation of such a government department and to create new rules to take account of the conflicts that arise from the individual ownership of such industrial patents as they deem to so grant.

As I have already related in my petition to the Supreme Court:

“Patents were devised as a way to permit someone with a new idea to be able to protect that idea for long enough to be able to establish a stable long term business. The patent was thus able to carry the idea from the inventor into general use through the mechanism of investment of capital to pay for the development of the new process or product. By issuing the patent, the governments’ intention, surely, was to provide enough protection to an inventor so that the new idea had a firm footing from which to grow into a strong business? I must emphasise the bit about growing into a strong business, for this is a long term process that can take decades to achieve. By this mechanism, the inventor creates a new competitive business that in large part serves to control the existing large companies or groups by making it impossible for them to interfere with these developments.

This is fundamental to the competitive marketplace. It is this point which begins to bring this debate into focus. For, without any non-monetary mechanism to establish the veracity of the contract; the contract is unbankable. The patent will be useless and the competitive process totally breaks down.”

The legal profession will immediately say that an inventor must seek advice, yes, but often that is not made available simply due to a lack of funds. A classic “Catch 22”. No value, no funding. No funding, no legal representation. No legal representation, no value. And remember, the finances of the inventor can be sufficiently dire that they will not even be able to sustain the ongoing costs of the expenses of the attorney.

It is a given that all large corporations and, as I make clear in my petition to the Supreme Court, including government departments; make a point of ignoring the individual inventor. The grant of an industrial patent to an individual poses no threat to the dominance of those major corporations or departments. Thus, as things stand, the patent granted makes no contribution to the process of competition. A patent granted to an individual should hold all the power of a government contract; instead, it is, at best, a source of amusement to any competent industrial or government attorney. For these aforesaid reasons, I believe that we need to start with a simple statement which must be attached to any communication, including particularly copies of patents from any granting patent office to the following effect.

The Government (of The United States of America) is absolutely committed to the establishment of competitive markets for any product or service. To this end and to foster such competition we so command:

Whether you be an individual, small entity, large commercial business or department of any government; be informed and make note. If you have made contact with this patent office for the purpose of discovery of information regarding any patent which may be seen as an infringement of your product or service, either existing or proposed.

Be it known herewith that you have an absolute duty, engendered in the grant of any such patent or patents, to make immediate contact with any and all who may have been so granted such a patent; (a right to prevent the use sale or manufacture of your possibly ifringing product or service), with a view to resolving any possible dispute in an amicable manner based upon the use of the highest ethical standards in your treatment of the other party.

You cannot use this order as a means to suppress competition. Your duty is to pay the grantee the royalties implicit to the grant of the patent. If you are the stronger party, those costs of resolution are yours alone.

If you choose to ignore these rights so engendered in the granted patents and do not make immediate contact with the grantee to discuss the matters so arising, and thereafter to use your best endeavours to resolve your possible or actual infringement the full force of the granting patent office will be brought to bear and a punitive solution will be summarily imposed.

There will be no extenuating circumstances accepted nor will any order for subsequent review be so granted under any circumstances other than for any possible increase in royalty payment which may be due. This is an upwards only contract which you ignore at your peril.

Further, you may not use this contact order to avoid any competitive pressures for it is deemed that competition is the imperative of the patent process. In all circumstances the rights to royalties will remain with the grantee for the duration of the patent.”

There are further rules needed for the environment outside of the legal process of the grant of a patent. Again; government is charged with creating a fully competitive industrial society. For that reason, no department of government may interfere in any way with that process. I therefore set out herewith a draft set of rules which are entirely based upon the highest ethical standards and serve to throw the responsibility for maintaining that competitive society firmly upon the shoulders of the government, and as you will see, the nation’s savings institutions, the institutional investors.

“It is the responsibility of government to foster industrial and commercial competition through the patent grant process. It is hereby deemed to be a criminal act punishable by the full force of the law for any person or persons employed by or for any department of any government state or national to ignore the rights granted to any inventor by the patent office of any nation to create any competitive industry or commerce.

It is further deemed to be the responsibility of any such department of government to use all powers at their disposal to foster the creation of competitive industry or commerce through the patent process.

No department of government may in any way suppress competition.

All information passed to any department of government by any individual, small entity or any other form of commercial entity for the purposes of evaluation remains at all times and for all purposes the property of the individual or entity.

No department of government may hold any rights to intellectual property. Any intellectual property created by any department of government employee is deemed to remain the property of the employee as also any royalty income deemed to be payable.

No department of any government may prevent in any way any employee from creating a competitive industry or business from any granted patent to that employee.

Institutional Investment Rules

Now I turn to what are generally described as the savings institutions. This is very simple and again I provide a preamble.

The nation’s savings institutions are served with the responsibility to support the government of the nation in its aim to foster a fully competitive industrial society. To this end we believe that only a fully competitive free enterprise based industrial society will support our aims. For such a society to be engendered, we deplore the present investment methods that take control of the entity being invested in from the outset with a view, within a very short timescale of a few years, to selling that so controlled investee on to a larger industrial or commercial business. We believe that process only serves to suppress rather than foster competition and further confines such investment to a very narrow spectrum that does not take proper account of the needs of the full breath of society in general. We therefore rule:

No savings institution, holding the savings capital of the citizens of the nation may pass those savings to any individual or other entity that attempts through any process to prevent the creation of a fully competitive industrial society based upon the concept of free enterprise where the original creator and (often) manager of the business owns the business.

That at all times the investee must remain in complete control of their business post investment and thus the savings institutions may not themselves or their proxies own any controlling interest in their investments.

Therefore all such investment must be at arms length.

Total freedom must be the ultimate aiming point.

All savings institutions are further charged with the responsibility of properly capitalising the granted patents of any inventor whether or not a citizen or from a foreign country where the purpose of that capital injection is the creation of a competitive industry or commercial business within the confines of this nation.

No Savings institution can refuse to so capitalise any potentially viable competitive industry.

Any such savings institution not deemed to have adequately set aside sufficient capital as their equivalent contribution towards the attainment of a fully competitive free enterprise based industrial society may have its license to so continue reviewed.

I believe these simple rules will serve to invigorate the industrial society we all believe is the only viable solution to promote the full benefits of successful citizens at every level of society.

I cannot emphasise enough; at every level of society.

We must stop believing in the idea of investment for the few promoting success only at the top of society and government subsistence handouts for the rest.

Only a fully competitive free enterprise based society can succeed; and to achieve that success, everyone must take responsibility and play their part to encourage; those individuals that step forward to try and to succeed, as best they can, within their own communities.

Human competition is the most natural influence and must be encouraged at every level. That is surely the governments greatest responsibility?

[bobola]

Re: The Road Ahead from a Grass Roots Viewpoint

Chris, from your web site;

"A fully competitive, free enterprise, open to all, marketplace; designed to supply equity capital to a much wider range of new, privately owned start-ups, new high technology firms and small businesses than at present on terms acceptable to everyone."

What terms would be more acceptable than those currently in place?

Are you talking about a new source of money anyone with a new idea can easily tap?

How is this different than current VC financing?

Let's assume that I have the money you need.

How much money do you require to get started?

What are the terms?

What control do I have once you get the money?

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Chris, from your web site;

"A fully competitive, free enterprise, open to all, marketplace; designed to supply equity capital to a much wider range of new, privately owned start-ups, new high technology firms and small businesses than at present on terms acceptable to everyone."

What terms would be more acceptable than those currently in place?

Are you talking about a new source of money anyone with a new idea can easily tap?

How is this different than current VC financing?

Let's assume that I have the money you need.

How much money do you require to get started?

What are the terms?

What control do I have once you get the money?

Bobola, please bear with me while I put up the last two posts, Annex C and a final wrap. Then I will come back and answer. Chris.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Annex C: Free markets in capital must be established at every level to support a free, competitive and successful nation.

There can be no argument that competition, particularly industrial and commercial competition; is seen as the fundamental foundation stone of a free society. My dictionary says competition is: “The action of competing with another or others for profit, prize, position or the necessities of life; rivalry – The rivalry between two or more businesses striving for the same customer or market: Competition tends to keep prices down”

Competition is a natural human concept that lifts the most successful to the top of society. Competition makes others strive… to compete. Competition makes for a more successful nation. Those that strive win and by winning, lead us all towards success. It is that fundamental rivalry that also keeps anyone from being in a position of too much power or influence. So it is this simple competitive mechanism that in fact, keeps us free, keeps us from falling into a feudal society where the free marketplace does not operate and where the accumulation of wealth or power has no checks or balances. Where rivalry can be suppressed and competition is excluded. Feudal nations prevent the naturally successful from rising to the top and thus the best in the human society are prevented from succeeding.

In such a feudal society, and here I include communist, socialist as well as aristocratic models, we always see a small group taking control of the many, who in turn, are restricted by onerous rules and other mechanisms that exclude anyone outside of that group from competing. Lack of competition tends to mediocrity. Uncompetitive nations will always fail eventually.

So this is not simply a matter of an argument about profit; this is a matter that will profoundly affect the vitality of any nation, large or small. Once an uncompetitive business environment is established you will see visible signs of arrogance towards those less fortunate who in turn have to pay the over inflated fees and costs of a distorted market. Indeed, it is this distortion that so clearly marks out this scene. A good example being that the companies and individuals trading within an uncompetitive market are able to pay themselves grossly inflated fees.

Let us see a simple free market in action.

A free market is open to anyone. Naturally depresses the potential for excess. Always has change occurring as prices rise and fall according to demand. Never stops evolving as the natural competitive rivalry swings the balance of opportunity to and fro. Today’s winner is often tomorrow’s loser.

A free market in anything demands that the seller can always get the best price of the day, most usually via what we call an auction. An auction is where goods and services are sold in lots at the fall of a hammer. That sale price is determined by creating an opportunity for the maximum number of potential buyers to immediately bid based upon the perceived worth, (of their purchase), to them downstream from that purchase.

The moment the sale takes place; the bid is accepted, payment is made and immediately the ownership of what is being sold changes. No one expects the seller to retain ownership of what is sold. In fact, if the seller did retain ownership, then the free market would not work as there would be an obligation upon the buyer that transferred value created by the buyer back to the seller beyond the power of the market to adjust.

The transfer of ownership is thus a fundamental aspect of a free market. The seller has to accept the price the market will deliver that day for the concept of the free market to work. The price paid must be the market price of that day. The buyer has priced his bid based upon their knowledge of the cost of whatever onward process they have in mind. The price to the final consumer is adjusted accordingly. If that buyer fails to sell on at their final market price, then they cannot afford to go back and buy more at that price and must adjust their bid accordingly.

This is the essential element. Paying too much to the original producer may secure the supply, but suppresses the onward sale of the finished product at the end marketplace. It is this natural check and balance that keeps the whole process of rivalry competitive. Once again, today’s winner is often tomorrow’s loser. The only way to win over the long term is to keep your margins to the minimum that will secure a steady income. Raise prices too far and you are automatically excluded by another that prices below you. Reduce prices too much and you cannot continue to pay your way. Your money runs out before you can replace the original deal with another.

Competition is not designed to give anyone an advantage. It is the decisions made at the time of purchase that make for viability downstream. You have to succeed in your decisions to succeed. You cannot gain an unfair advantage. You must constantly test your market knowledge by succeeding in your market.

I charge that government has an absolute duty to see that at all times, a fully competitive marketplace is maintained for anything and everything that is traded in society. We all know the rules for a democracy and now someone has to define what the rules of a free market society are. Have you ever seen them writ large on a wall? I cannot find them so let us create some here and now.

What is a free market? What should the rules be?

1. A free market is any place where anything may be bought or sold.

2. No one can be prevented from access to a free market.

3. No one can be prevented from selling their goods or services.

4. No one can be prevented from buying.

5. All sales and purchases must be to the highest bid.

6. You cannot deal against the market outside of the market.

7. No one can be permitted to use undue influence upon any transaction.

8. It is the duty of everyone associated with the creation of free markets to see that there are as many as possible independent producers of all goods and services provided to society.

9. Any restriction upon the number of independent producers of goods and services acts against the interests of a free society.

So, for example, if we want to purchase a ton of potatoes, we proceed to the fruit and vegetable market, walk through the door, make our selection and pay the going price for that market that day. The ownership of the potatoes immediately passes to the purchaser upon the seller receiving their price.

The seller has no further lien upon the potatoes. This is very significant.

We all know about such transactions. They repeat in our everyday lives. But it is important to recognise the basic principles. For a true free market to operate the seller of the goods must not:

• At the same time control the purchaser and thus be able to exert undue influence upon that purchase; the price paid at the auction.

• Retain ownership of that which was sold.

• Be able to in any other way influence the progress of the competitive process downstream of the original purchase.

Competition must be seen as being the fundamental foundation stone; the principle purpose of a free society. For that to occur you have to have as many as possible competing in that market; any market, all markets. The more you reduce the number of competitors, the more you eventually reduce the natural quality of your nation. The less competitive you become and the opportunity for anyone, from whatever background, to rise to the top and succeed consequentially reduces. Failure will become endemic.

In such an uncompetitive environment, it is an easy illusion to believe that the few that are succeeding are all that can succeed. This is the great delusion created by any feudal society designed specifically to keep the group at the top exclusively their own. Feudalism naturally excludes success. So what is it that has got me so engaged with the process of and the people involved with the creation of new industry and commerce? It is that I believe that the way the process operates today serves to reduce rather than increase competition and in so doing is not acting in the best interests of a free competitive society.

Simply put, job creators, inventors and the like do not have access to a free market for capital.

Let us look at the process of creating a new company; a new independent producer of goods or services. The company is founded by a competitive creative individual or group of such individuals who will capitalise the company to their maximum ability.

• The most important thing to emphasise here is that as many as possible start ups at this first stage must have access to the further capital they will need to be able to survive. Just like seeds in a seed bed, the last thing you want is for the majority to die off for want of a little water or nutrients.

Yes, they must fail if the fundamentals of their particular business case are flawed. But it is imperative that they do not fail for any other reason. Good seeds must be allowed to flourish. To compete!

So what are the basics we should be looking for in such a start up?

1. Independence. They have stood up to compete in their chosen market.

2. Market power. They have something new and attractive that will sell.

3. Courage. To take on the competition of even the mightiest company.

What do we not want to see at this stage?

If a company is succeeding, the last thing you want in a free market is for the successful to be in any way forced into the hands of a larger competitor. That route naturally suppresses competition.

We need as many new companies as possible to remain independent and competitive. We need as many as possible of these new companies snapping at the heels of the mighty companies.

That is not happening today. What is happening is that from that first stage start up, the founders of the independent company do not have free access to a free market for the capital they need to grow and nurture their business. Instead, they are actively encouraged to approach what is described as a Venture Capitalist who has a quite different agenda; to turn their initial investment over by selling the capital of that business on to the highest bidder for that company; in as short a timescale as possible.

“In the U.S., Michels complains, investors want deals only when the possibility of acquisition exists, meaning that they anticipate their payoff by quickly selling the company. "No one is looking for the next big thing," Michels lamented -- an opening that just might be Europe's ticket for a high-tech future.” (Fanning Innovation Euro-Style By Stephen H. Wildstrom, BusinessWeek online, June21, 2005).

Looking at that Venture Capitalist, (VC), particularly where they have taken their own start-up funding from a larger financial institution, they will have borrowed their working capital from that major financial institution. It is this loaned investment by the financial institution that now means that there is a vested interest that is detrimental to the wider society. Why? Because the financial institution also owns the shares of the larger companies which in turn buy the investee business from the Venture Capitalist.

Yes, the VC can argue that they gain the majority of their capital for investment from smaller investors. But that argument has to be countered by the fact that by far the majority of these investments are sold on to a larger business and in as short a timescale as is possible. The investing VC never contemplates holding onto those shares for the length of time needed to establish a stable long term business owned by the original business creator.

So for this system to work effectively, the very first thing the VC absolutely must achieve is total control over the company they invest into. It is entirely in their interest to do so. There is no other way that they can be certain that, at any time appropriate to the VC, the VC can sell on their ownership for the highest price available.

From this moment in time, the founders lose control. The competitive potential collapses.

This is not a free market.

There is no imperative for the creation of free and independent companies that will compete against the major companies. But the debate about this first stage of the process acts as a smokescreen for the next stage; Mergers and Acquisition, (M&A).

Today, instead of a process that constantly creates a rolling wave of innovative, free, independent companies; we have a process that, immediately the start up tries to expand and has to raise capital, they become entrained into a rolling wave of uncompetitive mergers and acquisition, M&A. The people that are driving this wave of M&A are employed as a division of the financial institutions that fund the VC. Once the start up has been financed by a VC, they are automatically entrained into a process that is designed to make them fodder for the next stage, M&A. They are acquired, or merged with another company with which they would otherwise compete. Thus this whole process is anti competition and anti free market.

Now we are looking at a closed system that has no competition. The people involved can pay themselves huge bonuses for each sale or merger as there is no way for any outsider to gain a foothold to compete against them.

M&A is a classic demonstration of absolute market power. Total control!

The primary seller of the capital does not sell, but loans. The primary seller controls each stage of the downstream process; owns the M&A, controls the VC and through the VC, demands total control of the start up company. Because the VC must borrow the capital, the VC must also sell as soon as possible onwards to be able to earn a capital gain from the initial investment.

This is another important point. The VC has little likelihood of an income from the start up. There is none; all the spare income of any start up should always be re-invested back into the growing company. The only way the VC can satisfy the loan from the institutional investor; is to make a capital gain, turn the shares into cash as quickly as possible. To gain access to another tranche of new capital to invest, the VC in turn must play to the rules of the financial institution that needs the M&A activity to keep satisfied the bonus income needs of its subsidiary employees. So, instead of many competing new businesses, you have a system designed to maximise the income for the financial institutions, and to do that competition must be suppressed.

Even more important to society, no one considering founding any independent company, where they intend to remain independent, can gain access to this capital market. No VC will go near them. The VC will not entertain investment when they cannot control the company and sell at their optimum timing. The VC has no interest in free enterprise, none whatever!

Again, no VC will look to capitalise the smaller company either. Here the argument will be that they will not become large enough, quickly enough, to make the short term investment worthwhile. In each case, the imperative is not to create as many as possible competing independent free market companies; instead, the imperative is to create as quickly as possible, a company to be sold on to an existing competitor.

This is a gigantic and totally uncompetitive feudal monstrosity that is now leaving vast swathes of society grossly undercapitalised and unable to compete. Countless thousands of grass roots individuals in the wider society are excluded from success by exclusion from access to the capital they will need to compete.

The majority do not have access to capital.

It must also be argued that these uncapitalised individuals are the very best people in any society. Why?

For the simple reason that they see that it is their own natural imperative to compete as independent individuals in the wider society. They believe in free enterprise. They have accepted the challenge to compete.

The base, grass roots of society is thus starved of capital. If you do not believe me, take a walk through any poor area in, for example but not exclusively, the United States. Today, many at grass roots level see that the only way to gain access to the capital that they need is through being outside of a free society and into illegal trade in the likes of drugs; that the road to success is through unlawful activity rather than through lawful rivalry, free competition.

I believe that lack of access to capital drives lawlessness and there is much lawlessness today..

What needs to be recognised is that the primary savings institutions, the institutional investors, have a profound duty to see that at all times, they are doing all they can to create a free and fully competitive society. They have to change the way they return the savings of the nation back to the nation as investment into new independent free enterprise companies.

Yes, they have direct access to the largest markets on the planet, the stock markets trading in the stock of the largest and thus the most stable companies. Yes, they are constrained by many rules imposed upon them.

But these institutional investors must now look out from their eyries and recognise that they have concentrated so hard upon their trade that they have lost sight of the need to capitalise a free, independent and competitive free enterprise nation in a way that ensures the maximum competition; moreover, naturally competing against the very companies they have invested into themselves. They must understand that they have to accept such competition against their investment; from these smaller, unlisted, privately owned and totally free enterprise businesses.

That they must not act in any way to prevent such competition. How do they do that? I believe that institutional investors must return to the basics of the free market and create a flow of capital back into society over which they relinquish control.

They must adhere to the rule that whatever they sell, they cannot at one and the same time, remain in control of. That title to the capital passes to the purchaser.

They must recognise the need to maintain a free market reservoir of capital to service the needs of the wider society beneath them.

As I see it that is all that is needed is that government ensures that multiple free markets are established for that flow of capital into the creation of the new, competitive free enterprise companies. I have set out in some detail my own view of what I call a Capital Spillway Trust, http://www.chriscolesholdings.com/page3.html This will serve to start the debate about the need for a free market for capital investment into free; independent, free market based new companies at the grass roots level.

From that moment, the power of the market will take back control. Those company founders that still wish to relinquish control for a sale onwards; into the hands of their competitor may still do so. But this time, all those independent company founders also have access to capital and are free to reject that route. That in turn will create a much higher level of competition.

The VC’s will find themselves in a very different environment where the independent company sector is now free to compete - on their own terms. To survive, the VC will have to provide a superior service to compete. Their monopoly power vanishes.

M&A as we know it today will almost certainly stop. Why? Because the institutional investor will now recognise that they are not acting in the best interest of a fully free and competitive society by allowing the M&A market to continue as before. M&A will thus not be able to secure funding for anti competitive activity.

Further, any completely independent company, not owned by the institutional investor, can now always make its own deal outside of the existing M&A environment. They will own their own business, have proper access to a free market for capital and can deal with whoever they like. From this moment onwards, the M&A cartel will have to compete with a fully free market. Their market power vanishes. Competition wins.

The people running this uncompetitive business environment will have to recognise that they are seen as the new robber class numbering many thousands. They pay themselves bonuses as though they own the capital of the nation as their own fiefdom to use as they will. That is a contradiction that must be brought to an end and the sooner the better for everyone.

Competition must be established in every marketplace, particularly the markets that channel new investment into the wider society which is today starved of free enterprise investment.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

The final wrap up:

Now that we have had the opportunity to look at what went wrong with a feudal mercantile economy we can see that it gave a profit to only one small group, right at the top of the financial food chain. Everyone else within a feudal system must suffer a reduction of prosperity. And that has been born out by the record over the last fifty years.

In time, we will look back at this recent past era and ask how on earth did we think that allowing our savings institutions to remove our prosperity from our communities and play with it exclusively, amongst themselves; would in any way improve our communities prosperity? A feudal mercantile economy simply makes us slaves.

The great strength of free enterprise based capitalism is that everyone profits, but that their profit comes to them in different ways. The shareholder still gleans profit by dividend, but the employees profit comes from an increase of income and improved working conditions, the suppliers profit comes from an increase in orders, the community profits by the increase of invested capital allowing everyone in the community to prosper, but each in their respective ways, spreading prosperity from the grass roots to the top of the tallest tree while at one and the same time, keeping the overhead costs to the best minimum.

Freedom comes from the investment of equity capital into free markets which in turn increases the prosperity of everyone so that we all profit and can share the dividends of our combined industry and inventiveness.

But no one deeply embedded in a feudal system will give up their control over the majority and as such it is up to us turn away from feudalism and to construct the institutions, the rules of engagement and the regulatory framework necessary; to permit us to provide our own solutions for our own needs.

We must therefore create what we need for ourselves. No one else will do that for us. For that reason, I call on everyone that can see the way forward to join me in this new adventure.

We really do not have anything to fear but fear itself.

[Chris Coles]

Re: The Road Ahead from a Grass Roots Viewpoint

Chris, from your web site;

"A fully competitive, free enterprise, open to all, marketplace; designed to supply equity capital to a much wider range of new, privately owned start-ups, new high technology firms and small businesses than at present on terms acceptable to everyone."

What terms would be more acceptable than those currently in place?

Are you talking about a new source of money anyone with a new idea can easily tap?

How is this different than current VC financing?

Let's assume that I have the money you need.

How much money do you require to get started?

What are the terms?

What control do I have once you get the money?

Bob, I am firmly of the belief that the most fundamental lesson to learn from the last few decades is that, unless the investee is left free and in complete control of their business venture; you will always have a built in tendency to revert to a feudal system. Free enterprise is commonly described as where the manager of the business, owns the business. The only way to ensure that freedom, (at the first stage), is to rule that the investor can only retain 20% of the equity.

I am saying we have to create completely new savings institutions that will be directed to invest the savings of the local community into the local community as equity capital under the rules as I have already described.

The government in turn should create a free marketplace system, throughout the nation, to ensure there is access to working capital at twice the equity investment. i.e. for every 25K equity, there should be 50K working capital at 4% fixed over 25 years.

The current VC only invests under feudal terms where they must have complete control from day one. I call that blatantly anti competitive and the fundamental reason why we have evolved into a feudal mercantile economy.

I have made it quite clear that I am not going to seek funding for any of my ventures via this web site. This multi-part thread has been put up as a debate for the benefit of everyone. However, if you are saying, as others have already, that you wish to look at starting what I have been calling a capital Spillway Trust in your local community, then yes, join the others and the ongoing debate. I am sure that there is a real market for such a new savings based institution and that this debate will, in time, lead to a complete change of direction, away from a feudal system to free enterprise capitalism. I certainly cannot do that by myself.

The terms, the how and whys of the investment of savings into such a new system has to be debated; I will welcome anyones viewpoint.

If my thinking is correct, what we will see, once we get past the fear factor of a complete change in direction, will be an immense improvement of the local community prosperity. By involving everyone in keeping their own eye on the new businesses created with their savings, which we will create in the local communities; a new understanding of the nature of free enterprise will open a new era of freedom and prosperity.

It was why, in the first place, if I could get my hands upon the royalties owed to me, I was going to put my money where my mouth was, so to speak and invest under my rules as set out above to prove my theories.

Chris.