Disrupting Student and Education Debt By NY Assemblyman Ron Kim Version 1.0 www.GutCheck.us

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EXECUTIVE SUMMARY………………………………………… 3

INTRODUCTION ………………………………………………… 6

STUDENT & EDUCATION DEBT BACKGROUND…………… 12

RESILIENCE VERSUS STIMULUS ……………………………. 14

SOLUTIONS ……………………………………………………… 16

CHALLENGES AND NEXT STEPS ……………………………. 23

FINANCIAL HURDLES …………….……………………………. 25

CONCLUSION …………………………………………………… 29

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EXECUTIVE SUMMARY

The elimination and cancellation of student debt is the ultimate litmus test for whether one is aligned with corporate politics or controlled by Too Big to Fail Banks.

Most elected officials and policymakers with progressive stances support worthy and vital issues, such as immigration reform, women’s rights, and criminal justice reform. However, these are symptoms of a more significant problem, one relating to the way our private sector and economy function. Unless we fix the core issue–a debt-driven economy based on virtual currency that extracts as much value and money as possible from local communities—we will continue to be a step behind, only reacting to the failures of divisive politics.

Since President Richard Nixon delinked the dollar form gold in 1971, there has been a systemic effort to create an economy of scarcity, led by a fiat-based virtual currency system that gave interest-bearing loans and credit to the poorest nations in the world, as well as to low-income students all across America. New money, backed by the US and the overwhelming strength of its military, was created out of thin air, putting more people around the world in debt than ever before in human history.

In many past cases, stretching all the way back to Ancient Greece and China, people have repeatedly revolted under such conditions. In some cases, rulers reset and started over with a clean slate: a debt-free state. In other instances, local communities created their own banking and currency systems to fight off the centralized extraction of money.

In the periods of time just before such revolutions, there was often extreme divisiveness—including finger pointing and vilification of different groups, immigrants, etc. When the powerful and wealthy have already eaten their fill and left just one piece of pie for the rest of the world, the natural and first reaction is to fight each other for that last slice.

At this point, politicians either intervene by offering a line of credit to buy the next round of available pies, or they have a gut check and tell the people the truth: there wasn’t enough of the pie or pies to begin with.

That moment of honesty and truth should have taken place after the 2008 financial meltdown. Simply put, our federal government had a choice: Bail out the banks or the

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people. They chose the banks, converting trillions in “made-up” money (interest, loans, credit) into real money overnight for the culprits who crashed the system.

Now, as the next global economic meltdown looms, policymakers, and our democracy, will face another gut checking moment: Tell people to stay on the economic treadmill or help them find a way to get off and start a new chapter—a new economic paradigm based on abundance.

That chapter can begin by canceling $1.6 trillion dollars of student debt in this nation. It is the nation’s second largest category of household debt and growing exponentially every year. As studies show, sizable public indebtedness is one of the clearest signs of an unsustainable society and an economy that will crash. In addition, unlike other forms of consumer debt, such as home mortgages and credit card debt, higher education debt has been fueled almost entirely by the federal government.

The system has failed by design; our current higher education market failures are a direct result of four decades of underinvestment by the federal government, and two decades of excess funding for interest-bearing loan programs.

As outlined in detail by David Graeber in his book “Debt,” governments and authorities have manipulated debt for centuries to enforce labor, compel production, demand loyalty, and mandate duty (“social contract”) from their people.

It is not a coincidence that our current generation’s student debt crisis began around the same time President Ronald Reagan and Prime Minister Margaret Thatcher shook hands in 1980, agreeing to create a more acutely market-driven world prioritizing efficiency and growth. With the support of leading economists and think tanks from all sides of the political spectrum, they methodically redefined anti-trust laws, paving the way for super monopolies to flourish. Traditionally public domains, like higher education, became privatized and millions fell trap to a lifetime of debt.

The financial mechanisms exist for the central bank, US Department of Education, state governments, and local municipalities to cancel, buy, or monetize current student debt. This paper will mainly focus on state and local solutions to not only cancel troubled student debt but also seek creative solutions to leverage that debt to circulate more real money back into local economies.

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This document will also address future higher education debt by introducing a student-driven learning model based on Mass Open Online Classrooms (MOOC), a way to make traditional classrooms more competitive, thus keeping tuition down.

But first, let’s begin by taking a deeper look at how we got here.

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INTRODUCTION

The following Gut Checking Graph illustrates how, by design, we have been accelerating every year towards the “concentration” triangle of power and wealth in the bottom left Red Quadrant:

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The Red Quadrant is based entirely on the premise that we can allow the super wealthy and powerful to optimize the extraction of money and resources from the rest of the population, and trust that they will do everything possible to maximize profit in order to keep our country economically competitive.

Those who oppose this narrow-mindedness function between the blue quadrants, where we focus on either fixing the symptoms of our societal failures (upper left Blue Quadrant) or offering an alternative universe of super-monopolies and extractive models disguised as Big Tech or Technocrats (lower right Blue Quadrant).

The irony is that if one peels back the layers of who is funding the nonprofit and advocacy groups behind issues involving women’s rights, criminal justice, LGBTQ rights, or immigrant protection, we find many corporations and billionaires who want political leaders to focus on fighting divisiveness in the upper left Blue Quadrant.

Those who are in power (Mega-corporations, Billionaires, and Too Big to Fail Banks) want to keep politicians and policymakers in the two Blue Quadrants, so they can continue to extract from our communities while keeping the public in a lifetime of debt.

Executive-level leaders, from Mayors to our President, in many ways, are constrained under the current paradigm because the Too Big to Fail Banks essentially control the state through debt (public bonds). In other words, the moment that states borrowed money from banks to finance our wars to public projects and programs, governments also became indebted and ultimately controlled by the same Too Big to Fail Banks.

A legislative breakthrough is our only viable path to the Green Quadrant, a debt-free society based on an economy of abundance where there’s enough money circulating in every community. The alternative path to the Green Quadrant would be a full-blown revolution by the people.

There are many other issues that are part of the Green Quadrant, such as a 100% green economy, tax justice, universal healthcare or Medicare for all, and even cooperative and community currencies to establish a “doughnut” economy that circulates (instead of extracts) as much money and value back into localities as possible.

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But everything must begin with financial freedom and a debt-free society, and that is why this policy white paper will focus on the local and state mechanisms for buying, monetizing, and canceling student debt.

In order to reset and undo the damage done by our debt-driven society, we must disrupt the rigged system of interest, money, and debt first.

Nearly $1.6 trillion dollars of student debt is owed by 44 million borrowers in America. Millions of talented and hard-working Americans are stuck in a lifetime of debt, defaulting on billions of dollars to the government and banks. More than 80% of Americans are living paycheck to paycheck and just one car accident, doctor’s visit, or family crisis away from unrecoverable financial turmoil, bankruptcy, and poverty. Instead of helping people get out of a debt-driven society, Congress has strengthened rules favoring the lending industry with tougher restrictions on bankruptcy discharge. There have been recent federal efforts to avoid another financial meltdown, but the mechanisms that led to our nation’s debt-driven student financing issue are systemic and deep-rooted. They won’t be addressed by a centralized government that perpetuates the problem. As long as Congress is attempting to resolve this problem by tinkering with rules “inside the box” of a debt-driven growth model, we may offer band-aid solutions that provide temporary and short-term relief but we won’t get to the root of the issue. We can start thinking outside of the box, but why not just get rid of the box? This paper will outline a long-term vision to disrupt the entire higher education ecosystem by: 1) Systemically devaluing our paper degree and grade-based academic system to promote market competition through near zero marginal cost to higher education; 2) Turning student debt into social and community assets. As more and more students go directly online for classes and lectures, more academics in certain fields (like STEM) believe peer-to-peer learning and peer review are better indicators of academic success than our traditional brick-and-mortar classroom.

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Building on this trend, conventional colleges can become more affordable by creating other competitive options like “Massive Open Online Classes” (MOOC) and diversifying the higher education market. The Student-Driven Higher Education System will lay out a future vision of a universally accepted student-to-worker pipeline based on their ability to collaborate and perform instead of a system that trades overpriced paper degrees for a chance at upward mobility. Instead of associating the worth of higher education with simply having a degree or the branding equity of an institution, a student-driven model will promote peer-to-peer learning and grading mechanisms. This white paper will also offer a state-by-state solution for the millions of borrowers who are suffering from education debt by detailing the ways local governments can transform centrally-created debt into a re-investment opportunity to build resilient local economies—countering a debt-based system designed to extract value from local communities. The latter has crippled our neighborhoods while exposing citizens to the risk of another worldwide financial catastrophe. The Tokenization of Student Debt will combine the best blockchain protocols with the most successful cooperative currency models to give borrowers who are struggling an option to repurpose their debt, and allow states to reinvest over a trillion dollars worth of student debt into productive community assets. Before commercial and fiat-based currency systems dominated our ability to exchange goods and created our current debt-based economy, humans participated in local—what many anthropologists refer to as “human”—currency based on social trust. Throughout recent history, whenever a commercial currency system imposed itself on local human currency systems, it has resulted in conflict, war, or exploitation of people. Now, with the rise of decentralized technology (blockchain and cryptocurrency) and the Internet of Things (IOT), new economies based on alternative currency systems can bring a whole new set of tools to re-evaluate and repurpose debt incurred under conventional financial markets. In other words, we can use new technology to monetize social and community assets, resulting in the cancellation or settlement of outstanding student debt.

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Under the current debt-driven growth system, financial markets focus on supporting policies and incentives that fuel creation of new money based on credit, loans, and interest. They rely on “fractional reserve multipliers” that allow our current markets to create up to 10x the original debt/loan. This is often referred to as the “new money” created out of our debt-based system. When left unchecked, this debt-driven approach alters the lives of far too many young people forced to rely on the over-flowing lending markets to finance their expensive degrees. It limits their ability to move forward in the socioeconomic ladder: marriage, homeownership, car ownership, etc. This capitalization of higher education has brought in some of the worst and most predatory practices, masking non-collateralized debt as “providing hope” for students seeking astronomically-priced degrees while actually turning them into debt pawns. When it comes to the exponential growth of student debt, most politicians campaign on providing free and affordable college options. Few are focused on alleviating the current debt incurred by borrowers. Free tuition is a good campaign slogan but under the current economic paradigm, it’s not a sustainable model when applied to traditional brick and mortal classrooms. Private and public institutions have scaled vertically with our corporate-driven society, meaning they are also profit driven. As long as there is money to be borrowed and a consumer market that craves expensive degrees, colleges will continue to raise tuition. The only way to force higher education institutions to lower tuition and scale down is to make higher education more competitive, to disrupt the entire profit-driven ecosystem of brick and mortal classrooms. The Student-Driven Higher Education System (SDHES) will disrupt the education system hierarchy designed to produce as many efficient employees as possible. Under the current model, students borrow hundreds of thousands to go into a classroom to memorize and regurgitate data and knowledge, leading to a paper degree validation. Classrooms themselves have become a mirror replica for a mass production top-down system, and students are taught to become employable. The problem is that the world they will graduate into has rapidly changed into what many refer to as a “collaborative commons”, led by shared energy grids, an Internet of Things, 3D

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printing, artificial intelligence, and Blockchain. This “4th Industrial Revolution” puts the “sharing economy” at its core and rewards collaborators who add value to the network, creating real opportunities to design an education system that produces “learners”, not just “knowers”. This changing mindset and approach toward education indicates a need to transform our classrooms and how students learn, a redesign of our system that will ultimately bring the cost of education to a near zero marginal cost. SDHES will support this lateral growth by exploring and introducing statewide programs to support peer-to-peer and peer-review based learning, advancement, and placement. For those already indebted with education loans, there have been efforts to forgive them for those entering public service, and to lower the interest rate on loans. The Levy Institute has put together a comprehensive and rational approach toward completely forgiving student loans, and offered a step by step outline to potentially cancel all student debt, boosting the middle class and stimulating the economy in the process. These are all laudable efforts and initiatives that should be pushed. Currently, however, there are just too many layers of financial beneficiaries and stakeholders, including the Secretary of Education Betsy Devos, who would stand against them.

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STUDENT DEBT BACKGROUND

In New York State, Comptroller Tom DiNapoli has shed significant light on the out-of-control status of student and education debt:

• New York’s student loan debt has more than doubled in the last decade, growing 112 percent from $39 billion to $82 billion.

• The number of student loan borrowers in the state has risen sharply over the past ten years—by more than 41 percent—to 2.8 million.

• Student loans represented 11.4 percent of the $722 billion owed by New Yorkers in outstanding consumer (or household) debt. Figures on student loans do not include other debts that families and individuals incur to pay for college, such as home equity loans, borrowing from retirement accounts, or credit card debt.

In New York City, more than one million New Yorkers (roughly 15%) have student debt, collectively owing around $35 billion. Student loan-linked financial distress is noticeably high among the poorest New York City neighborhoods. Moreover, lower-income areas have disproportionately high delinquency and default rates.

This crisis of exponentially growing student debt was created by the federal government underinvesting in higher education for forty years while overfunding interest-bearing loans, putting the burden of financing colleges and graduates schools on the individual. Meanwhile, both private and public colleges began to raise their tuitions, taking full advantage of essentially unlimited access to money.

What’s even more troubling is that nearly 20 states use punitive measures to help private collection agencies and lenders collect their student debt: https://www.nytimes.com/2017/11/18/business/student-loans-licenses.html

These states will punish delinquent debtors by revoking their drivers’ licenses and even professional licenses unless they pay back what they owe.

As for the federal government’s efforts to forgive borrowers based on their public service, out of 1.2 million borrowers who applied, only 55 had their debts forgiven: https://www.washingtonpost.com/education/2018/09/26/few-graduates-working-public-service-have-received-expected-break-loans/?noredirect=on&utm_term=.8eea06b4e34e

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Currently, there are pending federal lawsuits against private lenders like Navient and a growing legal push across states to crack down on predatory lending practices.

However, with Supreme Court Justice Brett Kavanagh nominated and Betsy Devos leading the nation’s education agenda, there will be a clear preference toward favoring creditors and lenders over the needs of struggling borrowers.

In 2018, United States Senators and Congress Members introduced various federal bills to address borrowers’ inability to be forgiven of student debt even when under financial distress—including bankruptcy. Congressman Jared Polis from Colorado also introduced the Students Over Special Interests Act (H.R. 5928), which would repeal President Donald Trump’s trillion dollar corporate tax breaks and repurpose that money to cancel the nation’s student debt.

This October, more than 20 labor groups, nonprofits and community leaders joined elected officials calling for a one-time cancellation of student debt, outlining the economic rationale and financial mechanisms for how it could be executed: http://spectrumlocalnews.com/nys/capital-region/capital-tonight-interviews/2018/10/10/canceling-student-loan-debt

Long before elected officials began paying attention to student debt and the problems surrounding a debt-driven society, advocates and community activists stepped forward to help those suffering from debt-induced financial woes. Laura Hanna, co-founder of the Debt Collective, is one of those leaders whose organization spent years buying and canceling debt for hundreds of low-income families.

On a global scale, a larger movement has taken place calling for all central banks to institute a “People’s Quantitative Easing” or “Green Quantitative Easing”, anticipating the inevitability of another economic breakdown. The goal would be to ensure that our taxpayers’ money is no longer being used to bail out commercial banks but instead given directly to the people to settle their debt or invest in a green economy.

For the first time, there is a growing coalition of policymakers, academics, and community organizers willing to have open and honest conversations about debt, and to go beyond the legislative edges to address the core problems fueling an economy of scarcity.

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FINANCIAL RESILIENCY VERSUS ECONOMIC STIMULUS

After the 2008 financial crash, caused by private banks and lenders engaged in subprime mortgages and over-leveraging of bad loans, the federal government bailed out the Too Big to Fail Banks in America with trillions in stimulus money.

Further abroad, massive housing and infrastructure spending by China kept global markets relatively stable as the rest of the world witnessed millions of low-income Americans lose their homes.

Between the G-7 Central Banks and the leading financial institutions around the world, the stimulus funds were spent to maintain GDP growth and a uniform, unsaid motto was adopted: Keep the Party Going at All Costs.

For decades, by design, our central banks and governments have been on a growth-focused treadmill based on a debt-driven market or an economy of scarcity. Too much money, power, and financial mechanisms remain in place to stop this treadmill; economists, the media, and politicians are relied on to emphasize the importance of “growth”, and banks continue to produce money from thin air based on credit, interest, and debt.

The ultimate irony, and the reason for the rise of groups like Occupy Wall Street, Strike Debt, and Black Lives Matter, is that this economic model extracts money from the public and burdens countless people with a lifetime of debt; then when everything crashes, it expects taxpayers to hand over trillions more in stimulus money to bail out the perpetrators.

They are extracting from both the front and the back, or the boom and the bust of the economic cycles.

Alternatively, an economy based on financial resiliency fights to attract, retain, and circulate as much value and money in local communities as possible. Instead of a triangular hierarchy where the top 1% keeps getting wealthier and more powerful, a circular model pushes for lateral growth based on peer-to-peer and cooperative economics.

As mentioned in the Executive Summary, the Gut Checking Graph illustrates how in both the Blue Quadrants and Red Quadrant the vertically integrated triangle hierarchy is enforced by a public and leaders that are extrinsically driven.

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Extrinsic motivation is based on a need for validation, and often taps into people’s fears of failing, losing, or humiliation.

A debt-driven higher education market puts 80% of Americans, who are already living paycheck to paycheck, in a state of constant stress, worrying that they can’t pay their bills and may lose their homes or families. Many among the ruling elite have decided that this fear is the ultimate motivation for our society to be as productive as possible.

The Green Quadrant represents political leaders who are intrinsically driven, who believe people are motivated by deep purpose and are innately cooperative and collaborative.

Another way to describe the difference is to ask whether our leaders believe the public is driven by pure self-interest, where greed and materialism dominate our everyday rationale, or if they think people are fundamentally cooperative and collaborative human beings.

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SOLUTIONS

The most logical solution, as outlined by the Levy Economics Institute’s “Macroeconomic Effect of Student Debt Cancellation”, is for the federal government to execute a onetime education debt cancellation. It outlines several mechanisms for doing so.

Another solution is for the central bank to implement the “People’s Quantitative Easing”, as pushed by various European-based advocates to help people settle their debt. Instead of central banks buying public bonds from commercial banks, with the hope that these banks will spur more economic investment and circulation of money, they advocate giving that money directly to the people so they can pay off their debts: https://www.theguardian.com/business/2017/sep/28/in-defence-of-peoples-quantitative-easing

Some refer to this as the “Positive Money” movement. In lieu of a federal cancellation of student and education debt or central banks giving money directly to people, states and localities can institute certain financial mechanisms to buy, monetize, and cancel this debt at local levels.

Since the 2008 financial crash, Professor Robert Hockett of Cornell University has focused on using local eminent domain powers to buy and cancel underwater mortgages all around the country. In the face of numerous challenges, including lawsuits by Wells Fargo and other major financial institutions, he persisted and made it clear that local governments have the ability to buy troubled debt to improve public conditions. Implementing this across the country on a state-by-state basis would be a multi-step but feasible process.

To begin with, every state may have different versions of eminent domain procedures, and may first need legislative amendments to make it clear that “debt” qualifies as “property” and can be purchased to serve a public good.

Secondly, a local agency or even a state-backed bank, like the Bank of North Dakota, should be created through state legislation to oversee the execution and monetization of student debt.

Once there is a structure to buy, monetize and cancel student debt at the local levels, policymakers will be able to design various circular economic systems based off that structure.

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The boldest design would be to create financial mechanisms to leverage this debt and activate local and community currencies, leading to greater circulation of money and value across all underserved communities.

Such community currencies can be designed to reward consumers for shopping at independent and family owned local stores, and even implement “civic points” for volunteering or community service.

This would make sure cancelled or forgiven debt is repurposed to support financially resilient activities, placing communities one step closer into the Green Quadrant.

Another possibility is to design a local debt forgiveness program that issues functioning and cooperative currencies, which can be used for local services such as mentoring a child, helping seniors, volunteering at a shelter, etc.

Without such radical programming, even if state and federal governments are able to cancel the $1.6 trillion in student debt, mega corporations and Too Big to Fail Banks will continue to extract more money and eventually put the public back into debt.

In ancient Greece, a fed-up faction of the public instituted the “Palintokia”, which not only made interest-bearing loans illegal but punished the creditors by forcing them to pay back the interest they earned from the public.

There are plenty in the present that would like to see the Palintokia re-instituted in modern times, and a full blown people’s revolution may result in something close to it.

However, there are better options moving forward that capture and implement new technologies, such as blockchain and crypto-economics—options that favor redesigning the market to be resilient, decentralized, and sustainable.

Building the Prototype for Tokenization of Student Debt

For the most part, the public has seen and learned about Bitcoin from the media lens of the conventional, profit-seeking market. The big news is always around how much Bitcoin is trading and crashing. Unfortunately, this misses the point about virtual currencies and the technology behind them: Blockchain.

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These cryptocurrencies were created with a clear mission in mind: To show that individuals can do peer-to-peer transactions without intermediaries through a safe and nearly un-hackable ledger system. They’ve laid the groundwork for overturning our extraction-based economy of giant online markets, transportation dispatch companies, and mammoth banks controlling all transactions through centralized, top-down machines.

Historically, when new commercial banking systems met local human economies, it led to some of the ugliest moments of human history. Virtual currencies, however, have lifted up some of the most distressed villages around the world.

For example, Grassroots Economics from Kenya teamed up with Bancor Network to bring their village community currencies into the 21st century by using tech-based e-wallets to circulate their neighborhood money. Before Bancor joined, Grassroots Economics began their mission by creating one of Africa’s first local currencies to stop corrupt governments and corporations from extracting money and value from their villages. The founders were even arrested and spent time in prison, as central authorities could not comprehend the concept of community currencies.

Once the central governments realized this is a healthy and sustainable model, the founders were released and went on to create seven more regional local currencies. They are now developing in full partnership with the Bancor Protocol Network.

This particular model and over 4,000 other community currencies around the world are based on creating local exchanges to lift up underutilized talent, services, and goods. They work by either trading national currencies into the regional currency or having villages design their own system.

With the tokenization of student debt, for the first time, conventional market and financial systems will intersect with alternative currency mechanisms designed to eliminate extractive behaviors.

Again, the first step is for states and localities to transfer the federal student debt or buy the troubled debt through eminent domain. Then, the challenging part will be to design and implement the tokenization of student debt in a way that combines traditional concepts of monetization, collateralization, and securitization of debt.

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One of the key design features of a community currency is that it can exist on pure peer-to-peer networks. No more transaction fees for merchants and no more annual credit card fees for consumers.

Furthermore, once this groundwork is in place, it can build up other peer-to-peer economies, including a new energy economy, turning ordinary consumers into producers overnight. New Securitization Protocol and Financial Mechanisms to Collateralize Student Debt Blockchain technology, currently being used to back new alternative currencies, represents a promising alternative. It can potentially enable us to create new mechanisms to identify and monetize value that our current markets do not or cannot properly capture. For example, the Saber educational currency, a recent proposal in Brazil, posits that when scholarship funding is tokenized into a peer-to-peer, young-to-old tutoring and mentoring system, the use and value of the money can be successfully multiplied more than ten times. (Some have even calculated it up to a hundred times.) Instead of a one-time scholarship fund, imagine giving the money to a 14-year old who can only spend it on tutoring costs from a 15-year old. The 15-year old will do the same toward a 16-year old. By the time a 17-year old student uses it and liquidates it into scholarship money, its value will have been magnified several times over. The original money was circulated at least four times but the long-term impact on the community, including the network building and beneficial effects of reciprocal teaching and learning, has added, according to some analysts, 100 times the original value. Cryptocurrencies can provide the tools to capture this value, which can be tokenized and traded in conventional markets. Three major occurrences in recent times have led us to the point where a Value Capture Mechanism is possible, which is the foundational premise for facilitating the Tokenization of Student Debt:

1. State-backed austerity measures to collect student debt established governments’ willingness to intervene on non-collateralized debt obligations, which proves they are legally in a position to get involved in resolving consumer debt.

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2. Impact Tokens are on the verge of trading in conventional trading platforms. 3. Proposals like the Saber educational currency have shown the value multiplier impact in

non-conventional currency systems. All of the above allows us to propose a new financial model that can create collateral assets from traditionally non-collateralized items. The stakeholders that would lead this bottom-up financial mechanism and protocol are the states, financial institutions, credit rating agencies, cooperative economists, and blockchain experts.

Collaborative and sharing economies are slowly taking over vertically integrated traditional market models and moving toward peer-to-peer economies, cutting out unnecessary intermediaries that mark up prices for products and services. The debt driven and dependent institutions in conventional financial markets will have to make tough but inevitable choices in readjusting to this new economic paradigm. They can continue in their linear thinking and try to keep the party going until all the lights are off, or explore ways to bring their investments into the new laterally integrated space.

The Tokenization of Student Debt is a way for states and local governments to take the lead in bridging and normalizing the reinvestment of traditional capital into the new economy.

Global Trends: https://www.coindesk.com/pboc-filings-reveal-big-picture-for-planned-digital-currency/

China has recently filed more than 40 patent applications, “all as part of an aim to create a digital currency combining the core features of cryptocurrency and the existing monetary system.” This means that its centralized government and state-sponsored corporations are working efficiently to produce a virtual product that can cross over between conventional and unconventional markets.

Value Capture Mechanisms Blockchain protocols allow us to build new local currencies with as many verifiable data points, proof of work systems, and smart-contract agreements as we need to design as imaginative a cooperative currency as possible. Cooperative and peer-to-peer economies existed for thousands of years, but only in recent years, as the digital era begins a “4th Industrial Revolution”, have we entered a new

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paradigm where decentralized technologies can complement our need to live and function in a more collaborative world.

Statewide Support for Student-Driven Higher Education System

The same peer-to-peer and distributive economic vision can also be applied to higher education classrooms. The technology and tools exist for all students on this planet to learn at near zero marginal cost, without intermediaries extracting tens of thousands of dollars for a well-branded paper degree.

After a few decades of underinvestment in higher education by the federal government, conventional colleges have grown and expanded based on certain tuition-based revenue projections. Many institutions have also borrowed from banks to finance their real estate expansion and capital projects. They are indebted like any other private enterprises, and the only long-term way to bring meaningful is to support competitive alternatives.

The monopoly of brick and mortar classroom colleges has collectively and dramatically raised tuition to maximize profit from students. By promoting and adding more value to Massive Open Online Courses (MOOC), we can push traditional colleges to redesign their businesses and bring down tuition costs.

State governments can kick-start student-driven higher education through institutional support for “collaborative learning communities” (like “Stack Overflow”) and MOOCs. They can implement measures such as:

1) A 100% free public university MOOC program with degrees based on collaborative learning, peer-review and a peer-to-peer verification system (based on a permanent distributed ledger system).

2) Incentives for local employers to hire MOOC graduates

3) Government fellowship programs for MOOC graduates

4) Grants for top public college professors to participate in MOOC programs

In the decentralized “doughnut” economy represented in the Green Quadrant, students will be the key ambassadors that sustain a trust network promoting collaboration and

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cooperation. People’s intrinsic drive, based on their passions, purpose, and curiosities, will shape the way networks are created and maintained.

Many leading academics, professors and modern political thinkers are fully aware of the disconnect between traditional college settings and the ever-changing workforce and needs of the future. However, most students are stuck just trying to get by, pay off their debts, and put food on the table for their families.

Many top notch institutions have already joined the MOOC movement and even started their own hybrid online affordable classrooms. They may not necessarily approve of the peer-to-peer learning model but it is clear they see the importance and potential of the movement.

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CHALLENGES AND NEXT STEPS

There will be a coalition of special interest groups, corporations, and powerful individuals who will oppose and lobby against its proposed measures.

The Green Quadrant represents an economic paradigm shift that minimizes the role of extracting forces which currently make trillions of dollars at the boom and bust of economic cycles.

There are many groups that may not be part of the most wealthy and powerful but also believe they are reaping the benefits of the current debt-driven market system. Even if this was rigged game of musical chairs, they seem to still have a seat every time the music stops. So why do anything to disrupt it?

What they don’t realize is that the truly wealthy and powerful are not even in the game; instead, they have permanent seats on the balcony looking down, extracting chairs from the game every chance they get.

Those “defenders” who exploit this system have accepted that our current economy works in cycles and there are inevitable “downturns”, where there is a scarcity of money and it’s expensive to borrow. They feel confident that as long as they have a pulse on the upswings and downturns, they can navigate the system, knowing when to extract as much money as possible from each cycle.

In fact, very smart mathematicians, economists, engineers, and financiers have spent endless hours modeling these cycles with new speculative algorithms based on certain rationalities, inputs, and outputs. They are part of the group of upper middle-class professionals, whose household income-debt ratio still makes it difficult for them to move upwards, that must lead the way in pushing for a better economic paradigm.

They must understand and accept that the world deserves an economy of abundance where every person’s needs can be taken care of.

Legislative Hurdles

For four decades, most states have adopted a pro-market culture where state agencies help the private sector perform as efficiently as possible. We allowed new monopolies and chain stores to dominate markets and bully mom and pops and independently-owned businesses.

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Big companies with big agendas have endless corporate money behind their lobbying efforts, and it will be difficult to overcome their ability to control the macro agenda by “killing” any new legislation that may disrupt their ongoing extraction party.

The two immediate legislative challenges will be to: 1) Institute financial mechanisms at the local and state levels by activating eminent domain, or compulsory purchasing, to buy troubled debt from the federal government; and 2) Create a blockchain-friendly environment for new decentralized tools to flourish and grow.

In New York State, there are currently five legislative proposals that would lay the groundwork to cancel student debt, co-design local currencies, and circulate real value back into communities:

Community Currencies

The Office of Financial Resiliency

Fintech Sandbox

Freedom for Working Families Act (pending)

NYS Community Bank Act (pending)

These and many other statewide initiatives around the country are designed to turn our nation, from the ground up, into the Green Quadrant where we can live in what some refer to as a “Liquid Democracy”: a fully engaged and participatory government where people truly have ownership of the outcome.

Once there is a paradigm shift, local government and states can also accept community and cooperative currencies for local taxes, bills, fines, etc. to provide a functional monetary ecosystem.

Other nations, like the Netherlands, are already ahead of us. It has spent the last few years building an ecosystem around local and community currencies under a private-public initiative led by Qoin.com.

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FINANCIAL HURDLES

Even if we can pass legislation and activate local eminent domain to buy, cancel, or monetize student debt, how will we fund and finance it?

There are three immediate possibilities:

1. Eliminate “corporate welfare” and use that money to buy distressed student debt.

2. Raise capital from third-party investors based on long-term returns on monetized student debt.

3. A combination of options 1 and 2.

The State of New York issued a total of $8.25 billion to corporations in 2015 and offered incentives totaling 76% of the state’s gross tax revenue, ranking it the worst in the nation in this category for effective return on value. During that same year, New York’s distressed student debt was around $9.8 billion, approximately 12% of the state’s $82 billion in total student debt.

If we phased out corporate giveaways in five years to give the private sector enough time to readjust, that corporate welfare money can instead be used to cover 84% of our state’s total distressed student debt.

(In the future, we will run a 50-state analysis with real-time data to determine whether the nation’s total corporate welfare alone can cover all of the nation’s total distressed student debt.)

Return on Investments (ROI) for Student Debt Cancellation versus Corporate Welfare

When defending corporate welfare, neoliberal and technocratic governors and mayors often cite job creation as the main reason for giving away billions to super-monopolies and mega-corporations.

First, it’s important to dispel a couple of assumptions. Everyone, including corporations, is in debt. In fact, the bigger the company, the more likely it is that they are leveraged and in debt. The difference between the two can be summarized by a quote from J. Paul Getty: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

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Corporations often aggressively seek corporate subsidies for exponential growth, and thus look for government support to alleviate their debt-equity ratio. This turns “fake money” (interest-bearing loans) into “real money” (taxpayers money) for investors overnight. It is no different than when the federal government gives away trillions in corporate tax breaks, only to watch it be used for stock buybacks instead of invested into the company to create more jobs.

In this case, the right way to analyze return on investment (ROI) is an honest assessment of actual debt levels and economic impact from debt cancellation (“financing”) when comparing corporations and students debtors.

Debt relief for corporations results in more leverage, corporate expansion, stock buybacks, or just additional money pocketed by principals.

Debt relief for past students will result in immediate upward mobility, family formation, small business creation, housing investments, and other social-economic growth for local communities.

In conventional terms, let’s compare the two using standard economic measurements like job growth, gross domestic product (GDP), or gross state product (GSP). The main question should be if there is any correlation and if so, what kind, between these different factors

Timothy Bartik, from the W.E. Upjohn Institute for Employment Research, has shown in a recent study that there is absolutely no correlation between corporate debt relief and effective economic growth:

“The majority of studies [published to date] suggest incentives are not cost-effective, with either no statistically significant effects or large costs per job created. The high costs of economic development programs lead to concerns that many of these incentives are ineffective or have negative effects, such as distorting business investment decisions or unduly enriching companies that would have made investments without the need of incentives. Bartik’s initial findings add to the growing body of evidence that there is little proof that incentives achieve their goals: he found no correlation between the use of incentives and changes in wages, unemployment rates, or economic growth in the places he studied.”

However, in a 2017 study done by the Levy Economics Institute of Bard College, its authors showed that cancelling student debt correlates to an impactful increase in real GDP:

“A program to cancel student debt executed in 2017 results in an increase in real GDP, a decrease in the average unemployment rate, and little to no inflationary pressure over the

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10-year horizon of our simulations, while interest rates increase only modestly. Our results show that the positive feedback effects of student debt cancellation could add on average between $86 billion and $108 billion per year to the economy. Associated with this new economic activity, job creation rises, and the unemployment rate declines.”

These economists and studies indicate that in conventional ROI measurements, cancelling student debt instead of corporate expenditures lead to much higher macroeconomic returns.

However, to fully capture ROI, there must also be a standard measurement on local economic impact (microeconomic performance).

A simple method would be to make an extraction-circulation ratio. Does the debt relief result in extraction of revenue and resources from regional economies, or circulate additional money and value at local levels?

As of November of 2018, the governor of New York and mayor of New York City are on the verge of agreeing to a large corporate giveaway incentive package to Amazon, all for an expanded site in Long Island City, Queens. At the time of writing, no details have been offered about the deal (another problem in of itself) but for simulation purposes, assume the following to be true: Amazon delivers 100,000 jobs in a ten-year span, and they receive $100 million for ten years as their corporate welfare check.

In an extraction-circulation analysis, $10 million is extracted every year from New York to Amazon’s corporate headquarters in Seattle, going directly into the pockets of investors; or it is re-packaged and leveraged elsewhere, with the 10-year timeframe of $100 million offered to a third party at an upfront discount in order to extract $70 million, thus enabling the company to borrow more money.

If the $100 million were instead used to buy and cancel student debt in the neighborhoods most distressed by debt, that extra income would immediately re-circulate back into local economies. As confirmation, a “tokenization” process can even be implemented to monitor and track the circulation of the money within neighborhoods.

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CONCLUSION

This policy white paper has outlined the local and state mechanisms to not only improve our higher education market but also undo decades of poorly designed systems and reset our country toward an economy of abundance.

The ultimately question, however, is whether political leaders and policymakers around the world have the vision and fortitude to move forward from the Blue Quadrants into the Green Quadrant. Are they willing to take down the super-monopolies, mega corporations, and Too Big to Fail Banks?

This is a gut check moment for every politician and policymaker.

The rise of hate crimes and vilification of minorities, immigrants, and women suggests we may actually be heading towards the very bottom of the Red Quadrant, where there is a glaring concentration of power wealth, extreme divisiveness, and corruption.

The intent behind this document is not to undermine politicians or merely underscore the importance of them taking strong positions against acts of hatred and divisiveness. With every incident involving hate or violence, elected officials and community leaders must fight back in unity.

But as Daniel Pinchbeck noted in “How Soon is Now?” when referring to the #MeToo movement, “Probably we can’t completely heal the divisions between men and women until we address the unjust, oppressive nature of our economic system as a whole. Capitalism turns human beings into commodities and conscripts them into a false set of values. Both men and women chafe against the constraints of an unnatural system.”

Pinchbeck’s assessment rings true for all divisions in our society, not just between men and women.

The goal then must be to respond back against hatred, divisiveness, and degenerateness while working towards the Green Quadrant:

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Thank you for reading our White Paper

Written by Ron Kim

Edited by Tony Cao, Chief of Staff to Ron Kim

Designed by Digital Urbana Inc

Contact info@ronkim.com

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