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Capital Homestead Accounts (CHAs)

The Capital Homestead Account (CHA), previously referred to as the Individual Stock Ownership Plan (ISOP), is designed as a special kind of Individual Retirement Account (IRA) to be set up by each citizen at any bank or approved financial institution, for financing new stock issuances by any enterprise that can convince a commercial bank that it has a viable (i.e., self-liquidating) capital project.

The CHA would enable all “eligible” citizens and families to acquire diversified holdings of newly-issued, full dividend payout corporate shares on credit repayable with future tax-deductible dividends. “No interest” credit and new money created by the central bank for private sector growth would be “irrigated” through citizen CHAs. Citizens could invest their Capital Homestead credit in 1) a company for which a member of the family works, 2) a company in which the family has a regular billing account, or 3) in new share issuances of profitable corporations with successful track records.

Upon retirement, the accumulated assets in the CHA could generate a significant stream of retirement income. The CHA could also be used to demonstrate a voluntary alternative to stem some of the projected increased costs of the Social Security and other public sector retirement and social welfare schemes, and supplement or replace them with an asset-based stake in the productive sector of the economy.

The central bank would estimate the growth assets needed each year in both the public and private sectors for new plant and equipment, physical infrastructure and rentable space. To the extent a well-managed private sector company is willing to add and manage some of those assets under a soundly conceived feasibility plan, the central bank can arrange through its discount mechanism to expand commercial bank credit at a low servicing fee. This would allow the bank to set its own mark-up on the cost of newly created credit to a CHA.

With such credit available to the nation’s CHA market, active and retired public sector workers, for example, could acquire a growing diversified portfolio of full dividend payout shares in new and expanding enterprises or mutual funds holding such shares. This would provide annually significant retirement benefits for public sector employees. This new source for funding retirement benefits would also help radically reduce future pension obligations of the government, generally one of the most costly items in a government’s budget. And it could also be used to meet unfunded pension obligations.