Stock Acquisition Mortgage Loans

Abstract

Purpose: There is an undeveloped market for the broader distribution of future capital acquisition and income in which the price (cost) paid for acquisition of securities to realize future capital income plays a crucial role. Our objective in this paper is to propose a new loan which facilitates acquisition of financial capital with the future earnings of the financial capital acquired.

Design/methodology/approach: This is a theoretical paper relying on mathematics, graphs, verbal arguments and some numerical summary measures to describe concepts.

Findings: We show that increasingly elastic demand for future capital income raises consumption (and therefore production) for the entire economy and, under certain conditions, for both high and low income earners.

Research limitations/implications: The proposed hypothesis is not empirically tested, an exercise left to future work.

Practical implications: We describe how Stock Acquisition Mortgage Loans may be instituted in countries with well-functioning financial markets and monetary systems, at acquisition costs lower than average historical returns in security markets.

Social implications: Relative to high-income earners, economic prospects of poor and middle-class people could be enhanced if (a) they were also extended the economic opportunity to acquire capital with earnings of capital and (b) then after the capital is acquired (and fully paid for) they too could supplement their labor earnings and welfare payments with capital income.

Originality/value: The proposed Stock Acquisition Mortgage Loan is a new loan (currently not in existence) which can significantly improve income for all.

Keywords: Banking, Investments, Finance, Income Distribution, Wealth Distribution, Capital Acquisition, Growth, Development, Macroeconomics, Monetary Economics

JEL Classification: E2, E4, E5, G2